Morning business round-up: Eurozone fears mount - BBC News Morning business round-up: Eurozone fears mount - BBC News

Wednesday, May 23, 2012

Morning business round-up: Eurozone fears mount - BBC News

Morning business round-up: Eurozone fears mount - BBC News

What made the business news in Asia and Europe this morning? Here's our daily business round-up:

European Union leaders will meet in Brussels on Wednesday as fears mount over the region's debt crisis, amid concern that Greece may have to leave the euro.

Leaders are expected to hear the new French President, Francois Hollande, challenge the EU's German-led austerity drive.

The head of the IMF, Christine Lagarde, is also keeping up the pressure on Greece to fix its finances.

In an interview with the BBC, Ms Lagarde said there had to be more tax collection and structural reform.

That is despite the deep unpopularity of austerity measures imposed on Greece by the IMF and European Union in return for bailout funds.

Greek politicians are divided over whether to continue supporting those measures and face a 17 June election.

Meanwhile, the World Bank has warned that the eurozone crisis could harm the growth of East Asian economies.

The bank said that a "serious disruption" in the eurozone could hurt growth and dent demand for exports from East Asia.

It said that East Asian countries needed to boost domestic demand to rebalance their economies and sustain growth.

In company news, Fiat and Mazda have formed an alliance to develop two-seater sports cars.

The alliance will work on a car for Fiat's Alfa Romeo brand and a roadster with a different engine and styling for Mazda.

The cars will be built at Mazda's plant in Hiroshima. Both will be based on a new version of Mazda's MX 5, the car that Mazda is best known for.

Business headlines

The Indian rupee hit a record low against the dollar in early trade on Wednesday.

The Indian currency fell to 55.82 rupees against the US dollar, down from 55.39 on Tuesday.

The slide comes amid concerns that slowing growth and a high rate of inflation may hurt India's economy.

Lenovo, the world's second largest PC maker, has reported a big rise in annual profits thanks to strong demand for its products in China.

Beijing-based Lenovo made $473m (£300m) in the year to 31 March, compared with $273m in the previous year.

Japan's exports rose less-than-forecast in April, hurt by a drop in shipments to China and Western Europe.

Exports rose by 7.9% from a year earlier. Most analysts had forecast growth of close to 12%.

Reebok India has lodged a police complaint against two former executives, accusing them of commercial and financial irregularities.

The firm alleged that former managing director Subhinder Singh Prem and ex-chief operating officer Vishnu Bhagat set up secret warehouses, fudged accounts and indulged in fictitious sales.

It said such activities by the two had resulted in a loss of almost 13bn rupees ($233m; £160m).

UK defence giant BAE has signed a £1.9bn ($3bn) deal with Saudi Arabia to supply aircraft, including 22 Hawk trainer jets, and training equipment.

According to trade union Unite, 218 jobs at the East Yorkshire factory where the aircraft is made will now be saved.

Retail sales volumes in the UK fell by 2.3% in April, largely because of a record fall in petrol sales, according to the Office for National Statistics (ONS)

Sales of fuel were down by 13.2% in April. In March, motorists had panic-bought petrol ahead of a threatened tanker driver strike.

Sales of clothing and footwear were also affected by April's record rainfall.

Luxury fashion retailer Burberry has reported strong growth in annual profits as it continues to expand around the world.

Pre-tax profits were up 24% to £366m, with sales also up 24% to £1.86bn.

The company said the Asia Pacific region accounted for 37% of both retail and wholesale revenue. The firm plans to invest £200m this year and open 12-14% more space.

The latest Business Daily podcast considers the impact that a slowdown in China could have on the rest of the world.

Leave Business Secretary Vince Cable alone – he’s the moral centre of this Coalition - Daily Telegraph

The true test of loyalty comes when a minister’s support is sacrificial, in the sense that it is unpopular with his own political base and therefore damaging to his personal interests. Mr Cable endured just such a test, and emerged with flying colours, when he threw his full-hearted backing behind the higher education reforms, the responsibility of his Tory junior minister David Willetts, in the early months of the Coalition.

These reforms, and in particular the proposal to raise tuition fees to an upper limit of £9,000, were toxic among Liberal Democrats. Mr Cable could have stood aside, and there were some who advised him to do so. Instead, he joined the battle.

He has shown comparable self-effacement in his loyalty to George Osborne. History is full of self-confident business secretaries who have embarked upon a war with the Treasury and sought to set out their own rival economic strategy: George Brown in the mid 1960s and Michael Heseltine in the early 1990s are well-known examples. Mr Cable, who set out his own plans for economic revival ahead of the 2010 election, would have had every excuse.

But he has shown unstinting support for Mr Osborne’s financial strategy, and resisted what must have been a very substantial temptation to set himself up as an alternative chancellor. Accepting that retrenchment was inevitable, he oversaw a significant reduction in the number of his department’s civil servants, once again a hateful move for Liberal Democrats. He has not just acted by the letter, but in the full spirit of this reforming Government, quietly privatising the Royal Mail, standing out against new regulation in the workplace, and becoming a powerful advocate of Oliver Letwin’s “red tape challenge”. Mr Cable deserves the bulk of the praise for the recent small surge of inward investment into Britain, though characteristically he has not tried to grab all the credit.

Now we come to the Beecroft report, the source of the latest trouble and the excuse for so much Downing Street-inspired private briefing against Mr Cable in recent months. The core point to understand is that the Business Secretary did not block Beecroft. Indeed, he accepted almost all of his recommendations. On only one issue, Mr Beecroft’s now notorious proposal for “no fault dismissal” – the disastrous consequences of which were unwisely described by the private equity mogul as a “price worth paying” – did Mr Cable object. It is worth noting that he did not initially dismiss even this proposal out of hand, taking the emollient and considered step of putting it out for consultation.

