www.london.
edu
Issue 1,328 Wednesday 23 February 2011
GADDAFI PLEDGES
TO DIE A MARTYR
Oil price spikes as ports closed
WORLD
▲
BY STEVE DINNEEN
COLONEL Gaddafi yesterday vowed
to “die as a martyr” and urged his
supporters to attack his enemies as
he clung to the vestiges of power.
The despot said he would never
flee Libya, saying he will “fight to
my last drop of blood”.
Following the leader’s speech,
Tripoli residents reported heavy
machine-gun battles in the capital’s
centre as Libya appeared close to all-
out civil war.
The events threw Libya’s oil econ-
omy – the first major oil producing
Middle East state to be affected by
the wave of revolts – into turmoil.
Libya’s ports – including Zawia,
Tripoli, Benghazi and Misurat –
have been closed, traders in the
country said. Crude output from
the country has fallen by at least a
fifth this week and foreign oil com-
panies, including Italy’s Eni SpA
and Spain’s Repsol YPF, said they
had suspended production in the
region. Oil prices continued to rise
yesterday with Brent crude oil
futures surging to $106.47, despite
Saudi Arabia saying it could meet
any shortage in supply.
Markets across the world also con-
tinued to suffer with the FTSE 100
crashing below the psychologically
important 6,000 level to 5,996.76 and
the Dow Jones Industrial Average
falling 1.4 per cent to 12,212.79 – its
lowest level since August.
Gaddafi however crushed any
hopes that he would stand aside to
prevent more bloodshed, saying: “If
I were president, I would have
resigned, but I have no position to
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resign from.”
He blamed the protests sweeping
Libya, which have taken control of
the major cities, on the influence of
foreign forces. He said a small num-
ber of “sick” agitators had tempted
Libya’s youth with “drugs and
money,” branding his enemies “rats”.
He said: “You men and women who
love Gaddafi, get out of your homes
and fill the streets. Leave your homes
NASDAQ t2,756.42 -77.53
Thursday 10 March 2011: City of London
Threadneedles Hotel, 5 Threadneedle Street
www.cityam.com
and attack them in their lairs. The
police cordons will be lifted, go out
and fight them.”
David Cameron called Gaddafi’s
104 $
actions “completely unacceptable”,
while German chancellor Angela
102
100
Merkel described his speech as “very
frightening” and said he had virtual-
ly declared war on his own people.
98
96
ALLISTER HEATH: P2,
MIDDLE EAST CHAOS: P8
94
£/$ 1.62 unc £/¤ 1.18 t-0.01 ¤/$ 1.37 unc
FREE
FSA boss
to head EU
watchdog
▲
REGULATION
BY DAVID CROW
A DIRECTOR of the UK’s Financial
Services Authority (FSA) is set to take
the reins at the new European super
regulator in charge of financial and
securities markets.
Verena Ross, currently director of
the FSA’s international arm, was
nominated to lead the Paris-based
European Securities and Markets
Gaddafi delivered a Authority (ESMA) by regulators from
rambling and the 27 EU member states following an
paranoid speech intense lobbying effort by Britain.
Picture: REUTERS
Verena Ross, currently
director of the FSA’s
international division,
began her career at
the Bank of England
Chancellor George Osborne, who
led the lobbying campaign, was con-
cerned that none of the three new
watchdogs would be run by a British
regulator even though the City is
Europe’s financial capital.
A German national, Ross has spent
many years regulating the UK finan-
cial services sector. She started her
career as an economist at the Bank of
England, before becoming chief of
staff for Sir Howard Davies between
1998 and 2000, when he was the inau-
gural chairman of the FSA.
Last month, there was fury in the
City after three European career offi-
cials were handed the powerful chair-
manships at each of the super
regulators.
ANALYSIS l Brent Crude Oil Futures
106.47
22 Feb CRIPPLING
DAMAGE OF
NZ QUAKE
24 Jan 31 Jan 7 Feb 14 Feb 21 Feb
EXPERTS TALLY
THE COSTS P4
Certified Distribution
29/11/10 till 02/01/11 is 98,444
D;M
OEHA
>ED=
AED=
:K87?
 2 News
Five threats worth worrying about
EDITOR’S LETTER
ALLISTER HEATH
THERE have been some scary develop-
ments in the world economy in recent
days, led by the fallout from Colonel
Gaddafi’s horrifying crackdown in the
Middle East. Here are five trends that
worry me.
1) Libya’s civil war has already dou-
bled the risk premium on oil prices to
$10 per barrel, with more to come. But
the real threat to prices is if anti-
regime protests spread to Saudi
Arabia, where demonstrations are
already planned, forcing the King to
make an urgent return. There would
be no problem if a liberal, democratic
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WHAT THE OTHER PAPERS SAY THIS MORNING
SUGAR TRADERS CONSIDER CAP
The world’s largest sugar exchange
and top traders are mulling “circuit
breakers” to cap the recent surge in
price volatility, people familiar with
the discussions said. The ICE Futures
US exchange, based in New York,
and the World Sugar Committee
(WSC), an advisory group of top
traders, are setting up a working
group to agree on the new “circuit
breakers”. The system will interrupt
trading when prices move beyond a
certain limit.
BOOST FOR GLOBAL GM PRODUCTION
The global area planted with geneti-
cally modified crops increased by 10
per cent last year to 148m hectares –
equivalent to about 10 per cent of the
world’s total area of cropland. The
increase was the second largest
recorded since the commercial grow-
ing of GM crops started in 1996.
regime were to spring up – but what if
extremists gain power, cutting off oil
supplies? After years of costly and
depressing post 9/11 military interven-
tionism, Western foreign policy is in
disarray. We don’t have a clue what to
do next. It would be a horrible end to a
revolution inspired by hope if more
nations slipped into extremism – and
were to push up the price of oil to
$150, $200 or even higher in extreme
scenarios. What would Barack Obama
do if maniacs started torching Saudi
wells? Would China, which is equally
dependent on oil, step in militarily?
2) Oil importing nations could cope
with a further 30 per cent hike in oil
prices – but not with 100 or 150 per
cent rises. Some would suffer double-
dip recessions, putting further
unbearable strains on public finances,
triggering fresh financial crises and
further undermining support for cap-
italism. With a bit of luck, oil supplies
will be all right – but the rocketing
price of oil is now the number one risk
to the global economy.
Citigroup in
Madoff row
COURTS
▲
BY HARRY BANKS
CITIGROUP tried to pass on its expo-
sure to Bernard Madoff to other
banks just months before his epic
fraud was revealed, the Madoff
trustee said in a lawsuit accusing a
second major US bank of unsavoury
dealings with the financier.
Trustee Irving Picard said red flags
about Bernard L. Madoff Investment
Securities were apparent to Citi as
early as 2005, according to court
papers. The lawsuit seeks $425m
(£263m) from the bank.
Citi said in a statement yesterday
that the allegations in the lawsuit
were false and it would “vigorously
defend against these claims”.
Madoff, now serving a 150-year sen-
tence, was arrested in December 2008
after admitting he ran a decades-
APPLE TESTS INVESTOR RIGHTS
Shareholders pushing for changes to
the way US company directors are
elected look set to gain significant
support at a test case vote on the issue
at Apple’s annual meeting on
Wednesday. In an important indica-
tor of investor willingness to press for
greater shareholder rights, the
California Public Employees’
Retirement System has put a proposal
to the meeting seeking to introduce
majority voting on the election of
directors.
JP MORGAN EYES CHINA LICENSE
JPMorgan and Fidelity are among the
overseas banks and asset managers
preparing to apply for trust company
licences in China as the sector attracts
a new wave of foreign investor inter-
est. Regulators in Beijing are leaning
on the country’s more heavily regulat-
ed commercial banks to curtail credit
growth. However, trust companies,
which do not take deposits, are more
lightly regulated.
3) Oil could derail British politics in
another way. If prices keep rising,
motorists will turn on the coalition: as
Andrew Lilico of Europe Economics
points out, fuel duty has jumped a
scandalous 17 per cent since
December 2008, reaching 0.5895p per
litre. Truckers could blockade roads
again, disrupting supply chains; any
settlement which looked as if George
Osborne were going soft on the deficit
would be received very badly by the
markets, which would push up bor-
rowing costs and compound his woes.
4) The Middle East isn’t our only
problem. China has hiked its bank
deposit reserve requirements twice
this year as it battles bubbles. Base
rates are below the rate of inflation,
which means people are being paid to
borrow (if that sounds familiar, it is
because the same is true in the UK).
The one-year benchmark rate is 3.0 per
cent, below the (official) 4.9 per cent
inflation rate. The world is relying on
China for growth; if it falters, trouble
looms.
long, multibillion-dollar swindle.
Picard also has sued JPMorgan
Chase & Co, Madoff’s primary banker,
for $6.4bn, alleging the bank turned a
blind eye to Madoff’s scheme.
Portions of both lawsuits were edit-
ed to conceal names. The lawsuit
against Citi was filed on 8 December
in US Bankruptcy Court in New York.
It cited a September 2008 email by
a Citigroup Global Markets trader to
another bank saying: “We’re needing
to terminate our Madoff trade. Do
you have appetite for that risk over
there?”
Bernard Madoff, 72, is
now serving a 150-
year jail sentence for a
Ponzi scheme worth
up to $50bn
FIRMS TOLD TO SMASH GLASS CEILING
A clutch of Britain’s most respected
companies are among the biggest
businesses that have no women direc-
tors. The Times has found that 18
leading businesses — almost a fifth of
those listed on the FTSE 100 — could
be forced to co-opt women on to their
board.
UNFAIR ENERGY RULES ATTACKED
The boss of Britain’s most polluting
power station has launched a wither-
ing attack on the Government’s plans
to clean up the industry. Dorothy
Thompson, the chief executive of
Drax, the publicly quoted company
that runs the giant coal-fired power
station in North Yorkshire, has criti-
cised the existing rules which mean
that Drax is releasing more carbon
dioxide than it might. Drax is trying
to restrict its pollution by burning
biomass.
5) Yields on US junk bonds recently
hit a record low of 6.8 per cent, less
even than the 6.81 per cent in
December 2004. Risk is again massive-
ly under-priced, a sure sign of exces-
sive liquidity. Low yields on other
assets – caused by central banks – have
encouraged investors to pour into
junk bonds, pushing prices up and
yields down. It’s not all bad: junk still
pays 4.56 per cent more than
Treasuries, up from the mad 2.41 per
cent seen in June 2007. But even then
both rates are too low and the gap too
narrow. One of the biggest problems
in the global economy is that credit –
including that being offered to the US
government – is too cheap. Eventually,
its cost will rise again, trashing equi-
ties and other assets in the process.
The most likely scenario is that we
will be fine, for now at least. But while
pundits are never short of imaginary
risks, the harm caused by these forces
could yet end up being all too real.
allister.heath@cityam.com
Follow me on Twitter: @allisterheath
Adam Posen has consistently voted to keep rates on hold
Posen: Don’t fear inflation
ECONOMY
▲
BY KATIE HOPE
THE public’s fears over inflation should
not pressure the Bank of England into
raising interest rates, external MPC
member Adam Posen argued yesterday.
Posen, who in direct contrast to fel-
low Monetary Policy Committee (MPC)
members Andrew Sentance and Martin
Weale, has consistently voted to keep
rates on hold in recent months, said his
colleagues were wrong to worry that
expectations of rising prices are becom-
DEFENCE SPENDING FEARS HIT BAE
As investors beat a hasty retreat amid
spiralling unrest in Libya, defence
giant BAE Systems suffered the
sharpest slide in the benchmark
index. Fears that the Government
could put a squeeze on military
spending sent traders running for
cover, as a committee of MPs attacked
the Ministry of Defence’s “continuing
failure” to manage spending on major
defence projects.
UK FILM MAKER TO OPEN IN DOMINICAN
Pinewood Shepperton is set to
announce today that it will open a 35-
acre film and television studio in the
Dominican Republic to serve South
America. The Telegraph has learnt
that a ceremony led by Leonel
Antonio Fernández Reyna, the
President of the Dominican Republic,
to welcome the move is scheduled for
today.
CITYA.M. 23 FEBRUARY 2011
NEWS | IN BRIEF
CapCo in talks over Earls Court
Property group Capital & Counties is in
talks over the redevelopment of Earls
Court in west London with one of Asia’s
wealthiest families. The firm is negotiat-
ing a joint venture with the Kwok family,
the controllers of Sun Hung Kai
Properties – Hong Kong’s largest listed
developer. The talks are said to centre
on the redevelopment of a site occupied
by a car park on Seagrave Road, the
Financial Times reports. Chelsea Football
Club had been linked with the site, yet
has reportedly been told it would have
to pay up to £1bn for the land.
BoA shares fall after writedown
Shares fell in Bank of America yesterday
following Monday’s disclosure of a
$20.3bn (£12.6bn) charge on its credit
unit. The non-cash goodwill writedown
paid to regulators will not however affect
its capital or prior earnings, according to
the bank. The measures take into account
weak credit quality in early 2009 as well
as an expected loss of revenue in debit-
card charges under the Durbin
Amendment – a new rule forcing banks to
charge less for each swipe of a card.
Shares closed down 3.9 per cent at $14.18.
ing entrenched, risking a self-fulfilling
spiral. “Putting the welfare of British
citizens foremost does not imply taking
them seriously as macroeconomic fore-
casters”, Posen said.
Speaking at the Oxford Institute for
Economic Policy, ahead of today’s publi-
cation of February’s minutes, Posen
said that a pre-emptive interest rate
increase now would bear similarities to
mistaken tightening moves by central
banks in the early 1930s Great
Depression and the Bank of Japan in
2000. ECONOMICS: P13
NASDAQ EYES A DEAL WITH NYSE
Nasdaq OMX is desperate for a date.
A week after a rival, New York Stock
Exchange parent NYSE Euronext,
announced a $10bn deal to combine
with Germany’s exchange operator,
Frankfurt’s Deutsche Börse, Nasdaq
has been scrambling to find a part-
ner to survive in the eat-or-be-eaten
exchange landscape. The New York
company, under Chief Executive
Robert Greifeld, is assessing whether
it can compete against Deutsche
Börse to buy the NYSE, people famil-
iar with the matter said.
VTB BUYS STAKE IN BANK OF MOSCOW
Russian state-controlled bank VTB
Group has paid $3.5bn to gain a con-
trolling stake in Bank of Moscow.
VTB bought a 46.48 per cent stake in
Bank of Moscow and a one-quarter
stake in the Capital Insurance Group
from the city of Moscow,
CITYA.M. 23 FEBRUARY 2011 News 3

BP plans sale NEWS | IN BRIEF

Dutch banker eyes ECB top job

Dutch central-bank chief Nout Wellink

of North Sea has signalled his interest in the presiden-

cy of the European Central Bank. He told
the Wall Street Journal he was looking
at “future developments with great
interest”. His emergence as a candidate
could be welcomed in Germany, follow-

oil operations ing the surprise withdrawal of

Bundesbank president Axel Weber earli-
er this month.

F1 team tightens IPO price range

Formula One team Williams has reduced
the price range for its €265m (£224m)
listing in Germany next week as a result
▲

ENERGY interest in Wytch Farm, an onshore oil

BY RICHARD PARTINGTON
BP yesterday revealed plans to sell sever-
al assets it holds in the southern North
Sea valued at around $1bn (£620m).
The oil firm plans to use the pro-
ceeds of the sale to plug the void left in
field in Dorset.
The collected output of the assets BP
has put up for sale is around 40,000
barrels per day, well below the output
of its more modern operations.
Around 250 staff are expected to
transfer across to a new owner as part
Guy Hands hopes to claw back his failed investment in EMI.
of violent clashes in the Middle East. The
racing team has tightened its offering of
€24 to €29 per share to between €25
and €27 per share. Formula One’s season
opening race in Bahrain was called off
Picture: Bloomberg earlier this week because of pro-democ-
racy protests in the Gulf state.

