Ground Zero
Bank warning
The governor of the Bank of England, Sir Mervyn King, has slashed growth forecasts for the UK economy for the year once again. In its quarterly inflation report, the Bank downgraded forecasts for this year and beyond, saying that growth in two years is only likely to be around 2 per cent. Mr King warned that recovery will be a long process, not helped by the crisis in the eurozone which "goes on, and on, and on". Meanwhile, the Bank of France has warned that its economy is heading back into recession in the third quarter of this year.
Standard hit
US accusations
Until this week, Standard Chartered had cruised serenely through the quagmire that the banking sector has sunk into over recent months as it brushed off scandals involving rival UK-isted banks, pointing to its emerging markets focus as a virtue. But shares in the bank were smashed on Tuesday when regulators in New York State accused the bank of being a "rogue institution" which, over a period of 10 years from 2001 to 2010, processed up to 60,000 transactions with the Iranian government to the tune of $250bn – violating sanctions against Iran. A fine is the likely outcome, but the threat of losing its New York banking licence is a scary prospect, hence the 20 per cent-plus plunge in its share price.
See Standard hit by sanction-busting allegations
Miner trouble?
Capex cuts
The fall in global commodity prices has been apparent in the latest round of results from the biggest mining companies on the UK markets, who pretty much across the board have reported falling revenues and profits. And this is now feeding in to capital expenditure decisions with Xstrata the latest to push back some of its spending plans in the hope of an improvement in pricing conditions. The risk here is that, as with many other commodity rallies, the capacity expansion becomes misaligned with the rebound in demand, pushing prices up sharply once more.
See Xstrata attractive ahead of merger end game
London living
Property surge
While the rest of the UK stagnates or continues to slide backwards, central London property prices continue to boom. The latest land registry figures show that London Central residential house prices rose by 15.6 per cent quarter on quarter to reach an average £1.3m in June. Supply is a key factor with the number of sales continuing to fall, down to less than 15 a day. Meanwhile, the Olympic effect has yet to register in East London with average residential prices in Newham rising just 6 per cent since the successful bid was announced in 2005. The West End has more than doubled in the same time period.
Italy struggles
Data gloom
Official statistics from the Italian economy make for ugly reading right now. The double dip recession that Italy succumbed to last year continued through the second quarter of this year during which GDP fell by 0.7 per cent on the previous quarter, leaving it 2.5 per cent below the level recorded a year previously. Falls were registered across several sectors with industrial production still looking bleak with output falling by 1.7 per cent in the second quarter. Meanwhile relations between Italy and Germany are reported to be at a low ebb with speculation growing that some German politicians may baulk at any future bail out request.
PPI boost
£9bn
The UK economy has received an unexpected £9bn boost over recent months as consumers have been handsomely compensated by banks for miss-sold Payment Protection Insurance. Indeed, the National Institute for Economic and Social Research has predicted that a worst case scenario for the banks of a total £15bn payout would boost the UK economy by 0.7 per cent, the equivalent of an income tax cut. The Office for Budgetary Responsibility has also upgraded its income forecasts for the next two year by 0.5 per cent, largely due to PPI payments.