Mr Beecroft has responded by labelling Mr Cable a “socialist” and a danger to good government. The language is intemperate, but more importantly Mr Cable is right and Mr Beecroft, along with his Conservative admirers, has taken a very dangerous wrong turning. The kind of untrammelled free market capitalism which Mr Beecroft is advocating is inhumane, unedifying and unBritish, and ultimately comes close to the false proposition that the Conservative Party should be the plaything of very rich men pursuing their financial interests at the expense of a disempowered workforce.

It’s easy for Mr Beecroft to make his sweeping statements. He is very rich. Apax, the company he helped to run, was one of a number of similar concerns which made vast fortunes for a tiny financial elite on the back of Gordon Brown’s tax reforms at the turn of the century. Ed Miliband, who was a special adviser at the Treasury during this period, showed quite breathtaking hypocrisy in attacking David Cameron yesterday for his links with millionaires.

In truth, Mr Cameron, who has stood by his Business Secretary over Beecroft, does not emerge too badly out of this affair. None the less, the man he needs to thank for keeping the Conservative Party in touch with rudimentary human decency is the widely despised Vince Cable.

It sounds paradoxical to say so, but Mr Cable is a new type of politician. He has knocked about the world, working as an adviser to the Kenyan government and chief economist of Shell. He has unusual personal accomplishment, as anyone who saw his remarkable appearance on Strictly Come Dancing will know. He is the author of the most gripping memoir by an active politician since that by David Blunkett. He has known personal tragedy through the slow death from cancer of his first wife, Olympia. He has rough edges and has enjoyed a genuine career outside Westminster. Alone among the Liberal Democrat members of the front bench, Mr Cable has managed to stay loyal to the Coalition without surrendering his identity.

There was a time when age was an advantage in British public life. It was recognised that the old possessed qualities that were unattainable for the young. This respect for human longevity helps explain why William Ewart Gladstone, the greatest prime minister of the 19th century, did not enter No 10 until he was 58, and enjoyed three terms of office thereafter. That time may yet come again. Mr Cable is now in that very interesting place: he is the moral centre of gravity for the Coalition and of British public life. If Nick Clegg, as widely expected, steps down as Lib Dem leader before the general election, Mr Cable – should he decide to run – is highly likely to replace him. His best years may lie ahead.

US STOCKS-Wall Street falls 1 pct on Europe, Dell - Reuters UK

Wed May 23, 2012 6:48pm BST

* Euro-zone officials agree to prep for Greek exit scenario

* Dell revenue outlook weighs on sentiment

* U.S. new home sales, prices rise in April

* Facebook shares rebound despite lawsuit

* Dow off 1 pct, S&P off 0.9 pct, Nasdaq off 0.8 pct (Updates to early afternoon trading)

By Ryan Vlastelica

NEW YORK, May 23 (Reuters) - U.S. stocks fell 1 percent on Wednesday, with all S&P 500 sectors trading negative as concerns mounted over Greece's future in the euro zone.

Tech shares were among the day's biggest decliners as a weaker-than-expected revenue forecast from Dell Inc, the third-largest computer maker, spurred fears that global tech spending was declining faster than had been previously anticipated.

Euro-zone officials have agreed that each euro-zone country must prepare an individual contingency plan in the event that Greece decides to leave the single currency bloc. The agreement was reached during a teleconference of the Eurogroup Working Group, which lasted for about an hour on Monday.

An index of European shares fell 2.2 percent to close at 971.99.

"It's very frightening to hear about this kind of talk, even if it makes sense as a contingency, because the lack of a clear path there continues to be very problematic for banks," said James Dunigan, chief investment officer of PNC Wealth Management in Philadelphia.

An S&P index of financial shares fell 1.2 percent, with Citigroup Inc down 2.1 percent at $26.35 and Capital One Financial off 1.9 percent at $49.34.

Dell Inc plunged 17.8 percent to $12.40, on track for its biggest one-day drop in more than a decade after forecasting disappointing second-quarter revenue. Hewlett-Packard Co lost 4.7 percent to $20.76.

The Dow Jones industrial average was down 118.60 points, or 0.95 percent, at 12,384.21. The Standard & Poor's 500 Index was down 11.75 points, or 0.89 percent, at 1,304.88. The Nasdaq Composite Index was down 21.55 points, or 0.76 percent, at 2,817.53.

Falling oil prices also depressed the energy sector, with an S&P index of energy companies down 1.2 percent. U.S. July crude oil future fell $2.30 to a session low of $89.55, trading below $90 a barrel for the first time since Nov. 1, on easing concerns about Iran's nuclear dispute with the West and increasing worries about global economic growth.

Earlier in the session, stocks had briefly trimmed their losses after data showed new U.S. single-family home sales rose more than expected in April and prices pushed higher. The latest reading on sales of new homes offered further evidence that the housing market was turning the corner.

The data "adds to the growing sense that housing is stabilizing, but it isn't enough to overcome the global issues driving the day," said Dunigan, who helps oversee $112 billion in assets.

Facebook Inc and banks, including Morgan Stanley , were sued by the social networking leader's shareholders, who claimed the defendants hid Facebook's weakened growth forecasts ahead of its $16 billion initial public offering. The stock was up 2.3 percent at $31.70.

In the earnings arena, shares of Toll Brothers Inc rose 1 percent to $27.30 after the largest U.S. luxury homebuilder reported a second-quarter profit, beating analysts' estimates, compared with a year-ago loss. (Editing by Jan Paschal)

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