Hands’ hope for EMI cash

its finances following the Gulf of
Mexico oil spill.
The sale of the stake will bring the
total value of asset disposals by BP
close to $23bn.
The firm aims to raise $30bn this
year as part of a divestment pro-
gramme to cover the costs of the
Macondo well spill.
However, the final bill is yet to be
settled, with estimates currently close
to $41bn before tax.
Part of the assets BP plans to sell
include the first commercial discovery
in the UK sector of the North Sea.
First discovered in 1965, the firm’s
West Sole operation off the coast of
Lincolnshire has gradually seen its out-
put decrease – prompting the disposal.
BP is also selling its controlling
of the sale.
Regional president for the area Moneybookers owner eyes IPO
Trevor Garlick said: “The assets we The owner of the online money transfer
intend to divest are of high value but service previously known as
find it difficult to compete for capital Moneybookers plans to announce next
and resource within our North Sea week that it is seeking a stock market
portfolio.” PRIVATE EQUITY of our other investments in the fund listing in London aimed at raising about
BY RICHARD PARTINGTON and the potential acquisitions that £150m. Investcorp, the Bahrain-based
ANALYSIS l BP our team are evaluating.” private equity group, could disclose its
p
GUY HANDS, the private equity Hands first invested in EMI – the intention to float Skrill as early as next
500 tycoon, has told investors he can record label behind the Beatles and Monday, according to Sky News.
492.75
22 Feb recover £1.7bn of the cash he lost in Coldplay – in 2007 with backing from
480 British music group EMI. Citigroup. Amazon reveals film service
In a quarterly letter to sharehold- He also said lawyers were continu- Amazon has unveiled a new video
460 ers, the Terra Firma chairman said he ing to appeal a decision last year that streaming channel that allows users to
“remains hopeful of returning all of rejected Terra Firma’s claims it was play films in real time. With a library of
440
the capital” invested in EMI through duped into buying EMI by Citigroup 5,000 titles, the services is limited to
the firm’s TFCP III fund. The bank has since taken control of US-based Amazon Prime members, who
He added: “This will not be easy but the music group and is now looking pay $79 (£49) per year for free shipping
420
1 Dec 9 Dec 4 Jan 25 Jan 15 Feb we are encouraged by the prospects to sell it. on online orders.

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 4 News CITYA.M. 23 FEBRUARY 2011

ANALYST VIEWS: WHAT IS THE LIKELY EXTENT OF THE DAMAGE?

By Alison Lock

ROBERT MUIR-WOOD | RMS UK JOANNA PARSONS | RBS

“ Christchurch city was much closer to

the epicentre and damage is reported to be signif-
icantly higher than last year. Two buses were
crushed by collapsed buildings, contributing to
the high death toll, and there are reports of land-
“ The insurance sector is bound to be
weaker on the news: all Lloyd's, Bermudian
and European reinsurers will be exposed.
However, it depends on the degree of insured dam-
age as if buildings were already damaged in the

” ”
slides. House reconstruction costs are likely to September quake it may not result in the same
exceed the Earthquake Commission’s ‘first size of loss. It means 2011 is starting off as
loss’ limits of £47,000 per building. an active year for natural catastrophes.

STUART DUNCAN | PEEL HUNT

“ This quake looks to have been far worse in terms of loss of life and physical damage than the September quake

”
where loss estimates have been consistently revised upwards. Market estimates currently suggest insured losses amount-
ing to $5.5bn-$6bn, however it seems likely that the market loss will be larger than the September quake.

Rescue workers fear hundreds are still missing in the rubble in Christchurch

New Zealand
quake payout
may top $6bn
or more, based on its exposure to last
▲

INSURANCE
BY ALISON LOCK
LONDON insurers were facing the
prospect of further large losses yester-
day after a 6.3 magnitude earthquake
devastated New Zealand’s largest
south island city Christchurch.
The quake, the country’s worst nat-
ural disaster in 80 years, struck the
busy business district at lunchtime
leaving hundreds trapped by fallen
buildings and at least 75 dead.
Sources close to Lloyd’s insurers
told City A.M. insured losses were like-
ly to start at $5.5–6bn (£3.4-3.7bn), the
level incurred from a 7.0 magnitude
quake that flattened parts of
Christchurch last September.
But they said yesterday’s loss of life
and damage to commercial city cen-
tre buildings means losses to UK
insurers, particularly in the Lloyd’s
market, are likely to be far higher.
Lloyd’s could face losses of $330m
September’s earthquake.
It took a $324m loss from the 2010
quake, equivalent to 5.9 per cent of all
losses, said JP Morgan analyst
Andreas de Groot van Embden in a
note. Amlin lost $160m while Beazley,
Catlin, Hiscox and others each lost
less than $60m.
Peel Hunt analysts led by Stuart
Duncan also expected yesterday’s loss
to outstrip the September quake, and
said reinsurers of state-backed home
insurer the New Zealand Earthquake
Commission may be worst-affected.
Lloyd’s spokesperson Sarah Robson
said it was too early for it to estimate
its exposure to the quake.
“Lloyd’s is contacting all of its part-
ners in the region to ensure they are
safe and accounted for. We will do
everything we can to support them
and to help the city recover by pro-
cessing and paying claims as quickly
as possible,” she said.

