August News in Brief: A Monthly Round-Up

By James Drakeford

Posted: 31st August 2012 09:37

August has picked up the baton to follow the same direction as months gone by with Barclays and the Eurozone continuing to dominate column inches around the world.  Throw in the mega-money court case between Apple and Samsung along with tension in the public sector in Brazil and you have got yourself an intriguing month of news.  Here is a brief round up of all the big stories and their latest developments.
 
Antony Jenkins Appointed As Bob Diamond’s Replacement
 
Following last months resignation of chief executive Bob Diamond, as a result of the Libor Scandal that rocked the banking world, Barclays have handed the job of restoring its tarnished reputation to an insider. 
 
Antony Jenkins appointment came as little surprise in the City, given that he was widely tipped as a leading contender to the throne.  The 51-year-old has been retail and banking boss for Barclays since 2009 and his division was largely untarnished by the current controversies engulfing the group making him a safe pair of hands to steer the ship out of the mire.
 
Educated at Oxford University, Mr Jenkins began his career at Barclays nearly 30 years ago when he completed the Barclays Management Development Programme before going on to hold various roles in retail and corporate banking.  He moved to Citigroup in 1989, working in both London and New York and most recently held a senior role in the credit card division.  He re-joined Barclays as chief executive of Barclaycard in January 2006 and was appointed chief executive of retail and business banking, with a seat on the executive committee in November 2009. 
 
Barclays Hit By Three Scandals
 
Just when you thought things couldn’t get worse for Barclays they somehow have.  Having already paid £290 million to settle claims that it used underhand tactics to try to rig financial markets, they have now been landed with a further two scandals. 
 
Barclays revealed a potential £450 million bill for mis-selling complex financial products to unwitting small businesses.  It was one of four banks which agreed with the FSA to compensate customers who were mis-sold interest rate hedging products.  Also known as interest rate swaps, the complicated derivatives products may have been sold to businesses as protection – or to act as a hedge – against a rise in rates without the customer fully grasping the risks.
 
The latest claim is the revelation that the Serious Fraud Office (SFO) has launched an investigation into payments made between the bank and Qatar at the height of the financial crisis in 2008.  The bank said last month that the matter was being investigated by the FSA but it has now transpired that the SFO has launched its own inquiry.  The organisation is understood to be looking at whether disclosure of payments to advisers were sufficient when it raised more than £5 billion of emergency capital from Middle Eastern investors.
 
Brazil Faces Public Sector Strikes As Economy Continues To Stall
 
Last month we reported that the Brazilian economy recovery was not going to plan and this month that unrest had spread further with the country’s largest ever industrial disputes threatening to stifle the public sector.  The Confederation of Federal Public Sector Workers (Condsef) said: ‘’It is virtually a general strike of the Brazilian public sector,’’ pointing out that 350,000 of the 500,000 federal employees had joined the work stoppage over higher pay and a career plan.
 
Brazil’s Planning Ministry has now said an agreement had been reached with workers from 30 out of 35 different government departments and public bodies, ranging from teachers to motorway police officers.  The government said the majority of public workers had accepted the offer of a 15.8% pay rise over three years.  The federal police and tax inspectors, among others, rejected the deal.
 
Eurozone Crisis Faces Crunch Month in September
 
The economy of heavily-indebted Greece remains stuck in recession with the country currently trying to finalise a package of €11.5 billion euros (£9.1bn) of spending cuts over the next two years.  It is also being asked to put in place economic and structural reforms, including changes to the labour market and a renewed privatisation drive in order to qualify for the next €33.5 billion instalment of its second €130 billion bailout.
 
Spain’s attempts to stave off a full bailout were dealt a blow when the regional government of Catalonia said it needed €5 billion (£3.97bn) from a central government rescue fund, while the region of Valencia has upped the size of its aid request by €1 billion to €4.5bn.
 
Early September will see political and economic battles in Athens, Frankfurt and Paris determine the future of the single currency.  In the Netherlands, the euro will dominate a general election campaign that could see another incumbent leader unseated.  And in Karlsruhe, Germany’s top judges will rule on whether Europe’s new bailout mechanism, a key plank in the region’s response to the crisis, is legal.  If August has taught us anything, it’s that the Eurozone crisis faces one of the most nail-biting months since the debt crisis began almost three years ago. 
 
Investment News
 
Apple Hits Record High As Samsung Slumps
 
Apple shares hit a new record of almost $681 a share in US trading as investors continued to digest the fallout from a £665 million patent lawsuit.  Samsung was ordered to pay £665m in damages to Apple in a US legal verdict after a jury found the South Korean electronics group had copies key features of Apple's iPhone and iPad.  Samsung shares fell almost 8% in trading in Asia, the largest daily fall in four years, as investors fretted that the company would have to redesign forthcoming launches.
 
Domino Expand In Europe
 
Takeaway chain Domino’s Pizza satisfied its hunger for European expansion with a deal targeting tech-savvy consumers in Switzerland.  The group, which has a network of 748 stores in the UK, Ireland and Germany, plans to open at least 25 stores in the country over the next five years after buying the Domino’s master franchise and 12 existing stores.
 
With internet use in Switzerland higher than in the UK, Domino’s believes there is an opportunity to drive online growth in the same way as its domestic market as consumers order through phone apps and Facebook pages.  Domino is paying an initial £3.3 million for the exclusive right to operate and franchise stores in Switzerland, Liechtenstein and Luxembourg, as well as an option on stores in Austria.
 
North Korea Needs More Reform To Win China Investment
 
China has underlined its support for North Korea's efforts to rebuild its economy, after a meeting between Hu Jintao, the Chinese president, and Jang Song-Thaek, the powerful uncle of North Korean leader Kim Jong-un.
 
The isolated North’s new leadership has been signalling in recent weeks plans to repair an economy brought to its knees by decades of mismanagement and international sanctions, but will rely heavily on neighbouring ally China to do so.
 
North Korea still needs to make it far easier to invest in its destitute economy if it is to have much hope of tempting in Chinese money, but the initial moves are promising.  Between 2003 and 2009, Chinese investment in North Korea stood at £62.1 million; just 12% of the amount Chinese firms have invested in South Korea, according to Chinese data cited in a 2011 report.


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