Ontario vows to review plans for

TMX and LSE exchange merger
Growing resistance has thrown
▲

MARKETS
CANADA’S most powerful province
yesterday vowed to launch a nonparti-
san review of Toronto and London
stock exchange plans to merge.
Ontario, whose capital, Toronto, is
Canada’s financial centre, questioned
whether London Stock Exchange’s
planned acquisition of Toronto Stock
Exchange parent TMX Group would
benefit the province and the country.
into question whether the deal will
survive an intense review process.
“If it’s an investment, great. If it’s a
takeover, and operations move to
London, that’s not what we’re inter-
ested in,” said Ontario finance minis-
ter Dwight Duncan
TMX chief executive Thomas Kloet
said he takes the opposition seriously
as Canada’s reputation on free trade
and competition hinges on the deal.
 6 News
Mike Duke blamed pricing and merchandising issues for poor sales
Home Depot
income beats
expectations
▲
RETAIL
BY RICHARD PARTINGTON
THE WORLD’S largest home-improve-
ment retailer, Home Depot, has post-
ed sales of $15.1bn (£9.3bn) in its
fourth quarter results.
Analysts had predicted lower rev-
enues of $14.8bm.
The US firm, which operates 2,248
retail stores worldwide, also updated
its profit forecasts for this year on
the back of the stronger than expect-
ed performance.
It said it now anticipated a 2.5 per
cent increase in sales for this year,
with earnings per share increasing
approximately 9.5 per cent to $2.20.
Home Depot’s net income
increased to $587m in the three
months to 30 January this year, up
from $301m a year earlier.
Overall sales last year for the firm
hit $68bn, an increase of 2.8 per cent
on a year earlier. Earnings per dilut-
ed share were $2.01, compared to
$1.55 per diluted share a year earlier.
The company said it planned to
open ten new stores this year and
repurchase approximately $2.5bn of
outstanding shares.
Chairman and chief executive
Frank Blake said: “We continued to
invest in our business and made
solid progress against our key initia-
tives.
“We completed the roll out of our
Rapid Deployment Centers, an
important part of our distribution
network; we saw year-over-year
improvement in customer service
ratings; and we continued progress
on our merchandising transforma-
tion. Our actions, coupled with an
improving economy, resulted in pos-
itive sales growth for the year, the
first time since 2006.
“Our associates did an outstanding
job in 2010. Their hard work and ded-
ication made these accomplishments
possible.”
Macy’s eyes growth as profits lift by 50pc Bookseller halts dividend
▲
RETAIL
BY RICHARD PARTINGTON
MACY’S, the US department store chain,
has increased its fourth-quarter profits
by 50 per cent, predicting further
growth this year.
The retailer, which also operates the
Bloomingdale’s brand, saw sales
increase to $8.27bn (£5.1bn) in the 13
weeks to 29 January this year.
Net income for the firm was $667m
Picture: Reuters
over the period, up from $445m a year
earlier.
Cincinnati-based Macy’s recorded
sales of $25bn for the full-year, up 6.4 per
cent on 2009.
The retailer opened several new stores
across the US, as well as a branch of
Bloomingdale’s operated under licence
by a third party in Dubai.
Chief executive Terry J. Lundgren
said: “2010 was a very successful year for
Macy’s and Bloomingdale’s based on a
Wal-Mart sales still slide
▲
RETAIL
BY HARRY BANKS
WAL-MART yesterday posted its sev-
enth consecutive quarterly drop in
sales at established US stores and said it
will take some time to turn things
around in its biggest market.
The world’s largest retailer, whose
shares closed down 3.1 per cent, has
struggled with pricing as it has lost cus-
combination of strong sales, steady mar-
gins and continued expense discipline.
“A successful holiday selling period in
2010 reinforced the effectiveness of our
talented team, our unique organisation-
al structure and the process that has
transformed Macy’s to a culture of
growth.
“We believe that our company is now
on a clear path that will lead to contin-
ued growth in sales, earnings and cash
flow in the years ahead,” he added.
tomers to cheaper stores while recover-
ing from a poorly executed decision,
since reversed, to pare down the num-
ber of items it offered.
“Some of the pricing and merchan-
dising issues in Wal-Mart ran deeper
than we initially expected, and they
require a response that will take time
to see results,” Wal-Mart chief executive
Mike Duke said.
Fourth quarter like-for-like sales at
RETAIL
BARNES & NOBLE, the world’s largest
bookseller, has suspended its divi-
dend payments after a drop in profits.
Net profits for the three months to
the end of January fell to $60.6m
(£37.6m) for the US retailer, down 25
per cent from the $80.4m recorded a
year earlier.
The results, impacted by a poor hol-
iday period quarter, prompted the
CITYA.M. 23 FEBRUARY 2011
US stores fell by 1.8 per cent. The retail
giant posted earnings per share of
$1.34 (83p) before one-off items, against
expectations of $1.31. Total fourth
quarter sales of $115.6bn missed Wall
Street expectations of $117bn.
Meanwhile, staff at Asda, the British
supermarket chain owned by Wal-
Mart, will share in a £27m bonus pot.
Asda helped boost its parent compa-
ny’s international sales nine per cent.
Shares fall
for HP after
weak result
▲
TECHNOLOGY
BY RICHARD PARTINGTON
HELWETT-PACKARD failed to meet
investors’ sales expectations, resulting
in a fall in shares.
The US technology giant said rev-
enue for its first fiscal quarter of this
year climbed 3.6 per cent to $32.3bn
(£20bn), below forecasts of $33bn.
Shares in the firm fell 12 per cent in
after hours trading to $42.4 following
the news.
Sales in two of its core businesses –
personal computers and technology
services – contributed to the drop.
The limp performance overshad-
owed higher than expected fiscal first-
quarter profit, driven in part by cost
discipline and lower component costs.
The firm recorded a 16 per cent
jump in profit to $2.61bn, or $1.17 per
share. Revenue increased 3.6 per cent
to $32.3bn.
The results could worry investors in
the world’s biggest PC maker, which
had become a likely candidate for a
turnaround story.
Shares in the firm fell significantly
following the departure of chief execu-
tive Mark Hurd last summer.
However stocks had begun to rise
again this year prior to yesterday’s
announcement.
New chief executive Leo Apotheker
will attempt to address the California-
based firm’s woes as he unveils his
strategy for the firm next month.
ANALYSIS l Hewlett Packard
50 $ 48.23
22 Feb
46
42
22 Nov 10 Dec 4 Jan 24 Jan 11 Feb
firm to suspend its dividend to pre-
serve its shrinking cash reserves.
Barnes & Noble also decided not to
give investors a sales and profit fore-
cast for the current quarter, saying
that going-out-of-business sales at 200
locations operated by its bankrupt
rival, Borders Group, could pressure it
in the short term.
Chief executive William Lynch said:
“We’re pleased with our financial
results this quarter.”
CITYA.M. 23 FEBRUARY 2011
Revenue up as
public purse
hits a surplus
UK ECONOMY
▲
BY JULIAN HARRIS
CHANCELLOR George Osborne
received a double boost yesterday,
after the government recorded its
largest monthly surplus for two
years, and the US treasury secretary
gave a ringing endorsement of the
coalition’s austerity plan.
The government’s preferred meas-
ure of borrowing, which excludes
financial sector interventions,
revealed a £3.7bn surplus, as tax rev-
enues soared.
Total borrowing including inter-
ventions (PSNB) hit a surplus of
£5.3bn.
Tax receipts jumped by 12.4 per
cent compared to the same time last
year, with corporation tax up 13.2
per cent, and income taxes up 18.9
per cent.
VAT revenue surged to £8.5bn –
from £7.8bn in December – following
the chancellor’s decision to hike the
tax to 20 per cent from 4 January.
And Osborne’s plan to reduce
News 7
ANALYSIS l Government spending fell slightly in January...
55
45
£bn
2010/11
2009/10
35
Jun Sep
ANALYSIS l ... while tax receipts rose sharply
Source: Office for National Statistics
Dec Mar
66 Jan
£bn
56
2010/11
46
2009/10
36
Britain’s deficit -- expected to hit
Source: Office for National Statistics
£148.5bn this financial year, accord-
ing to the government’s fiscal watch- Jun Sep Dec Mar Chancellor Osborne’s cuts are on track Picture: PA
dog – was endorsed by US Treasury
secretary Timothy Geithner.
“I am very impressed at the basic
ECONOMIST VIEWS: IS THE GOVERNMENT ON COURSE TO SLASH THE
strategy he has adopted,” Geithner
said.
DEFICIT? By Julian Harris
“At a time when it was easier to HETAL MEHTA | DAIWA CAPITAL PHILIP SHAW | INVESTEC
“ “
make tough choices quickly, he
locked this coalition into a set of
reforms that were very good.” The figures are a relatively small January’s public finances data delivered
However, the government’s net improvement from a wretched position last year a positive surprise, as both tax receipts and
debt still stands at £867.2bn, 57.6 per
cent of GDP, up from £720.9bn, 50.4
when we had the first ever January deficit. The spending showed favourable trends. However,
per cent of GDP, at the same time government still has a long way to go in terms of there is still a long way to go. Government bor-
reining in its expenditure. Next month's budget rowing in calendar year 2010 amounted to
” ”
last year. Expenditure was up 4.4 per
cent on the same time last year. will show how committed it is to bringing around 10 per cent of GDP, the same size
“Underlying net debt as a propor- the public finances into order. as the Greek deficit.
tion of GDP is a relatively benign,”
said Investec’s Philip Shaw, “but the
debt will stay on a rising trend as the MICHAEL SAUNDERS | CITIGROUP
“
annual deficit remains high.”
“Next year’s discretionary fiscal
consolidation of £41bn, 2.7 per cent In all, these figures leave borrowing in April to January down by £14.2bn from a year ago, a markedly faster
”
of GDP, will be critical in ensuring pace of improvement than expected by the Office for Budget Responsibility. It seems likely that the deficit will undershoot
that borrowing continues to fall,”
Shaw warned.
the OBR’s forecast by about £8bn, ending up at about £140bn excluding financial interventions.
 8 Focus on Middle East turmoil
Egypt asks UK for debt help
▲
WORLD
BY STEVE DINNEEN
Egypt has asked the UK to help it can-
cel its debt with the EU.
Finance minister Samir Radwan
revealed he held talks with new UK
trade minister Lord Stephen Green.
Egypt wants the EU to halt interest
payments and consider cancelling the
entire debt, as the North African coun-
try seeks to get back on its feet follow-
ing the overthrow of Hosni Mubarak.
It also wants the UK to increase the
Saudi says it
will meet oil
shortages
▲
OIL
BY STEVE DINNEEN
SAUDI Arabia yesterday said it would
step in to meet shortage in oil caused
by the chaos in Libya.
Saudi Arabian oil minister Ali al-
Naimi said there would be no shortage
and that other Opec members would
step into the breach should produc-
tion be jeopardised.
Speaking at the sidelines of an oil
conference in Riyadh, al-Naimi also
said that oil supply and demand were
equal and that there was no shortage
of supply.
Libya is the third-largest oil produc-
er in Africa, and has Africa’s largest
proven oil reserves at 44bn barrels.
However, Libya produces around
1.6m barrels of oil per day, and OPEC
has spare capacity of up to 6m barrels,
meaning that in theory even if all
exports were stopped this would not
create a supply shortage.
However, the fear is the contagion
THE GADDAFI EFFECT | HOW MARKETS WERE HIT BY THE CHAOS IN LIBYA
ANALYSIS l Brent Crude Oil
110 $ 106.46
22 Feb
108
106
104
102
Tue Wed Thur Fri
World with a Future
EVENT 24-25 March 2011, The Eden Project, Cornwall, UK
level of investment in the country.
The new government said it would
continue with dramatic economic
reforms and would seek to compen-
sate those who had property dam-
aged or lost jobs as a result of the
protests.
Trade minister Lord
Stephen Green dis-
cussed bringing UK
investment into the
Egyptian economy
could spread to places like Algeria,
Kuwait or the United Arab Emirates.
Analysts and investors are also
increasingly concerned that tensions
in Bahrain could spill over the border
into Saudi Arabia.
Shell yesterday continued the evac-
uation by oil firms of non-essential
staff, while German company
Wintershall has wound down produc-
tion completely as a precautionary
measure.
Iran has also stopped its oil-related
activities in Libya and will evacuate
staff in the next 48 hours.
Brent futures rose again yesterday
and US crude oil reached a two and a
half year high on concerns the revolt
in Libya could spread to other major
oil producers as companies suspended
operations and ports were disrupted.
US crude for April delivery was up
$5.71 at $95.47. Brent crude oil futures
for April delivery were up 75 cents to
$106.46, after earlier touching $108.57,
near Monday’s high of $108.70.
ANALYSIS l FTSE 5996.76
6,100
6,050
6,000
5,950
Tue W T F M T W
Meanwhile, EU finance ministers
yesterday discussed freezing the
assets of a string of high-profile for-
mer Egyptian officials.
The UK, US and France confirmed
the request but said Mubarak was not
on the list.
Mubarak, who resigned on Friday
after weeks of protests, and other sen-
ior officials are suspected of having
sent billions of dollars of assets
abroad. Protesters have called for the
cash to be clawed back to help allevi-
ate poverty in Egypt.
Protesters tear a copy of Colonel Gaddafi’s Green Book yesterday
ANALYSIS l Xetra DAX
22 Feb 7,450 7318.35
7,400
7,350
7,300
T F M T W T F M
® Book now
New business thinking is key to survival
and success in a fast-changing world.
Join us at our special 50th anniversary event
to learn how to build resilience to current
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±DQGDFKLHYHERWWRPOLQHEHQH¿WV
Italian bourse shut down after
spooked investors sell off stocks
▲
TRADING
THE Italian bourse was brought down
yesterday following frenzied sales of
stocks by investors spooked by its
heavy exposure to Libya.
Trading in stocks, bonds, warrants
and exchange-traded funds (ETFs) had
been suspended from the start of the
day until 2.30pm.
Borsa Italiana, a unit of the London
Stock Exchange, said the cause of the
total shutdown was not known but
ANALYSIS l FTSE Eurofirst 100
1,190
22 Feb
1,180
1,170
T W T F M T
Visit – www.panda.org/worldwithafuture
Call – 01483 412394
Email – betterbusiness@wwf.org.uk
CITYA.M. 23 FEBRUARY 2011
market participants pointed out that
it followed a sharp spike in volumes
on Monday.
Lobby groups have called the clo-
sure “suspicious” and called for more
information on the technical prob-
lems. Italian market regulator
Consob demanded an explanation for
the embarrassing halt, the longest in
at least seven years.
Italy has massive exposure to Libya,
especially through its mining opera-
tions in the country.
LIBYA | LIBYA’S CHEQUERED
RELATIONSHIP WITH THE WEST
1951: Libya becomes independent
under King Idris al-Sanusi.
1969: Colonel Gaddafi deposes King
Idris al-Sanusi in a military coup,
introducing socialism by nationalising
almost all economic activity, including
the oil industry.
1981: US shoots down two Libyan
aircraft over what Libya considers its
waters, after US warplanes were
confronted.
1984: British policewoman is shot
dead outside the Libyan embassy in
London.
1988: A PanAm airliner is blown up
over the Scottish town of Lockerbie.
2001: Abdelbaset Mohmed Ali al-
Megrahi is found guilty of the plane
bombing in a trial in the Netherlands.
He is sentenced to life imprisonment.
His co-accused is found not guilty. His
conviction is widely questioned.
2009: Al-Megrahi is controversially
freed from prison on compassionate
grounds.
2011: Protests start on 16 Febfuary
in Benghazi and quickly turn violent.
Protesters take over the city and
Gaddafi is forced to flee. Hundreds
are killed in brutal clashes.
1165.57
22 Feb
W T F M T W T F M T
CITYA.M. 23 FEBRUARY 2011
Santander in
sale of LatAm
insurance arm
▲
INSURANCE
BY ALISON LOCK
INSURANCE giant Zurich Financial
Services signed a $1.67bn (£1.03bn)
distribution deal with Spanish bank
Santander yesterday to fast track its
growth in Latin America.
The 25-year deal sees Zurich take a
51 per cent stake in Santander’s life
insurance, pension and general insur-
ance operations in Brazil, Mexico,
Chile, Argentina and Uruguay.
The sale will free up valuable cash
at fast-growing Santander to help it
meet more stringent Basel III capital
requirements coming into effect in
2013, and absorb recent acquisitions.
Zurich chief executive Martin Senn
said the acquisition offered “a rare
combination of high growth poten-
tial and strong cash flow generation”.
The price covers 80 per cent of the
deal value, with Zurich paying
Santander the remaining 20 per cent
in installments every five years on a
profit-share basis.
Santander’s Latin American insur-
ance business is well-established with
more than 5,600 branches, and the
deal will make Zurich the region’s
fourth-biggest insurer. Zurich gener-
ates 35 per cent of its life insurance
new business value from emerging
markets. The deal will be earnings-
accretive immediately.
Santander expects to bank $1.21bn
in capital gain from the sale, which is
a non-core asset for it as it buys bank-
ing assets across Europe.
JPMorgan Chase advised Zurich on
the deal, which should close by the
first quarter of 2012.
ANALYSIS l Banco Santander
9.00 €
8.86
8.50
22 Feb
8.00
7.50
29 Nov 13 Dec 10 Jan 31 Jan 21 Feb
Emilio Botín’s Santander booked a $1.2bn capital gain on the deal
Zurich taps growth market
YOU would think Santander must
be mad for selling part of its life
insurance business in Latin
America. True, the industry hasn’t
been growing at its scorching pre-
crisis rate, but the potential still
eclipses most other markets.
In 2010, Santander grew its Latin
American insurance premiums by
almost a third to $1.9bn, and there
is considerable scope for further
gains. In earthquake-prone Chile,
the region’s most mature market,
gross written premiums are equiva-
lent to just 3.9 per cent of GDP, fol-
lowed by Brazil (3.1 per cent),
Argentina (2.6 per cent), Mexico (2
Picture: REUTERS
per cent), and Uruguay (1.6 per
cent). In the UK and Switzerland,
the figure is nearer 13 and 10 per
cent respectively.
Santander’s rationale for selling
up is two-fold. First it thinks, right-
ly, that an insurance specialist will
grow the pie more quickly (even if
the Spanish slice is now half the
size). And a $1.2bn capital gain will
help it fatten up to digest recent
acquisitions and meet stricter capi-
tal requirements.
BOTTOMLINE
Analysis by David Crow
News 9
M&A by energy
firms at highest
levels on record
ENERGY
▲
DEALS between energy and power
firms have helped to boost the volume
of mergers and acquisitions to
$93.7bn (£57.9bn), the highest level
since records began.
Activity, boosted by several large
deals, lifted deal volume by 40 per
cent compared to the first few months
of last year.
The figure was helped by three of
the year’s biggest energy deals so far.
Anglo-Australian mining giant BHP
Billiton’s £4.75bn move for US energy
firm Chesapeake, announced yester-
day, is one of the biggest cross-border
deals to be unveiled this year to date.
Cross-border merger activity
between energy firms has hit $58.1bn
in total so far, accounting for 63 per
cent of worldwide merger activity in
the sector.
Deals targeting US energy firms have
hit a record $47.2bn, or 50 per cent of
worldwide activity in the sector.
US gas and electricity provider
Duke Energy’s $25.7bn merger with
Progress Energy, announced last
month, is the biggest deal so far this
year.
London-based oil giant BP’s pur-
chase of a $9bn stake in Indian firm
Reliance Industries, announced earli-
er this week, is the biggest cross-bor-
der deal so far. BHP DEAL: P11
 The Capitalist
10
PROOF THAT SEX SELLS
AS RACY DOMAIN NAME
BREAKS WORLD RECORD
ACCORDING to the famous TV
theme, “Dedication’s what you
need; if you wanna be a record
breaker”. And it looks like the sell-
ers of the Sex.com domain name
should be grateful to internet users
everywhere for their dedication to
illicit surfing – the £8.2m sale of
the address last year means it has
been officially recognised as the
most expensive domain name in
the world.
Online domain broker Sedo
spent two years putting together
the sale, with the lucrative hours
spent “establishing the relation-
ship, researching and finding the
right buyer”.
Apparently that mystery buyer
was the privately held Clover
Holdings – a company that very lit-
tle is known about beyond it being
registered in the Caribbean island
of Saint Vincent. Clover jumped in
with the highest offer just a week
before the domain was due to go to
auction, denying all those budding
internet porn barons the chance to
snap it up.
Once the sale was complete the
Guinness World Record officials
were called in to verify its status –
dragging them away from their
day-to-day fare of measuring the
world’s longest piece of nougat and
counting members of the largest
kazoo ensemble.
The news also comes as former
home secretary Jacqui Smith hits a
different kind of campaign trail,
publicising her Radio 5 Live docu-
mentary on the UK’s porn industry.
In promo shots for the show
Smith is photographed in a shiny
trenchcoat outside one
Soho’s less salubrious nightspots,
turning her hand to a new career
as a broadcaster on the back of her
CITYA.M. 23 FEBRUARY 2011
EDITED BY
ELIZABETH FOURNIER
GOT A STORY? EMAIL
thecapitalist@cityam.com
Jacqui Smith
is hitting a
different kind
of campaign
trail, publicis-
ing her radio
documentary
on the UK’s
porn industry
husband’s embarrassing viewing ed kid’s menu appears, or high-chairs
of
habits.
It seems like the old adage – sex
HOLDING THE BABY and crayons are handed out on
IT looks like childcare arrangements arrival.
sells – is still ringing true in two of are really being stretched by the
the world’s oldest professions; busi- majority of London’s schools being on
ness and politics. half-term this week.
Spotted in the City canteen, No. 1
RUGBY FOR RIFLES
For those already dreading in
Ex-home secretary Lombard Street, yesterday lunchtime: advance the end of the Six Nations
Jacqui Smith poses two men and a baby. tournament next month, fear not.
outside a Soho The diners, who tactfully posi- Rugby fans still can get their fix
nightspot tioned themselves near the restau- and support a good cause at the
rant’s entrance, were seen engaged in same time on 2 April, as Orpington
Pictures: lively conversation as the child – residents the Westcombe Park Colts
GETTY, BBC who stayed in his buggy rather take on local rivals the Bromley
than taking a seat at the Borough BaaBaas in a charity
table – looked on, no doubt a match to raise money for both
captive audience to discus- the Rifles Benevolent Trust’s
sions of rights issues and the Care for Casualties appeal, and
like. the Royal British Legion’s poppy
A call to the appeal.
restaurant con- Trading platform
firmed that it Savi Markets is spon-
has no set child soring the match,
policy in place, which is being played
so while older in honour of local hero
kids hit the slopes James Brown, who was
with whichever killed in Afghanistan in
parent has been 2009 at the age of 18.
lucky enough to Profits raised will also go
book this popu- towards installing a perma-
lar week off, it nent brass tribute plaque at
looks like those still James’ old school, and at his
hard at work have local Royal British Legion club.
found the perfect At just £3 entry and with
lunchtime creche. Westcombe Park’s clubhouse
It could be a open from 10.30am, even non-
while though rugby fans are guaranteed a
before a dedicat- good time.
CITY EYE
WINDOW cleaners
Lee Mason (left) and
Paul Wright pause
for a break in their
cleaning gondola out-
side the 50th floor of
the One Canada
Square skyscraper,
the London home of
Bank of New York
Mellon and NYSE
Euronext, on 8
February 2011.
It takes a month to
clean all the windows
on what is currently
the tallest building in
Britain (until the
Shard takes over in
2012), with the clean-
ers suspended up to
190m from the
ground.
Picture: GETTY
CITYA.M. 23 FEBRUARY 2011 News 11

BHP’s shale gas deal gets a MARK WARHAM

BARCLAYS
CAPITAL
BarCap yesterday, although the bank
declined to comment on this.
Vickers helped set up the bank’s
energy and resources team alongside

thumbs up from the market

BHP has hired Barclays Capital to
advise on its deal with Chesapeake,
rounding off a lucrative few weeks for
▲
Jim Peterkin.
Both Warham and Vickers joined
BarCap in May 2009 to beef up its
M&A team.
Warham moved from Morgan
Stanley, where he was head of UK
M&A, while Vickers was poached
from Citigroup.

ENERGY
BY MARION DAKERS
BHP Billiton’s share price rose yester-
day after details of its $4.75bn
(£2.94bn) purchase of US gas firm
Chesapeake’s assets and $5bn buy-
back filtered through the market.
BHP, which announced the plans to
the London market yesterday, said it
would take over Chesapeake’s shale
gas reserves in the Fayetteville field in
Arkansas to gain an exposure to the
growing shale gas industry.
The acquisition, BHP’s largest in six
years, pits it against China in a race
for global energy assets, following
state-owned PetroChina’s C$5.4bn
(£3.38bn) agreement to buy shale gas
stakes from Canada’s Encana earlier
this month.
BHP also announced plans for a
$5bn off-market buyback of its
Australia-listed shares as part of its
$10bn buyback announced last week.
Charles Kernot at Evolution
Securities welcomed the Chesapeake
deal, saying in a note to investors that
“shale gas has the scope to grow into
a significant business line for BHP
Billiton”.
BHP shares rose 1.6 per cent to
£24.13 yesterday, beating a general
decline in the FTSE 100
Mark Warham, co-head of European
M&A at the bank.
The BHP advisory job comes closely
after Warham’s team brought in the
London Stock Exchange as a client for
its £4bn merger with Canadian
exchange TMX earlier this month.
Market chatter named energy spe-
cialist Julian Vickers as the banker
who won the BHP mandate for
Leeds-born Warham is currently a
member of the Takeover Panel, and
served as its director general
between 2005 and 2007.
Advising BHP on the US aspects of
the deal is Scotia Waterous, the oil
and gas M&A specialist owned by
Canada’s Scotiabank.
Chesapeake Energy is being
advised by Jefferies.

BAA narrows
annual losses
despite snow
▲

TRANSPORT
BY MARION DAKERS
HEATHROW and Stansted owner BAA
narrowed its losses to £316.6m in 2010,
it announced yesterday, as a rise in
retail spending at its airports made up
for some of the £58m hit from snow,
ash and strike disruption.
BAA, owned by Spain’s Ferrovial,
said revenue rose 4.9 per cent to
£2.07bn last year.
Losses were cut by 61.5 per cent to
£316.6m, in part due to a £218m pen-
sions charge in 2009 that skewed the
figures.
Net retail income per passenger
rose 12.1 per cent to £5.29, while over-
all passenger numbers declined 1.8
per cent.
BAA said that stripping out one-off
disruption, passenger numbers actu-
ally rose 3.4 per cent at Heathrow and
fell by up to 4.8 per cent at Stansted.
“These results represent pretty
solid progress given the numerous
setbacks we had last year,” said BAA
chief executive Colin Matthews, who
turned down his bonus after criti-
cism of the firm’s handling of the
snow over Christmas.
The firm launched an
inquiry into its performance during
the weather. It was headed by non-
executive director David Begg and is
due to report in March.
Matthews said he was confident
that BAA could improve on its
“robust financial performance”.
“We would expect business travel
to keep growing – especially to China
and India given the growth there. In
2011, we expect to deliver a strong
increase in profits and cash flow,” he
said.
He added that the firm had not
decided its next steps after a competi-
tion commission ruling that ordered
BAA to sell Stansted and one of its
Scottish airports.
ANALYSIS l British Airways
305 p
282.50
295 22 Feb
285
275
265
255
10 Dec 30 Dec 19 Jan

BAA’S RESULTS AT A GLANCE

Pre-tax loss cut by
61.5 per cent to

£316.6m
Revenue up 4.9 per UK passengers using BAA Stansted traffic
cent to airports fell 8.1 per cent to fell 7 per cent to

£2.07bn 6.6m 18.6m

– around 1m
Heathrow traffic fell European passengers using BAA journeys lost
0.2 per cent to airports fell 1.8 per cent to through strikes,

65.7m 42.8m ash clouds

and snow

d
– 2.4m journeys lost d
through strikes, ash
clouds and snow
d
 12 News CITYA.M. 23 FEBRUARY 2011

Minerva values
ANALYSIS l February has been a busy month for European debt sales

UK market for 60
$bn
14

rise but lettings

54.9
50 £ and € sovereign debt issues ($bn) 12

Numbers of issues

cocos to be 40
10
remain elusive

40.3
8

worth £44bn
30 PROPERTY

▲
6 PROPERTY developer Minerva
remained tight-lipped over possible
20 tenants for its Walbrook and St

21.3
21.0
4 Botolph developments yesterday, as it

19.1

20.3
reported a 6.2 per cent rise in net asset
value.

13.9
10

17.6

17.3

17.7
2
▲

BANKING unprecedented means of raising cash The London-focused firm made

8.3
BY JULIET SAMUEL due to higher capital requirements. £10.4m profit in the last six months of

0.0

0.0
1.0
Basel III’s limited definition of qualify- 2010, while the value of its properties
THE market for contingent convertible ing capital could make cocos, which 0 rose 3.2 per cent to £1.2bn
bonds (cocos) in the UK alone is worth are bonds that turn into equity if a Jan Feb 2 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb “Our short term priority is to lease
2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2011 2011
at least £44bn, according to analysis by bank’s capital ratio falls below a trig- our City properties, finish and sell
Bank of America/Merrill Lynch. ger threshold, the cheapest option. Lancaster Gate and consider a joint

Europe rushes to sell debt

The figure is equivalent to two per
cent of risk-weighted assets at the UK’s
five largest banks, which is a low-ball
estimate of the extra capital buffer
that systemically important banks will
be required to hold. It could be as high
“If cocos are less expensive for the venture for the Kensington Odeon
bank than other forms of capital, side,” chief executive Salmaan Hasan
shareholders would probably want the told City A.M.
board to have at least considered Lancaster Gate, a luxury residential
them,” says BoA/ML’s Daniel Bell. development near Hyde Park, is 60 per
Basel III demands a minimum core cent let, Hasan said, with almost all of
SOVEREIGN DEBT
▲

as five per cent, or £110bn. tier one capital ratio of seven per cent issuances, with sovereigns placing the retail space at the St Botolph office
Banks are being forced to consider by 2019. On top of this, systemically BY JULIET SAMUEL £20.3bn versus nothing in December block now pre-let.
important financial institutions (SIFIs), 2010. Industry insiders said this week that
ONLY A HANDFUL OF BANKS HAVE ISSUED COCOS which will include a country’s largest FEBRUARY has been the busiest Portugal was also due to hold an Santander was in talks with Minerva
WHEN BANK ISSUANCE CAPITAL
banks, will have to have to hold two to month for European sovereign debt auction this week, but backed out to take space in the Walbrook, but
RATIO TRIGGER five per cent extra. issuance since March 2010, accord- after its last auction saw yields on five- Hasan declined to comment on
Credit Suisse’s public issuance of ing to data from Thomson Reuters. year debt rise to a punitive 6.4 per whether the bank is still interested
November 09 Lloyds £8.5bn 5%
€2bn in cocos last week was heavily With only a few days in the year’s cent – the highest since 1988 – and He told City A.M. that there has been
March 10 Rabobank €1.25bn 7% over-subscribed, with yield-hungry shortest month left to go, the data forced the European Central Bank to renewed interest since the start of the
investors snapping up the five year shows that sovereigns have been intervene to the tune of €711m. year, putting the number of potential
July 2010 UniCredit €500m 6% notes at a 7.88 per cent coupon rate. packing their debt sales into the first Spain has held the biggest sale so tenants in the “mid-single figures”.
January 11 Rabobank $2bn 8% The high demand is likely to encour- quarter, with $21.3bn (£13.1bn) far in 2011, having sold €6bn of 10- Minerva also said takeover talks
age other banks to issue the notes as issued so far and Germany planning year notes in January at a 5.5 per with an unnamed possible bidder
February 11 Credit Suisse SFr6bn 7% soon as the European Commission a €7bn (£5.9bn) auction today. cent yield, but that is due to be were ongoing, but refused to reveal
February 11 Credit Suisse €2bn 7% approves them. January also saw a rush of eclipsed by Berlin’s auction today. any details.

Europe
one way from

£ 49
including taxes
CITYA.M. 23 FEBRUARY 2011
Three year high for US morale Euro holds strong as ECB
US ECONOMY
▲
BY JULIAN HARRIS
AMERICAN consumers are the most
upbeat they have been since February
2008 as the US economy continues to
rebound, official data showed yester-
day.
“Rising equity prices, falling unem-
ployment and the boost to disposable
incomes from the payroll tax cut are
more than offsetting the effects of
higher gasoline prices and lower
house prices,” commented Paul Dales
of Capital Economics.
High street morale was boosted
Established
stocks take
back mantle
WORLD ECONOMY
▲
BY JULIAN HARRIS
STOCKS in developed markets have
rallied in the opening weeks of this
year, driven by more optimistic fore-
casts from the US and Europe.
Despite a knock to equities from
the recent uprisings in the Middle
East, developed country markets are
attracting investors more than
emerging markets, for the first time
since 2007.
The MSCI World Index of equities,
designed to measure the equity mar-
ket performance of 24 developed
markets, began the year on 1277.20,
but shot up 6.6 per cent to 1362.62 by
the end of last week.
The Libyan crisis has seen the
measure of stocks slip to 1358.10, but
analysts remain optimistic.
“Developed markets, led by Wall
Street, have outperformed emerging
markets, which have been going
nowhere for a few months,” Brewin
Dolphin chief strategist Mike
Lenhoff told City A.M.
The boost has been driven by
upwardly revised economist fore-
casts in the West. In America the
recovery is being boosted by a
CITY VIEWS: SHOULD STATE BENEFITS FOR THE ELDERLY BE RINGFENCED?
PETER HESKETH |
INSURANCE BROKER
“I strongly believe pensioners who
need benefits should get them. But
there are those
who just don’t
need them and
so in some
cases they
should be
revised and
means tested.”
despite upward revisions being made
to recent months due to changes in
the Conference Board’s methodology.
The headline figure for consumer
confidence reached 70.4 this month,
from 64.8 in January.
And consumers are optimistic for
the near future, with the survey’s
expectations index surging to 95.1,
from 87.3 last month, smashing the
long term average of 92 for the first
time since the recession.
America’s recovery was also reflect-
ed in the Federal Reserve Bank of
Richmond’s manufacturing figures,
which bounced back strongly.
“unique” environment of loose mon-
etary and fiscal policy, Lenhoff said.
“US is operating in its own orbit,”
he added. “In Europe there’s at least
fiscal austerity. Yet Germany too, the
anchor of the Eurozone, is going
very strong, and the French outlook
has been upwardly revised.”
In emerging markets, stocks fell
2.7 per cent between the start of
2011 and the end of last week (from
1153.55 to 1122.01, as measured by
the MSCI Emerging Markets index).
The slowdown reflects greater
monetary tightening in the world’s
upcoming countries, where
economies were starting to overheat,
Lenhoff said.
“In China both rates and the
reserve requirement have increased,”
he said, “while rates are going up
everywhere – India, Korea, Latin
America, and in emerging European
countries like Poland and Hungary.”
The rise in commodity prices is
more likely to affect people in devel-
oping countries, Lenhoff explained:
“If more of a family’s budget goes to
keeping body and soul together, food
prices bear greater importance.” This
has made rate hikes more urgent in
those areas, Lenhoff said.
Interviews by Maeve Slattery and Maria Tadeo
ALEX KENNEDY |
INSURANCE BROKER
“Top earners work for over 20
years and pay a considerable
amount of tax-
putting a lot of
money into the
system. So why
shouldn’t they
be entitled to
benefits once
they retire?”
weighs up inflation risks
The index climbed back to 25 this
month, as new orders soared by 10
points (from 17 to 27), the Richmond
EUROZONE ECONOMY
▲
Fed announced yesterday.
However, the US housing market
continues to slump, with prices THE euro held up against the dollar
falling 0.4 per cent in December, com- yesterday, as chaos in Libya was offset
pared to the previous month. by hawkish rhetoric from a senior
In the final three months of 2010, European Central Bank official.
prices in 20 main US cities dropped Having dropped as much as one per
3.9 per cent on the previous quarter, cent against the dollar as the Libyan
the Case-Shiller home price index crisis escalated, the euro recovered to
revealed yesterday. test $1.37 (£0.85) following the com-
“The silver lining that they should ments by ECB policymaker Yves
be bottoming out soon,” said ING’s Mersch.
Teunis Brosens. Inflation is likely to stay above the
Escalating food prices place pressure on emerging market governments. Picture: Reuters
ANALYSIS l Stock Prices in Wealthier Markets ANALYSIS l Stock Prices in Emerging Markets
1,175
1,400
p p
1,150
1,300
1,125
1,100
1,200
2011 Jan Feb Mar
2011 Jan Feb Mar
Old people need to share
PAMIR DOTAN |
LAB49 CONSULTING FIRM
burden of cuts: think tank
“The retirement benefits you are UK ECONOMY
▲
entitled to should relate to how
much you PUBLIC finances could save £16bn a
year if the government reduced state
earned entitlements for older people, the
throughout Institute of Economic Affairs (IEA) will
announce today.
your working Universal benefits – provided to
life and also everyone, including the rich – such as
relate to your winter fuel allowance should be abol-
ished, the influential Westminster-
personal based think tank is expected to say.
finances.” By 2015-16, £2.1bn a year could be
saved by scrapping the allowance.
News 13
ECB’s two per cent target of for the
whole of 2011, Mersch said.
“I would not be surprised at most
ECB colleagues concluding that we
have upside risks to price stability,” she
added, stressing that the outlook has
changed.
“We are experiencing a new exter-
nal shock -- this is not only coming
from oil prices, it’s all kinds of com-
modity prices and on top we also have
pressure on food prices.”
WEALTH MANAGEMENT: P19
NEWS | IN BRIEF
Food inflation fears grow in UK
Over nine out of ten shoppers expect
further food price inflation in the next 12
months, grocery research firm IGD said
yesterday. Price pressure are increasing-
ly feared by consumers, its survey
showed. A third of respondents believe
food will become “much more expen-
sive” in the next year. Last October, just
19 per cent feared “much more expen-
sive” food items. “There’s been wide-
spread media coverage of rising
commodity prices and the pressures it is
placing on the cost of food, and we see
the effect of this coming through in our
shopper research,” said IGD chief execu-
tive Joanne Denney-Finch.
German consumer outlook rises
German consumer confidence has risen
for the ninth straight month, the widely
regarded Gfk survey revealed yesterday.
The forward-looking index rose from 5.8
this month to six points for March – its
highest reading since October 2007,
prior to the financial crisis. “While
Germany’s recovery has been driven
largely by exports and investment, con-
sumer spending should make a bigger
contribution to growth going forward,”
said Ken Wattret of BNP Paribas.
Belgian confidence gets a boost
Business morale in Belgium continued to
rise this month, its central bank said yes-
terday. The headline business confidence
index surprised economists by leaping
from 4.5 last month to 5.8 in February –
its highest level since July 2007.
Belgium’s construction sector bounced
back to a positive score of five points in
the index, from January level of -3.6, the
pick up reflecting business delayed by
extreme winter weather. Retail trade
also upticked, reaching 13 points from
8.3 last month. “This survey confirms
the positive surprise of recent business
surveys,” said Francois Cabau of
Barclays Capital.
Pensioners often pay taxes and
receive benefits at the same time: a
needless “fiscal churn,” the IEA said.
And the state pension age should
rise in line with increases in life
expectancy, their paper “Sharing the
Burden” found.
“The government has imposed
many new burdens on the younger
generation in cuts and taxes,” said the
IEA’s Philip Booth.
“They have let older people remain
largely insulated from much of the
cuts. It’s time this changed.”
 14 Consumer News
Pendragon in
profit surge
after job cuts
CONSUMER
▲
BY JOHN DUNNE
CAR dealership group Pendragon said
yesterday its profit had doubled after
axing more than 600 jobs.
The UK’s largest independent opera-
tor of franchised car dealerships –
including – Evans Halshaw and
Stratstone – posted underlying pre-tax
profits of £25.2m in the year to 31
December.
The company, which sells premium
models such as Maserati and
Mercedes-Benz through its Stratstone
dealership, said used-vehicle volumes
would grow in 2011 under its Quicks
brand.
Trevor Finn, Pendragon chief execu-
tive, said: “The results of our used car
operations have been particularly
pleasing with out-performance against
the market.
“While the group performed well in
2010, what’s more pleasing is to see
that momentum carried forward into
January, and we look forward to it con-
tinuing during 2011.”
The company, which also trades as
Chatfields, said after-sales revenues,
which include parts and maintenance,
dropped from £391.3m in 2009 to
£354.7m last year.
But used and new car revenues were
up, as were revenues in its wholesale
business. Pendragon sold 101,000 new
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cars last year – or five per cent of the
UK market.
It said it would continue to review
its 245 franchises for potential closure
or sale, in order to further boost its
profit. The group said it had reduced
its fleet by 4,100 since 2009, while prof-
itability was driven by a strong per-
formance from its volume car retailer
Evans Halshaw as well as its prestige
arm Stratstone.
Pendragon said it is targeting
women, or what it calls “providing a
softer sales environment”, at its new
Quicks second-hand car supermarkets
in a bid to drive up sales.
Finn said: “A lot of the male popula-
tion is employed by corporates and get
company cars.”
Last month BMW and Mercedes
recorded bumper sales figures fuelled
mainly by emerging markets but also a
bounce back in US sales.
ANALYSIS l Pendragon
23.50
26 p
22 Feb
22
18
22 Nov 10 Dec 4 Jan 24 Jan 11 Feb
Charles Dunstone’s Carphone Warehouse and Best Buy are confident on the UK Pic: REX
TIME LINE | HOW BEST BUY’S UK LAUNCH HAS UNFOLDED
May 2008
BestBuy invests £1bn in Charles Dunstone’s
Carphone Warehouse to get foothold in UK.
1 May 2010
Best Buy with Carphone Warehouse opens
a “Big Box” megastore in Thurrock.
August 2010
Paul Antoniadis, Best Buy’s branded opera-
tions chief, quits the business.
Traders still shorting Ocado stock as
online grocer hits near-record high
RETAIL
▲
BY MARION DAKERS
ONLINE grocer Ocado’s shares are
still being shorted aggressively
despite enjoying record highs this
month, according to figures seen
by City A.M.
The firm, which floated at 180p
in July, closed at 224p yesterday
after spiking at 290p on 10
February.
But figures from Data Explorer,
which monitors stock loan and
short selling activity, show that
more than 40 per cent of shares
available for borrowing in order to
short the company were being used
CITYA.M. 23 FEBRUARY 2011
Best Buy in
China exit
but UK safe
▲
RETAIL
BY JOHN DUNNE
US electricals giant Best Buy yesterday
reaffirmed its determination to suc-
ceed in the UK market despite pulling
out of China and Turkey.
The company has six loss-making
mega stores in the UK which it runs
under a deal with Carphone
Warehouse.
It said it was on target to open
another five this year as it goes to bat-
tle with UK household names like
Dixons.
Critics have suggested the compa-
ny’s progress has stalled since it
opened its first store in Thurrock to a
fanfare last May but the company
insists that its plans are on track.
Carphone and Best Buy are in the
process of merging their marketing
and other teams.
In China, the company will focus
on developing its stores using the
brand Five Star, dropping Best Buy
The company emphasised that it saw
the UK as a key market that it was
intent on cracking.
ANALYSIS l Carphone Warehouse
440 p
April 2010 396.75
Launches UK website. 22 Feb
420
February 2011
Admits it has failed to make the impact it
400
had hoped for in UK. Four more execs go.
22 February 2011 380
Announces planned closure of stores in
China and Turkey. Insists UK growth is is 360
still key. Target remains at 80 stores.
22 Nov 10 Dec 4 Jan 24 Jan 11 Feb
yesterday. better than last year, when more
In total, 8.2 per cent of Ocado than 72 per cent of the shares avail-
shares covered by Data Explorer are able for loan, or 11.5 per cent of the
on loan to hedge funds and traders total shares, were being used to bet
betting on a collapse in the share on a slump.
price. One company insider sug-
gested that the real sum could be
A US hedge fund, Blue Ridge
Capital, is thought to have lost up
even higher.
The number of short positions
to £40m by shorting the stock last
year as it bottomed out at 120.9p.
on Ocado is more than double the While Ocado bosses blamed
average for a FTSE-listed company,
which would normally see between
hedge funds for partially keeping
the stock price low after flotation,
two and three per cent of its shares Data Explorer figures suggest that
used for shorting.
Investors owning around 20 per
only two per cent of the shares
were used for shorting in the first
cent of Ocado’s shares make their
stock available for short-selling.
month after the IPO.
Ocado declined to comment yes-
The outlook for Ocado shares is terday.

  !   !#   !
NEWS | IN BRIEF

    $ ! !  " !

 # !! ! ! %" ! ! Kerry Group sees sales surge
Kerry Group yesterday reported pre-
$ # tax profits of €392.8m (£332.2m) for
the year to 31 December. Sales at the
food company rose by 9.7 per cent to
€5bn over the 12 months while the
firm also announced a trading profit
increase of 11.3 per cent to €470m.
$$$!%   Sales revenues for the group’s ingredi-
 !      !  !  ! ents and flavours division rose by 12.7
per cent to €3.67m. The consumer
foods division recorded sales revenue
of €1.76m, up 3.2 per cent on the pre-
ceding year.
BA union to reballot over strike DB fined over mortgage advice
The biggest union representing British
Airways cabin crew said yesterday it will
re-ballot members over strike action
saying it feared a recent vote may be
invalid. Cabin crew voted last month to
hold further strikes in the long-running
dispute which has already cost BA
£150m. But, BA argued that the ballot,
the third held by staff backing industrial
action, was unlawful. That led the
Electoral Reform Society, the watchdog
responsible for overseeing the vote, to
qualify its official report, the union said.
The Financial Services Authority (FSA)
has fined DB Mortgages, part of the
Deutsche Bank Group, £840,000 for
irresponsible lending practices and
unfair treatment of customers in
arrears. It ordered the firm to pay
about £1.5m in compensation to DB
Mortgages customers. The FSA said
DB Mortgages failed to look at
whether there were cheaper deals
available for customers seeking self-
certified mortgages. It is the first time
the FSA has taken such an action.
CITYA.M. 23 FEBRUARY 2011
Egyptians uncertain but upbeat about future
BRANDINDEX
STEPHAN SHAKESPEARE
R
ISING petrol prices have stalled
BP’s recovery from the Macondo
oil spill. In the two months
from mid-April to mid-June the
Delays may
hit the iPad 2
and iPhone 5
TECHNOLOGY
▲
BY STEVE DINNEEN
APPLE may face production delays
that could push back the launch of
both its iPad 2 and iPhone 5.
The iPad 2 was slated for release in
April but people hoping to get their
hands on the latest tablet could now
have to wait until June. The iPhone 5
was expected in July but could now be
delayed until September.
However, conflicting sources last
night claimed it could be unveiled in
California as soon as 2 March.
The Cupertino-based firm has never
confirmed when either product will
be launched but iPhones are generally
released in June or July each year.
FBR Capital Markets analyst Craig
Berger said: “With various casing sup-
pliers and touch suppliers still ramping
up, with some chip vendors not having
yet received firm iPhone 5 orders, and
with other sockets like the image sen-
sor… a September launch is likely.”
Berger says he expects Apple to shift
100m iPhones in 2011. He also believes
BOISDALE WINTER SALE
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Served with chips, mayonnaise and watercress
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7 Great British cheeses &1963 Croft port £15
oil giant’s BrandIndex index score
plummeted from +7 to -13 but since
then it had seen a steady recovery and
at +3 was getting close to where it
started before, from mid-December
onwards, high petrol prices began to
hit perceptions of all the oil compa-
nies. BP slipped backed to -7, Shell
dropped eight points and Esso six
points. The Macondo incident did not
impact BP’s rivals (often events like
this can hit similar companies which
become tarred by association) but
once again in this sector we have seen
how much price increases impact on
Apple has increased its iPad target
from 38m to 45m units.
Apple has often struggled to keep
up with huge demand for new releas-
es, with previous iterations of the iPad
and iPhone sold out globally for
months after their launch.
The new iPhone is expected to fea-
ture near-field communication technol-
ogy, allowing it to be used as a portable
payment device, while the iPad 2 will
have front and rear-facing cameras.
The news comes as iPad retailers
slashed their prices on the first version
of the tablet, suggesting they expect
the new one to arrive soon. Carphone
Warehouse is completely out of stock
and Orange has cut its prices to just
£99 with a 24-month contract.
A new MacBook Pro computer is
also expected soon, with Apple staff
being asked to sign non-disclosure
agreements about a top-secret meet-
ing, believed to be about its launch.
Apple will face tough questions
from shareholders today about who
will succeed boss Steve Jobs, who is
thought to be extremely sick.
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perceptions across the board.
With views of petrol companies so
closely tied to prices they will be
watching the tension in North Africa
and the Middle East with interest. The
first post-Mubarak poll in Egypt, an
online poll by YouGov Siraj, shows a
mood of uncertainty grounded in
optimism; whilst 49 per cent do not
know who would form the next gov-
ernment, 85 per cent are expecting
the country to improve and 77 per
cent think their own situation will
improve. Encouragingly three quar-
ters also expect the country to respect
New Sage boss sees
return of confidence
TECHNOLOGY
▲
BY STEVE DINNEEN
NEW Sage boss Guy Berruyer says
confidence is returning to small
and medium enterprises (SMEs) but
that those in western Europe are
struggling to get hold of funds com-
pared to their US counterparts.
Berruyer, who took control of
Sage in October, was tasked with
turning around the fortunes of a
firm struggling to drive revenue
growth after its core market of
SMEs were holding back on spend-
ing. Last month Sage’s half year fig-
ures showed a gradual return to
form and Berruyer says the market
is continuing to recover.
He told City A.M. he believes
confidence is returning to the
sector, with a new survey by
the firm showing 44 per cent
of SMEs are more optimistic
about 2011, compared to just
19 per cent who are less opti-
mistic.
But he said one of the
biggest stumbling blocks
remains the difficulty small
firms have accessing capital
markets.
He also called for an eas-
ing of government bureau-
cracy, which he says impacts
on the confidence of small GUY BERRUYER
its international agreements.
Only four per cent are expecting
the Muslim Brotherhood to form the
next government and most
Egyptians are genuinely seeking a sta-
ble liberal democracy. When it comes
to the next President, Amr Moussa is
the clear leader with 49 per cent over-
all, well clear of Ahmed Zeweil (13 per
cent) in second place and Omar
Sulemain (nine per cent) in third.
This support is consistent across all
demographic groups, for example 51
per cent amongst those with a house-
hold income of less than $266 and 47
businesses. This can partly be
achieved, he says, by standardising
reporting mechanisms and making
systems more efficient.
He said Sage is now looking to
the “new frontier” of cloud-based
software, which his firm will be at
the forefront of.
Berruyer believes
the new
systems will compli-
ment, rather than
cannibalise, exist-
ing accountancy
software platforms.
News 15
per cent amongst those above $1,065.
Stephan Shakespeare is chief executive of
YouGov.
ANALYSIS l BrandIndex Esso vs Shell
20.0 p BP ESSO Shell
10.0
0.0
-10.0
19 May 19 Jul 19 Sep 11 Nov 19 Jan
NEWS | IN BRIEF
Google working with the EU
Google said yesterday it is working with
the European Commission to address
competition concerns after a rival
renewed complaints of anticompetitive
behaviour. The creator of French legal
search engine Ejustice.fr said it has
added to its complaints to European
regulators over Google's business prac-
tices. The French company is one of
three online search engines that have
already accused the world’s number one
web search provider of abusing its domi-
nant position by demoting rival sites in
results and giving preference to its own
services.
Informa starts the year well
Publishing and conference group
Informa posted a 1.5 per cent rise in
earnings for the year, broadly in line
with analysts’ expectations, and said it
was well placed to grow as the global
economy improved. The company, which
publishes shipping newspaper Lloyd’s
List, posted adjusted pre-tax profit of
£276.4m, up six per cent, on broadly flat
revenue of £1.23bn.
Misys’ investors redeem shares
Software firm Misys said the majority of
its shareholders had chosen to have
their shares redeemed as part of a
scheme to return to investors some of
the proceeds from the sale of its stake in
Allscripts-Misys. The company said 69.5
per cent of shareholders elected to have
their “B” shares redeemed. Meanwhile,
23.3 per cent elected to take a single
dividend of 38p. Misys is returning
£145m to shareholders, equivalent to
38p per share, following the sale of its
55 per cent stake in healthcare IT com-
pany Allscripts for $1.2bn last year.
 16 News
Sindall chair
plans growth
PROPERTY
▲
BY MARION DAKERS
CONSTRUCTION group Morgan Sindall
painted a bleak picture of the UK build-
ing market yesterday but said it plans
to increase its share of the shrinking
market in 2011.
Morgan Sindall posted a full-year
pre-tax profit of £40.7m for 2010, miss-
ing consensus forecasts of £46.9m, on
a five per cent fall in revenue to
£2.102bn.
The company, which recently won
part of a large tunnelling contract for
the £15bn Crossrail project, said
underlying pre-tax profit before amor-
tisation and non-recurring items for
the year ending was flat at £51.3m.
Chairman John Morgan told City
A.M.: “I don’t think the order book will
grow significantly this year, but I’m
confident that we are going to
increase market share across the
board.”
The firm’s order book last year was
made up of 60 per cent government
work, but Morgan said this had
already dropped to 50 per cent and is
expected to fall further as the year
goes on.
“The private sector is coming back,
particularly in London,” he said,
adding that the firm’s overall market
is looking 10 per cent smaller.
Morgan Sindall snapped up the bulk
of social housing services group
Connaught’s troubled assets last year
and has finished the year with a cash
balance of £149m, up 26 per cent year-
on-year.
Morgan said the move “was quite a
difficult integration for us...
Connaught’s contracts were not run as
we would have liked”, but said the
firm was already seeing modest
returns.
Margins in the firm’s affordable
housing division Lovell, which has
taken the Connaught work, rose 0.2
per cent to 4.2 per cent, delivering an
operating profit of £16.1m, up eight
per cent. Its overall margin rose from
two per cent to 2.2 per cent.
Morgan Sindall said its order book
grew to £3.6bn from £3.2bn last year.
RBS analyst Mark Howson said in a
note that the firm’s underlying profit
was better than expected, with cost
savings helping overcome a slower-
than-hoped recovery in the firm’s
refurbishment business.
The FTSE-listed firm’s shares closed
down 3.3 per cent at 692.5p yesterday.
SWISS WATCH EXPORTS UP 16.9 PER CENT
SWISS watch exports rose 16.9 per cent from the same period a year earlier to SwFr1.1bn
(£723m) in January, the watch industry federation FH said yesterday. Exports of wrist
watches were up 17.1 per cent year-on-year in January, with shipments of gold watches
increasing by twice the average rate.
Croda plans share
buyback of £50m
INDUSTRIALS
▲
BY HARRY BANKS
BRITISH chemicals firm Croda
International yesterday posted a high-
er full-year profit, boosted by strong
demand for consumer and industrial
products, raised its dividend and said
it plans to buy back shares.
The company, which has a market
cap of over £2bn, said it expected to
buy back shares worth about £50m
this year.
Croda, which makes chemicals for
cosmetics, healthcare and homecare
industries, had 137.3m shares out-
standing as of 21 December 2010.
The company said trading in the
current year had started well, but
that it had to increase its prices in
2011 to protect its profitability due to
a major inflation in raw materials.
Dynegy replaces top executives
as they fail again to secure a sale
▲
ENERGY
DYNEGY’S top management have
announced their resignations after
failing to sell the company for the sec-
ond time in a year.
The power company terminated its
$665m (£413m) deal to sell itself to
Carl Icahn because the billionaire
investor was unable to convince
shareholders to agree to the $5.50-a-
share cash bid on the table.
CITYA.M. 23 FEBRUARY 2011
NEWS | IN BRIEF
Cold weather spurs Drax revenue
Drax, the operator of Britain’s largest coal-
fired power station, reported higher rev-
enue for the full-year as the cold weather
boosted power sales, but warned rising
coal prices could pressure margins. Drax
reported revenue of £1.65bn for 2010,
comfortably beating the average forecast
of £1.47bn. Pre-tax profit rose 61 per cent
to £255m, but fell short of analysts’ esti-
mates of £305.2m. The average price
expensed for purchased CO2 emissions
allowances was £12.6 per tonne, down
from £14.3 per tonne last year.
Hargreaves on track for 2011
British energy support services firm
Hargreaves Services has posted a near 10
per cent rise in first-half pre-tax profit
driven mainly by higher commodity prices,
and said it was on track to meet its full-
year profit targets. The supplier of solid
fuels and bulk material logistics said it saw
a robust performance from its energy and
commodities business with revenue
increasing 32 per cent to £149.5m.
Price rise boost for Dragon Oil
Dragon Oil’s profit soared 49 per cent
in 2010 on higher oil prices as the
Turkmenistan-focused company said it
had widened its scope for potential
acquisitions to include West Africa.
Dragon Oil's pre-tax profit jumped to
$514.7m (£318.2m) in 2010, slightly
behind a consensus of $517m in a poll
of five analysts, from $345m the year
before. The company’s profits benefit-
ed from stronger oil prices in 2010 and
after its daily rate of production rose
5.5 per cent to 47,211 barrels of oil per
day.
Adjusted pre-tax profit from con-
tinuing operations was £192.3m for
the year ended 31 December, com-
pared with £108.0m last year. Sales
rose 21 per cent to over £1bn.
Consumer care turnover was up 14
per cent at £485.5m, while industrial
specialities turnover rose 29.7 per
cent.
ANALYSIS l Croda International
1,650 £
1639.00
22 Feb
1,500
1,450
22 Nov 10 Dec 4 Jan 24 Jan 11 Feb
Bruce Williamson will resign as
president and chief executive, effec-
tive 11 March. Williamson has also
resigned as a director and chairman
of the board, effective immediately.
David Biegler, currently an inde-
pendent Dynegy director, has been
appointed interim president and
chief executive. Patricia Hammick,
previously lead director of Dynegy,
now serves as chairman, the company
said.
CITYA.M. 23 FEBRUARY 2011 News 17

CITY MOVES | WHO’S SWITCHING JOBS Edited by Juliet Samuel in association with

Hawkpoint Partners
Simon Russell has been appointed as managing
director of Hawkpoint Partners. With an exten-
sive portfolio across top European companies,
Russell was previously head of technology at
Dresdner Kleinwort as well as the head of
European technology at Thomas Weisel
Partners. He has also provided advice to corpo-
rate clients including Liquavista, 2e2, Wolters
Kluwer and Datatec Group on M&A and capital
market assignments.
Quilter appointed Richard Carter as its senior
The specialist in personalised invest- fixed interest specialist. Based in the
ment management services has 20-strong research team in London, he
will report to Duncan Gwyther, chief
investment officer and cover segregat-
ed securities and bond funds.
Carter has over ten years’ experience
in investment management, having pre-
viously spent seven years at Baring
Asset Management. Prior to joining
Quilter, he was global fixed income and
currency fund manager at Blackfriars
Asset Management.
Governance for Owners Group
Yoichiro Iwama, chairman of the Japan
Securities Investment Advisers
Association, will be joining Governance
for Owners’ board of directors. Iwana
has extensive experience in insurance
and management after serving on the
boards of Aozora bank, DMC Japan
Holdings and the Japan Ministry of
Economy, Trade & Industry.
Matrix Group
The investment banking business has
appointed Richard Morse as senior
adviser where he will be primarily
focusing on small to mid-cap energy
technology companies in the power,
new energy and clean tech space.
Morse has more than 30 years of cor-
porate finance advisory experience
with a strong emphasis in the utilities
and infrastructure sectors.
He was previously managing director
at Dresdner Kleinwort Benson and
Goldman Sachs.
Credit Suisse
The financial services company named
five new research analysts to cover the
banks sector, based in London. Carla
Antunes da Silva will join Credit Suisse
as managing director, Amit Goel as vice
president, Ignacio Cerezo Olmos as a
director responsible for Southern
European banks coverage, and Andrea
Unzueta as an associate and Maxence
Gouvello as director.
In addition, Nick Gough and Justine
Shih join as directors on the specialist
sales desk.

To appear in CITYMOVES please email your career

SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT +44 (0)20 7557 7245
updates and pictures to citymoves@cityam.com morganmckinley.com

BEST OF THE BROKERS To appear in Best of the Brokers email your research to notes@cityam.com

ANALYSIS l BP ANALYSIS l British American Tobacco ANALYSIS l Go-Ahead Group

520 492.75 1,450 1,406.00
p 22 Feb p p 22 Feb
2500 2439.50
22 Feb
480 1,350
2400

440 1,250
2300

22 Nov 10 Dec 4 Jan 24 Jan 11 Feb 22 Nov 10 Dec 4 Jan 24 Jan 11 Feb 22 Nov 10 Dec 4 Jan 24 Jan 11 Feb

BP BRITISH AMERICAN TOBACCO GO AHEAD GROUP

UBS rates the oil major “buy” with a target price of 550p. The broker
believes that BP’s 30 per cent stake in Indian explorer Reliance is worth
$7.8bn (£4.8bn), slightly above the $7.2bn payment announced on Monday,
and that the deal will raise BP’s gearing to around 16 per cent. UBS thinks
the deal shows an aggressive reloading of exploration at the firm that will
also add 93,000 barrels of oil a day to BP’s production figures.
Morgan Stanley rates the firm “equal-weight” and has raised its target
price by 220p to £25.45. The broker predicts a cash return for investors
as BAT’s net debt falls to around 1.5 times underlying earnings, with the
possibility of further small acquisitions. Morgan Stanley views the stock as
a consensus play on emerging market growth, with one of the strongest
business models in global tobacco.
Nomura rates the transport group “neutral” with a lifted target price of
£14.08. The broker has raised its 2011 earnings per share forecast by 12
per cent to reflect strong gains in the UK rail business, and expects the
firm’s underlying revenue growth of three to four per cent outside London
to at least continue as the cost of motoring rises. However, Nomura does
not expect a dividend rise until cover hits around two times earnings.

FTSE falls below 6,000 level Worst Wall Street

as Middle East woes weigh drop since August
directly exposed to the subsequent on concerns more UK defence con-

THELONDON price pressures.

Both Brent and US crude oil rallied
to 2-1/2 year highs on concerns the
tracts will be cancelled to meet the
British coalition government’s goal of
slashing military spending.
THENEW YORK this. But any more weakness and
there will probably be a cavalcade.”
Oil prices held near a 2-1/2 year

REPORT revolt in Libya could spread to other

major oil producers in the Middle
East and North Africa.
Retailers were also weaker with
Defence-related engineer Smiths
was also hit hard, down 1.1 per cent.
Michael Hewson, market analyst at
REPORT high as the Libyan unrest cut supplies
from the OPEC nation.
Heavy energy-consuming sectors
CMC Markets, said the mounting ten- were among the hardest-hit. The Dow

B W
RITAIN’S top share index closed
lower yesterday as troubles in
the Middle East clouded senti-
ment, but bumper consumer
confidence figures from the US
spurred a late rally and boosted com-
modity stocks.
The FTSE 100 closed down 18.04
points or 0.3 per cent lower at
5,996.76, having finished at a two-
week closing low on Monday.
“The 6,000-level will be a hard one
to hold in the short-term until the sit-
uation in the Middle East has a little
bit more direction,” Martin Dobson,
head of trading at Westhouse
Securities, said.
Muammar Gaddafi vowed to die in
Libya as a martyr in an angry televi-
sion address yesterday, as rebel troops
said eastern regions had broken free
from his rule in a burgeoning revolt.
“There is probably more risk on the
downside but the FTSE might hold
better because of the gold and oil
price being stronger, with its com-
modity focus,” Dobson said.
The turmoil in the region and the
threat of unrest spreading has hit
stocks such International
Consolidated Airlines and travel firm
TUI Travel, whose businesses are
Sainsbury down 1.5 per cent and
Argos and Homebase owner Home
Retail off 1.0 per cent, as commodity
price pressures show no sign of eas-
ing.
Banks were mainly weaker as risk
appetite remained largely off the
table for investors. But Royal Bank of
Scotland, which reports results on
Thursday, rose 2.3 per cent.
London’s blue chips, however,
rebounded off the session low of
5,926.55 after US consumer confi-
dence rose in February to a three-year
high.
The improved optimism over the
health of world’s biggest economy
fuelled demand for mining and ener-
gy stocks as confidence grew over the
demand outlook for commodities.
The data from US helped offset
concerns of political unrest in Libya
and the wider North Africa and
Middle East region would derail the
global economic recovery.
The FTSE volatility index, a barom-
eter of investor anxiety, is up sharply
on the week as investors have
responded to the troubles.
Back on the downside, defence
firm BAE Systems was the biggest
blue chip casualty, down 4.3 per cent
sions in the Middle East and North
Africa could tempt investors to test
the FTSE support levels at 5,920/30
from the July 2010 lows at 4,790.
European shares also fell yesterday,
extending the previous session’s
hefty selloff on escalating tensions in
oil producer Libya.
The pan-European FTSEurofirst 300
index of top shares ended 0.6 per cent
lower at 1,164.60 points, its lowest
close since 3 February. It has shed 1.8
per cent in two straight sessions of
losses on concerns over Libya.
Italian oil firm ENI, the main for-
eign oil group in Libya, shed 0.5 per
cent while Spanish peer Repsol,
which said it was shutting down its
oil output in Libya, fell 1.2 per cent.
ANALYSIS l FTSE 5996.76
6100 22 Feb
5900
5700
5500
22 Nov 10 Dec 4 Jan 24 Jan
ALL Street suffered its worst
day since August yesterday
as investors dumped stocks
on turmoil in oil exporter
Libya, in what could be the start of a
long-anticipated pullback after a
lengthy rally.
Rising volatility and heavy volume
added heft to the possibility of a larg-
er pullback. With 9.76bn shares trad-
ed on the New York Stock Exchange,
the American Stock Exchange and
Nasdaq, it was the highest volume ses-
sion for the month and the second-
highest for the year.
The CBOE Volatility Index, Wall
Street’s so-called fear gauge, surged
26.6 percent to end at 20.80, its high-
est one-day jump since May 20, 2010.
“We’ve got some smoldering fires
and it’s an excuse for the market to
sell off,” said Stephen Massocca, man-
aging director of Wedbush Morgan in
San Francisco.
The benchmark Standard & Poor’s
500 lost 2.05 per cent, its worst one-
day percentage drop since 11 August.
“How significant a sell-off we get,
the next 24 to 48 hours is going to be
important. If we can hold this 1,315
on the S&P and hold the trendline,
11 Feb than we can probably get through
Jones Transportation Average lost 3.8
per cent, with FedEx down 5.1 per
cent at $93.29.
Despite the sharp pullback, the
benchmark S&P 500 Index held a key
support level near 1,313, representing
highs reached earlier in February.
Many analysts have been anticipat-
ing a correction in a market that saw
the S&P 500 climb last week to double
its 12-year low hit in March 2009.
Still, optimism about the U.S. recov-
ery appeared in a report that showed
consumer confidence rose in
February to a three-year high.
The Dow Jones industrial average
lost 178.46 points, or 1.44 per cent, to
end at 12,212.79. The Standard &
Poor’s 500 Index fell 27.57 points, or
2.05 per cent, to 1,315.44. The Nasdaq
Composite Index dropped 77.53
points, or 2.74 per cent, to 2,756.42.
After the closing bell, Hewlett-
Packard slumped 10 per cent to
$43.42 in extended trade after the
Palo Alto, California-based company
trimmed its 2011 revenue projections
on falling consumer demand for its
personal computers.
Wal-Mart Stores fell 3.1 per cent to
$53.67 after posting its seventh
straight drop in US sales.
 Wealth Management | Forex
18
CABLE BULLS
WILL HOPE FOR
THREE HAWKS
BORIS SCHLOSSBERG
DIRECTOR OF CURRENCY RESEARCH, GFT
T
WO or three? That’s the critical question that
currency traders will be asking today upon the
release of the Monetary Policy Committee (MPC)
minutes due at 9:30am. Last week, the market
was abuzz with speculation that Charles Bean may
have been the third MPC member to join the two Bank
of England (BoE) hawks Andrew Sentance and Martin
Weale in voting for a rate hike. Today those rumors
may be confirmed.
Until recently, Sentance has been the only hawk on
the MPC, despite headline inflation that is now double
the 2 per cent target rate set by the BoE. In contrast,
Mervyn King and other more temperate policymakers
remain concerned that any hike in rates could snuff out
the nascent UK economic recovery. The UK economy
remains in a fragile state and although last Friday’s
retail sales showed a strong rebound after a weather-
plagued December, the employment situation in
January actually deteriorated, with jobless claims ris-
ing by 2,400 when a fall of 3,000 had been forecast.
The perilous nature of the UK recovery is the pri-
mary reason that the BoE was so circumspect in last
week’s quarterly inflation report, noting that inflation
risks were “broadly balanced.” King played down spec-
ulation over interest rate rises, saying no decisions
would be made until future quarterly meetings.
There is no doubt that the UK faces some of the
strongest inflation pressures in the G10 universe, but it
is far from certain whether a rate hike would be effec-
tive in curbing these price pressures. Interest rate hikes
tend to work best when inflation is the result of exces-
sive demand, but the latest rise in prices has been
caused by supply shocks, most particularly in energy as
the turmoil in the Middle East continues to push the
price of Brent crude above $100 per barrel.
Nevertheless, if the MPC minutes reveal that Bean
voted for a rate hike, momentum will shift to the hawks
with three out of the nine members looking to hike
rates. If the situation in the Middle East begins to sta-
bilise and risk sentiment improves, cable could resume
its rally, targeting yearly highs at $1.6279 as the mar-
kets assume rate hikes are on the way.
WAITING BY THE PHONE.
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CITYA.M. 23 FEBRUARY 2011
Speculators seek out
sanctuary from shock
Tremors see investors
flee to safe ground,
writes Craig Drake
S
HOCKS, both in the political and seis-
mic sense, have driven flight into the
US dollar and the Swiss franc as
investors shy from risk.
Headlines in recent weeks have been
dominated by political unrest in north
Africa and the Middle East, but Libya’s tur-
moil is the first time that a major oil pro-
ducing country has been affected by the
upheavals. Libya is the world’s eighth
largest oil exporter. According to Nick
Beecroft of Saxo Bank, with anti-monarchy
protests planned for Thursday in Saudi
Arabia, the world’s largest oil exporter,
there could be volatile times ahead for oil
prices “The fall of Gaddafi, or even com-
plete interruption of Libyan oil supplies,
are not in themselves events to derail the
developed world’s recovery, but they do rep-
resent another important step along the
road that could lead to the destabilisation Christchurch, NZ sur-
of Iran, Iraq and Saudi, and their oil sup- veys the earthquake
plies. That is something that really could damage
cause real damage. Oil at $150 a barrel Picture: Reuters
would be a severe setback for the developed
economies.”
With risk-aversion dominant, the unrest that had been anticipated later in the week. same time, political tremors from the
in the Maghreb and the Middle East has This was before the news of the devastating shifts in power in the Middle East will con-
seen flows into the dollar and swiss franc, earthquake in Christchurch sent the NZ tinue to have currency speculators running
seen as “safe” currencies by investors – the dollar down to $0.7455. for safer ground.
franc’s one-month implied volatility jump- Following the seismic events earlier this
ing to a two week high of 11.20 per cent week, New Zealand’s central bank may ANALYSIS l AUD/USD
While the effect on the dollar was dulled hold off on the rise in interest rates. On the 1.006
USD
by the US markets having been closed for other side of the Tasman Sea, risk-aversion
President’s Day on Monday, Richard had the Australian dollar bobbing around
1.004
Wiltshire of ETX Capital reported Swiss pri- parity with the US dollar for most of yester-
vate banks and funds are aggressively buy- day. (see chart)
ing Swiss francs. Though the area will glean hope from 1.002
In the butterfly effect that is the foreign the fact that earthquakes do not usually
exchange market, the flows into the dollar have lasting effects on the economies of 1.000
drove the New Zealand dollar down, developed countries, the Kiwi dollar will
already driven low by the prospect of an likely continue to be kicked around the cur-
announcement of a rise in interest rates rency markets for the short term. At the
15 Feb 16 Feb 17 Feb
SPREAD BETS | CFDs | FOREX
free phone 0800 358 0864
gftuk.com
GFT Global Markets UK Ltd. is authorised
and regulated by the Financial Services
Authority. CD03UK.142.020411.
CITYA.M. 23 FEBRUARY 2011 19

THE
The attack of the TIPSTER
MERSCH

ECB hawks: how GIVES EURO

SUPPORT

T
HE euro was dropping steadily against

uncertainty has the dollar yesterday morning, tumbling

some 150 basis points before stabilis-
ing around $1.3530.
Then, a statement released across the
wires stated European Central Bank (ECB)
member Yves Mersch said the ECB may

changed tactics toughen inflation language next week, and

may warn of upside inflation risks.
This hawkish tone sent euro-dollar shoot-
ing right up to resistance at $1.3640 again.
With the Middle East unrest continuing
though selling rallies, this seems the best
course of action. Spread Co offer a spread on
euro-dollar is $1.36421-$1.36429.
Donata Huggins asks when the European All eyes will be on the safe haven curren-
cies as the situation in the Middle East
Central Bank will raise interest rates appears to be getting more
heated with every
day.
The Swiss

H
AWKISHNESS is not new at the
European Central Bank (ECB), but
this week its most notorious birds
of prey have been flapping their
beaks.
This has got foreign exchange traders
rather excited, and stabilised the euro
against the dollar at a time when the
upheaval in the Middle East should have
had them flooding in that direction.
While the dollar did gain ground, it did
not have the impact most would expect:
the euro reached around $1.3653 yester-
day.
The language of Yves Mersch and
Juergen Stark has certainly toughened
up the ECB’s stance on inflation ahead of
next week’s meeting, but does this mean
the board will raise rates earlier than
expected?
RATE RISE IN THE PIPELINE
Most have taken the view that an ECB
rate rise was in the pipeline, expecting it
to come later this year. The political
debate around the restructuring of its
bailout fund and the periphery coun-
tries’ debts was expected to be enough to
slow down the decision-making process
on rates. With this consideration, BNP
Paribas’s Ken Wattret said he did not
expect rates to be lifted until the fourth
quarter of this year.
But now he is not so sure: “The poten-
tial for further turbulence in the Middle
East and the increasingly hawkish tone
of the ECB makes me think a rate rise
could come sooner. A string of negative
market data is more likely to force their
hand.”
EXPECTATIONS ARE OVERDONE
Richard Wiltshire, a currency expert at
ETX Capital, however, thinks that
market expectations are overdone: “Most
of it is just rhetoric for now.”
Duncan Higgins, a market analyst at
Caxton FX, agrees: “Unlike sterling, the
market hasn’t priced in much chance of
a rate rise yet. I doubt that Mersch’s com-
ments will have drastically altered the
ECB’s view.”
He argues that the Eurozone is still a
hotbed of uncertainty, confidence is still
low and Portuguese bond yields are hit-
ting record highs: “The ECB will not
want to risk undermining a still nascent
recovery by raising rates prematurely.”
ANALYSIS l The performance of euro-dollar over the last five days
1.375 $
1.365
1.355
15 Feb 16 Feb 17 Feb
Who knows when they Higgins and Wiltshire may have a
will strike point. Mersch and Stark are known for
holding hawkish views. Indeed Stark was
Picture: Reuters once described as the very “representa-
tive of a good old Bundesbank tradition.”
SURPRISE CURRENCY MOVEMENTS
Yesterday’s surprise currency movement
certainly bodes well for single currency
bulls. And with inflation edging up, the
ECB can relied upon to be getting con-
cerned.
But whether a rate rise is actually due
is quite another matter. The fact that the
euro found a support level against the
dollar amidst the Middle East crisis goes
to show that the market is longing to
18 Feb 22 Feb hear more from the ECB’s hawks.
Franc has natu-
rally risen
against all
other curren-
cies and this
could continue
as long as the
situation
remains tense.
The New Zealand
dollar has been hit
since an earthquake in
Christchurch killed 65 people.
The Kiwi dollar already slid 2.4 per cent
against the Swiss franc, and based on the
overall situation there could be potential for
this trend to go on. Capital Spreads quotes
SFr0.7052-SFr0.7059 on New Zealand dol-
lar-Swiss franc.
The Swiss franc’s appeal as a safe haven
in times of geopolitical uncertainty com-
bined with Japan’s recent downgrade by the
Moody’s ratings agency has made the Swiss
franc-yen pair an interesting trade in recent
days.
A break above ¥90.00 on the pair would
be seen as significant by many because this
would pave the way for a return to the
2008 highs above ¥100.
So long as the uncertainty in North Africa
and the Middle East remains an open-ended
proposition then the Swiss franc is unlikely
to be short of fans. The current IG Index
price on dollar-yen is ¥88.406-¥88.431.
Donata Huggins

FOREX ANALYST PICKS

FOREX STRATEGIST FOREX STRATEGIST FOREX STRATEGIST
JOEL KRUGER ILYA SPIVAK JOHN KICKLIGHTER

My pick: Buy dollar-Canadian dollar Ca$0.9800 My pick: Stay short euro-dollar My pick: Short Australian dollar-dollar below $0.9900
Expertise: Technical analysis Expertise: Global macro Expertise: Fundamental and technical analysis and risk management
Average time frame of trades: 1 to 6 weeks Average time frame of trades: 1 week to 6 months Average time frame of trades: 1 day to 1 week

Daily studies are starting to look a little stretched, and in conjunction with
longer-term cyclical studies, warn of a major base. This leaves us looking for
opportunities to buy rather than sell into the downtrend. The Ca$0.9800
figure seems to be offering itself as a formidable support zone and ulti-
mately, only a weekly close back below Ca$0.9800 would delay the outlook
and give reason for pause.
I sold euro-dollar last week at $1.3568. The prices are retreating after last
week’s upswing as the greenback capitalises on safe-haven demand amid
the broadening crisis in Libya. With the pair testing resistance-turned-sup-
port at the top of a falling channel established earlier this month (now at
$1.3573), I will remain short and look for a break below this juncture. I will
do this in the hope that I will clear the way back below the $1.35.
A strong range reversal from dollar-Swiss franc prevented a long breakout
trade. However, a jolt in underlying risk appetite may put my previously laid
out Australian dollar-dollar short setup into play. A controlled short below
$0.9900 with an initial stop and first target of 150 basis points looks bet-
ter now than last week. Another appealing risk-based setup is to short
euro-yen below ¥113.00 with another 150-point buffer on each side.
 20 Wealth Management CITYA.M. 23 FEBRUARY 2011

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 Business Features
LLPs need to
watch out for
bullying risks
BY DOUG PREECE AND
JAMES DAUGHTREY
T
HE pressure on partners to perform is a
constant characteristic of a professional
firm. In such an environment perhaps it
should not come as a surprise when the
behaviour of some high calibre individuals falls
short of the mark. Generally, firms are alive to
the dangers of employees being bullied, particu-
larly following the case of Helen Green.
Damages of £828,000 were awarded to
Green, who suffered a nervous breakdown as a
result of workplace bullying while at Deutsche
Bank. However, when it comes to bullying
between partners, City firms are often not so
assiduous in tackling the problem.
Most firms try to deal with behaviour that
does not conform to the business’s values.
However, partners are not always treated the
same; a big billing partner, for example, may be
tolerated more than others. The typical set of
circumstances is of bullying causing illness
which affects performance, leading to the vic-
tim partner leaving the firm and then facing
great difficulty finding an alternative position.
What kind of behaviour should firms look out
for? Case law shows that a group of partners
ganging up on a fellow partner to pressure him
into accepting a position to his detriment can
be treated as bullying. Foul and abusive lan-
guage, behaviour designed to humiliate or
embarrass, or to intimidate or demoralise a fel-
low partner all fall within the scope of bullying.
Less obvious examples include a partner per-
sistently dismissing or belittling the input of a
fellow partner. Bullies might say that this is
part and parcel of being a partner in a high
pressured environment. Are they right? All
partners in a general partnership owe a duty of
good faith to their fellow partners. There is case
law authority to the effect that bullying can
amount to a breach of the duty of good faith.
This may give the victim partner the right to
claim damages and even the right to apply to
wind up the firm.
If the firm is a limited liability partnership
(LLP), a member in a LLP owes a duty of good
faith to the LLP. There may also be an express
provision in the members’ agreement imposing
an obligation of good faith between the mem-
bers. Even if there is no express term, there may
be a duty of mutual trust and confidence
between the members and the LLP. Bullying
would be a clear breach of this kind of duty.
Also, the common law duty of care to maintain
a safe workplace should apply equally to a part-
nership and an LLP.
The firm may also find that it is liable to the
victim partner under the Protection from
Harassment Act 1997, which provides that a
person must not pursue a course of conduct
which he knows or ought to know amounts to
harassment. The partner responsible for the
bullying will not be able to defend a claim on the
basis, for example, that the victim was overre-
acting, if a reasonable person would have
judged the behaviour as harassment. Once guilt
has been established, both the bullying partner
and the firm could be liable for damages and
the firm may also be liable for harassment
under the Equality Act 2010.
While many City firms are holding up in the
current climate, in countless cases partners are
running faster in order to stand still, with the
attendant pressure this creates. Firms should be
aware of the potential risk posed by a success-
ful but acerbic and dominating partner and,
where bullying behaviour comes to the atten-
tion of the firm, it needs to take action.
Doug Preece and James Daughtrey are part-
nership law experts at Fox Williams LLP
Changes to insurance regime
could mean a PII revolution
Proposals to alter the
way solicitors are
insured would have
wide-ranging effects
STEVE HOLLAND
S
OLICITORS are dealing with a
number of challenges that threat-
en the futures of many within the
legal profession. The recession has
affected everyone and solicitors are no
exception.
Corporate lawyers aren’t seeing the
deals that used to see them working into
the early hours of the morning and the
property lawyers have seen their con-
veyancing practices grind to a halt as the
property market remains stagnant.
On top of these worries, the same
solicitors are faced with increases in the
number of claims brought against them
for professional negligence, much driven
by the recession. The latest High Court
figures indicate that negligence claims
against solicitors reached 210 in 2009, up
from 80 in 2008. The banks are leading
the charge against solicitors, looking to
recoup their losses on defaulting borrow-
ers.
All solicitors in England & Wales must
hold professional indemnity insurance
(PII) at all times in order to provide their
clients with financial protection; howev-
er, the system in place to provide this
cover is in crisis due to the rising level of
claims.
The Solicitors Regulation Authority
(SRA) agreed to carry out a thorough
review on the future of the PII market
for solicitors and released a consultation
paper in December inviting interested
parties to submit their responses by 28
February 2011.
The SRA paper contains a number of
proposals, the most controversial of
CASE STUDIES| NEWS FROM THE COURTS THIS WEEK
SHARE-RAMPING BAN UPHELD
The Upper Tribunal (Tax and Chancery)
has upheld the decision of the FSA to fine
and issue a prohibition notice to a stock-
broker involved in a share-ramping
scheme. Graham Betton had 30 years
experience and was the managing direc-
tor of his firm. The scheme involved unau-
thorised trading of his clients’ accounts
and the use of roll-overs to artificially
inflate demand for the AIM-listed shares
and thus their value. The tribunal held
that although Betton was not a co-conspir-
ator, his knowledge of it, coupled with his
position in the firm, justified the prohibi-
tion and financial penalty.
| Law
which is the exclusion of cover for claims
made by lenders/financial institutions.
The SRA mandates the breadth of cover
that insurers must provide solicitors,
known as the Minimum Terms and
Conditions (MTC). If the proposal to
exclude lender claims from the MTC is
adopted, insurers will only allow certain
practices to buy back this cover.
Where the firm is unable to buy back
cover, they are almost certainly going to
lose all of their work from the lenders.
This will mostly affect smaller con-
veyancing firms and unless they can
show they have a good claims record
with robust risk management, insurers
will be reluctant to allow those practices
to buy back the cover.
Statistics show that claims from con-
veyancing represent 50 per cent of all
claims by value – with half of these made
by lenders. The conveyancing process
that causes these losses must also be up
for a fundamental review and should
undergo a thorough investigation. This
was the recommendation made by an
independent report by Charles Rivers
Associates (CRA) which was commis-
sioned by the SRA last year.
CRA estimates that 30-60 per cent of
firms in England and Wales may seek to
SYRIAN VS ENGLISH LAW
British Arab Commercial Bank issued pro-
ceedings against China’s Bank of
Communications and the Central Bank of
Syria to determine the respective positions
on counter-guarantees between them in
relation to a construction project. The
High Court had to decide whether English
or Syrian law governed their agreements.
It held that Syrian law was applicable
because the factors connecting the dispute
with Syria were stronger, disregarding the
presumption of English law. It also held
that, under Syrian law, neither BACB nor
CBS was liable under the guarantees or
counter-guarantees.
21
A safety net is vital buy back this cover. On the basis that 64
for solicitors per cent of the profession currently
undertake residential work, this could
Picture: GETTY mean that half of firms will no longer
have the cover and will consequently
have to stop doing conveyancing work.
The cost of buying this cover back may
well result in higher costs for the con-
sumer. On the other hand, if the cost is
absorbed by the partners this could
cause confrontation between different
departments which might drive strug-
gling firms to break up.
One of the consequences of this
restriction in cover may be a move by
some firms of solicitors to change their
regulator from the SRA to the Council of
Licensed Conveyancers (CLC).
There is no such restriction in cover
for licensed conveyancers who arrange
their professional indemnity through
the CLC scheme. Solicitors looking to
retain their work with lenders may well
shift their conveyancing business into a
separately regulated firm. Only those
firms thinking and planning ahead that
have their wits about them will survive
in this constantly changing environ-
ment.
Steve Holland is the executive director for
insurance brokers Lockton
by Henry Farris, of City Law LLP
DIRECTOR BAN OVERTURNED
The Upper Tribunal has decided
that a person whom the FSA
had deemed not a “fit and
proper person” can become
a company director. The FSA
said Mandeep Panesar
lacked competency and
capability to comply with
the regulatory require-
ments. This related to his
previous involvement with
the company. Panesar appealed
and the tribunal found that there
was no doubt as to his honesty,
integrity and reputation.
 Lifestyle
22
Are you ready to rumble?
The lastest offering from Porsche’s 911
range is as thrilling as it is well-made
I
T’S not often I get woken up to the
deep rumbling sound of a flat-six
engine firing up but it certainly
makes a change from my 16 month-
old daughter singing and it’s almost as
delightful in its way, even before coffee at
7.30am.
It’s the sound of a Carrera GTS, the lat-
est in the 911 range, a range that encom-
passes 22 models, now that Porsche has
added a new GTS coupe and GTS cabriolet
to its Carrera offering. Twenty-two differ-
CAR TALK
Running on bio, fast
Finland’s four-time world rally champion Juha Kankkunen has set a
new world ice speed record by driving an all-wheel drive, 6-litre, 12-
cylinder Bentley Continental Supersports convertible on the frozen
Baltic Sea, off the coast of Finland. The Finn reached 205.48mph in
the car, which was running on biofuel. One hundred examples of the
world’s fastest convertible will be available to buy and the car will
debut at the Geneva Motor Show in March.
6/..IURP…
&DOOIRUDWHVWGULYH
CITYA.M. 23 FEBRUARY 2011
| Motors WORDS BY
RYAN BORROFF
power, which represents an increase of 23hp
over the standard Carrera S. Driving the car
somehow manages to be exciting yet com-
fortable all at once, thanks to the seats in
particular. The steering is fantastically direct
and the driving position means you are
always aware of where the wheels are as you
look out across the arcing bonnet with its
familiar front wings. This feeling, perhaps
more than any other, defines driving a 911
for me particularly when the car turns in to
the corners so well.
The GTS is wider than the Carrera S by
44mm and has a wider rear track of 32mm;
combined with wide rear tyres it all
equals loads of grip. This car is also 20mm
lower than the Carrera S and has
Porsche’s active suspension system
option (PASM) too. Add to this Porsche’s
PSM stability management system and I
feel fantastically confident as a result. The
car feels lovely and well-balanced but still
feels as if you can unsettle it if you try
hard enough. Which suggests that element
of risk that is so fantastically addictive. You
can stiffen the chassis too but in sports
mode I find this too stiff for the roads we’re
on – best left for the track, that.
The Carrera GTS is a very desirable drive.
It’s been a while since I’ve driven the C2S
but the GTS looks and feels great and is a
genuine thrill. Back in traffic, the car is as
easy to drive as any other. Which means it’s
a truly great all-rounder and genuinely
deserves the accolade of everyday sports car,
even for City commuting.
developed the GTS for potential Porsche
buyers who may think the Carrera S isn’t
The super-sexy new
Carerra. THE FACTS:
hardcore enough for their needs but for
whom the RS3 is just too difficult to live PORSCHE 911 CARRERA GTS
with as a daily car.
PRICE: £78,371
ent 911s with prices that more than dou- The Carrera GTS is available with a six-
ble from the entry level Carrera to the speed manual or seven-speed PDK trans- 0-62MPH: 4.6secs
most expensive GT2 RS. It’s a range with mission. I drive both but it’s the GTS TOP SPEED: 190mph
such a variation in model and price that coupe with the manual gearbox I prefer CO2 G/KM: 242g/km
the 911 is now effectively its own brand. although the PDK is slightly quicker. MPG COMBINED: 27.4mpg
Which begs the question: does Porsche Stepping in to the cockpit, the car promis-
really need another 911 model? es to be a “proper 911”, thanks to its thick,
It would seem so. The Carrera GTS has Alcantara-trimmed steering wheel which THE VERDICT:
rear-wheel drive only but this time it’s suggests a purity of purpose even before DESIGN hhhhh
housed in the widest 911 body Porsche you start the car, which of course, sounds PERFORMANCE hhhhh
makes, the one usually reserved for the RS great thanks to its iconic flat-six engine. PRACTICALITY hhhii
or all-wheel drive 911 models. Porsche has The 3.8-litre engine produces 408hp of VALUE FOR MONEY hhhhi
BY RYAN BORROFF
Hyundai’s new i40 Toyota’s EV
This is Hyundai’s new i40 that will have its world premiere at the Toyota’s EV prototype, based on the current iQ model, will make
2011 Geneva Motor Show. The car is the Korean manufacturer’s first its European debut at the Geneva motor show. Toyota has inte-
D-segment created specifically for the European market and was grated an all-electric powertrain within the iQ by developing a
designed and engineered in Germany. The estate version seen here flat, compact, lithium-ion battery that sits under the vehicle floor.
will be the first i40 available ahead of the saloon that will follow Amazingly, this means interior space is the same as in the regular
later in the year. Both cars will be available with a 1.7-litre diesel iQ. Range will be up to 65 miles and the car will be available to
engine, which will emit just 113g/km of CO2. lease in 2012.
Wide choice, great value, first class service.
Mercedes-Benz Retail Used Cars.
0HUFHGHV%HQ]5HWDLO8VHG&DUV(DVW/RQGRQ$$OIUHGV:D\%DUNLQJ(VVH[,*76ZZZPHUFHGHVEHQ]UHWDLOXVHGFDUVFRXN
3ULFHFRUUHFWRIWLPHRIJRLQJWRSUHVV3LFWXUHIRULOOXVWUDWLRQSXUSRVHRQO\&DOOVPD\EHUHFRUGHG5HJLVWHUHGRɇ
FH0HUFHGHV%HQ]5HWDLO*URXS8./WG7RQJZHOO0LOWRQ.H\QHV0.%$
CITYA.M. 23 FEBRUARY 2011 Lifestyle | TV& Games 23

BBC1 BBC2 ITV1 CHANNEL4 CHANNEL5 TV PICK

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COFFEE BREAK
Copyright Puzzle Press Ltd, www.puzzlepress.co.uk

QUICK CROSSWORD
   

SUDOKU KAKURO
10 15 19 13 29 17 17 
5 24 12
20 34  
45
Place the numbers from 1 to 9 in each empty cell so that each 
row, each column and each 3x3 block contains all the numbers Fill the grid so that each block 22 23
11 16 9
from 1 to 9 to solve this tricky Sudoku puzzle. adds up to the total in the box 6 35

above or to the left of it. 14
You can only use the digits 1-9 13 11 7   
   and you must not use the
31 7
19   
same digit twice in a block. 16 20 32 4
    The same digit may occur 23 9 3 
11 9
  more than once in a row or
column, but it must be in a
18
22
18

21 16
   separate block.
4 8 14 
45
    4 8 15
 

   ACROSS DOWN
1 Hoodlum (4) 1 Digit of the hand (5)
 
    WORDWHEEL A P
3 Conclude by reasoning (5)
6 Kitchen appliance (4)
2 Pointed beard (6)
3 Devise (6)
Using only the letters in the Wordwheel, you have
   ten minutes to find as many words as possible,
F E 7 Arm bone (4) 4 Keep from
happening, make
none of which may be plurals, foreign words or
proper nouns. Each word must be of three letters R 9 Expiation (9) impossible (9)

LAST ISSUE’S or more, all must contain the central letter and
letters can only be used once in every word. There
T O 10 Not having a protective
covering (4)
5 Corroded (5)

SOLUTIONS KAKURO is at least one nine-letter word in the wheel.

E R 11 Performance (7)
8 Message that tells
the particulars
QUICK CROSSWORD 9 8 3 9 8 8 2
15 Anon (4) of an act or

C A S U A L C M
5 3 2 4 7 1 7 1 SUDOKU          17 Dependent upon or
occurrence (9)

E U O R A T O R
2 1 3 5 3 9 6
         characterised by 12 Stroke lovingly (6)
1 5 1 6 4 2 5 3
N I M B U S K V          chance (3-2-4) 13 Appraise (6)
O T N E M E S I S 9 6 8 8 3 1
        
T O O L S A S T E R 2 1 4 3 8 4 5 1
         18 Long fishes (4) 14 Item (5)
A
P
T
L A
U
I N
R
I M
O
P E
I
L
7
8 3 9
1 3
6 1 2
7 9
6
8
4
WORDWHEEL          19 Looks (4) 16 Pried (5)
H A L O G E N P A         
7 2 6 6 8 9 7 The nine-letter word was
M N C A N A A N
Z E N I T H G K 4 1 3 4 6 7 8 9          20 Conjecture (5)
D C O E D E M A 9 7 1 2 1 4 2
TRANSCEND         
21 Slipped smoothly (4)
 Sport
24 CITYA.M. 23 FEBRUARY 2011

@
Milestone as
velodrome
is unveiled
▲

OLYMPICS
BY FRANK DALLERES
THE 2012 Games may still be more

@
than 550 days away, but London offi-
cially received its first Olympic venue
yesterday when the velodrome was
declared open.
British cycling stars Sir Chris Hoy,
who helped to design the 6,000-seat
venue, and Victoria Pendleton were in
attendance at the Olympic Park in
Stratford for the unveiling.
The velodrome’s Siberian pine
track is being billed as the fastest in
the world, and four-time Olympic The velodrome will
gold medal winner Hoy said it would be able to seat 6,000

@
be “the best in the world – I can’t wait cycling fans
to compete on it”.
Lord Coe, chairman of London Pictures: GETTY
2012’s organising committee, called
the eye-catching arena, which was
completed on budget and within two
MORE NEWS years, “a stunning venue built for
champions”.
ONLINE The velodrome could prove the
www.cityam.com seen of some of Britain’s greatest
moments next year, with track
cycling the team’s most successful
email sport@cityam.com discipline in Beijing in 2008.
CITYA.M. 23 FEBRUARY 2011
Bopara digs
sorry England
out of a crisis
▲
CRICKET
BY JAMES GOLDMAN
ENGLAND captain Andrew Strauss
admitted his side got out of jail after
Holland came within a whisker of
causing a major World Cup upset.
Ryan ten Doeschate’s magnificent
119 helped Holland set a challenging
target, boosted by some woeful bowl-
ing and comical fielding, of 293.
Strauss led from the front in
response with 88, but a late flurry of
wickets saw the asking rate climb
alarmingly, before Paul Collingwood
steadied the ship and Ravi Bopara got
England over the line with a couple of
much needed lusty blows.
Strauss’ side eventually sneaked
home by six wickets with eight balls
to spare and he appreciates there is
significant room for improvement
ahead of Sunday’s crunch clash
25
England set
to keep faith
with Tindall
RBS
6 NATIONS
BY JAMES GOLDMAN
ENGLAND coach Martin Johnson is
against India. He said: “We got a lot of expected to again entrust Mike
things wrong with our bowling. It was Tindall with the England captaincy
a very poor first 50 overs, we need to after opting not to recall Lewis Moody
take it on the chin. to the starting line-up for Saturday’s
“We were very disappointed with crunch RBS 6 Nations clash against
ourselves in the field, but fortunately France at Twickenham.
we got ourselves out of jail. It was Moody, who has only just returned
nervy and we need to improve.” after five weeks out with a knee liga-
ment strain, may yet be named as a
WORLD CUP FINAL VENUE IS SAFE replacement when Martin Johnson
confirms his side on tomorrow.
MUMBAI’S Wankhede Stadium, the venue for France coach Marc Lievremont,
the Cricket World Cup final, has been given meanwhile, has gambled by making
clearance to host matches by the city’s fire sweeping changes to his team.
Scrum-half Morgan Parra and cen-
department. Last week safety inspectors were tre Damien Traille are among four
unhappy that mandatory fire equipment, players dropped from the side that
including water hydrants, alarms and extin- laboured to a 25-22 win over Ireland
guishers were still not in place. The 33,000- almost two weeks ago.
The talismanic Sebastien Chabal,
seater stadium will host the final on 2 April and wing Vincent Clerc, scrum-half
two group stage matches on 13 and 18 March. Dimitri Yachvili and centre Yannick
Bopara struck 30 from 20 balls to see England home Picture: ACTION IMAGES Jauzion are recalled.
 26 Sport CITYA.M. 23 FEBRUARY 2011

Walk in the
Nani has scored 10 goals this season Pic: PA

Fergie: Nani
Parken
l Anelka’s double eases the pressure on Ancelotti
l Chelsea boss says strikers are happy to be rotated
can become
new Ronaldo
MARSEILLE
FC COPENHAGEN 0
MAN UNITED
CHELSEA 2
▲

FOOTBALL
BY JAMES GOLDMAN
▲

FOOTBALL
BY JAMES GOLDMAN
MANCHESTER UNITED manager Sir
Alex Ferguson believes Nani is show-
ing signs that he is capable of emulat-
ing the success Cristiano Ronaldo
enjoyed at Old Trafford.
Ronaldo spearheaded United’s suc-
cessful Champions League campaign
in 2008 and so dramatic has Nani’s
transformation from bit-part player
to automatic starter this season been
that it has taken even Ferguson by
surprise.
Ahead of tonight’s Champions
League last 16 first leg tie in Marseille,
Ferguson said: “Nani has been fantas-
tic this season. He has scored goals
and created them. He has made an
amazing contribution.
“But Cristiano went on to become
the best player in the world. The chal-
lenge for any player is to improve as
much as that. Nani is showing signs
of it at the moment.”
Ferguson also revealed he is hope-
ful that veteran midfielder Paul
Scholes, 36, will follow Ryan Giggs’
example and sign a new one-year con-
tract with the club.
CHELSEA manager Carlo Ancelotti
claimed his big-name strikers are
comfortable with being part of a
rotation policy after a Nicolas
Anelka double all but booked his
side’s place in the quarter-finals of
the Champions League.
Since the arrival of Fernando
Torres, Ancelotti has unsuccessful-
ly attempted to harness the
Spaniard, Anelka and Didier
Drogba in a three-pronged attack.
But last night the Italian took
the bold step of reverting to a 4-4-2
formation, which meant a night of
bench warming for Drogba.
As a result, Chelsea delivered
their most cohesive performance
since Torres joined from Liverpool,
with the £50m man, despite not
scoring, looking more like his
usual self.
Ancelotti (right) said: “We want
to maintain their fitness, but rota-
tion could do them good with the
Premier League and the
Champions League.
“They are accepting my deci-
sions without problems, and this is
important. To have them available,
it’s important at this time of year.
“We have fantastic strikers. I have
to make a decision about the
games, to put them in or not.
“Didier played for two hours
against Everton. Torres and
Anelka were fresh and, together,
they played well.”
FC Copenhagen, unbeaten
in the Champions League at
the Parken Stadium, were
expected to provide a stiff
test.
But the Danish champi-
ons, currently in the midst
of a winter break, looked
well off the pace and were sliced forced his view that all is not lost this
apart time and again. season. Indeed, his side face an excit-
Anelka opened the ing few weeks which will see both
scoring in the 17th Manchester clubs travel to west
minute, and an London, and there’s also the matter
almost identical of a tough trip to Blackpool sand-
finish nine min- wiched in between.
utes after the “We are still alive,” he said. “I had
break secured a an idea before the game, and I main-
confidence boost- tain it. We are not dead. It’s just one
ing victory. game, though. I want to see my team
The return leg at play again, again, again.”
Stamford Bridge on 16 As for Torres, whose search for a
March ought now to be first goal in Chelsea colours goes on,
a formality, and he said: “Torres had a lot of opportu-
Ancelotti believes the nities that he created with his move-
manner of last night’s ment. I am sure that he will score in
performance rein- the next game he plays.”
 CITYA.M. 23 FEBRUARY 2011 Sport 27

KEY MOMENTS: DANISH PASTING

Harry stunned as Spurs Van Persie
injury curse
strikers fluff their lines hits Arsenal
0 mins: Reverting to 4-4-2 forced Ancelotti to
dispense with one of his big-name strikers.
BLACKPOOL 3
Drogba was the man forced to start on the
bench and it proved to be the right call ARSENAL
TOTTENHAM 1
STOKE CITY
▲

FOOTBALL
BY FRANK DALLERES

▲
FOOTBALL
TOTTENHAM manager Harry
Redknapp lambasted his toothless BY FRANK DALLERES
strikeforce after their hopes of hold- ARSENAL could close to within one
ing onto a Champions League spot point of Premier League leaders
suffered a major blow with defeat to Manchester United tonight but will
17 mins: Anelka latched onto former Chelsea struggling Blackpool. have to do so without their most in-
winger Gronkjaer’s wayward pass, raced into A Charlie Adam penalty and fur- form attacker, Robin van Persie, after
the penalty area, shifted the ball onto his right ther goals from DJ Campbell and the Dutchman’s injury curse struck
foot and drilled it beyond the goalkeeper Brett Ormerod brought the visitors again.
down to earth following last week’s Van Persie, who has 11 goals in
win over AC Milan at the San Siro. eight games, and centre-back Laurent
Roman Pavlyuchenko snatched a Defoe (right) has gone 17 Premier League games without a goal Pic ACTION IMAGES Koscielny are both sidelined for the
consolation for Spurs, but it did little visit of Stoke this evening, while mid-
to quell the ire of Redknapp after a leaves Tottenham fourth, just two Pavlyuchenko’s deflected volley in fielder Abou Diaby is suspended.
second half in which Blackpool goal- points ahead of Chelsea having injury time rounded off the scoring. Manager Arsene Wenger, however,
keeper Richard Kingson repeatedly played one game more. insists the hamstring and back
justified his selection.
“I have never seen a team miss so
Blackpool climb to 12th in the
Premier League but are still just five
TOP SIX injuries suffered by Van Persie and
Koscielny are minor and that both
TEAM PLD W D L F A PTS
many open goals in my life. We had points above the drop zone. “have a chance” of playing in
54 mins: Essien shoveled the ball onto chances from two, three, four yards Adam opened the scoring after 18 Man United 26 16 9 1 57 25 57 Sunday’s Carling Cup final.
Lampard who managed squeeze a perfectly out and we just couldn’t score or hit minutes, converting from the spot Arsenal 26 16 5 5 56 27 53 Stoke are the first of five opponents
weighted pass between two defenders, and defenders on the line,” said and Campbell got on the scoresheet Man City 27 14 7 6 43 24 49 in a hectic 14 days and Wenger
Anelka finished beautifully across Wiland Redknapp. “In the second half at 2-0 just before half time, heading in a admits he has never been busier. “We
Tottenham 27 13 8 6 38 31 47
we had chance after chance after James Beattie cross at the far post. were never involved in four competi-
chance. We missed about 10 open Ormerod poached the third with Chelsea 26 13 6 7 46 22 45 tions at this stage of the season so
goals and defended badly.” Defeat 10 minutes remaining, before Liverpool 27 11 6 10 35 32 39 that is credit to the squad,” he said.

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