Posts Tagged ‘Moody’s’

Friday Fiver

posted by Edward Jones

1. In a late breaking development, FSA regulatory chief Hector Sants announced his resignation from the soon to be disbanded organisation. It’s an unfortunate end to a week when the FSA successfully stung another trader for insider trading. Where next for Hector? Some are already suggesting a high profile role in industry awaits.                                                                                                                                                                                                                                              

2. Budget fever grew nicely, with more leaks from Treasury than there are hangers-on at an Only Way is Essex party. In no particular order, scrapping pensions tax relief, scrapping the 50p tax rate, issuing absurdly long-dated bonds, tax breaks for the TV and film industry and raising the income tax threshold towards £10,000.

3. Following on from point number one, it seems insider trading is a crime, but one that is only punishable by removing half a bonus. Then again, based on this, the key to insider trading really is as simple as playing a popular after-dinner game with your client over the (recorded) landline at your desk.

4. Hell of a week for Tesco losing its UK boss and telling its employees they’ll have to work two years longer before they retire – on the latter they’re to be applauded for addressing the issue sooner rather than later, many more are likely to follow.

5.  Fitch joined Moody’s this week to put the UK economy on a negative outlook threatening the AAA rating. Some have said it’s a gift for George Osbourne before the budget as it will set the tone for continued austerity. Indeed the agencies have been clear that any deviation from austerity would be more disconcerting. Ed Balls’ line however, that you should never set policy by the credit ratings agencies might just get some traction, particularly given the criticisms they face.

Euro 2012: Fifa vs. Moody’s

posted by nwoods

It’s 2012, another year in which I can gorge upon a feast of world class sport. The Olympics, the Paralympics, the European Championships and god forbid another failed attempt by Andy Murray to win Wimbledon. The UK may be nearing a ratings agency downgrade but it’s not all bad and a glorious summer awaits.

I wonder what it’s like working in the City when a major sporting event is on. With targets to hit, demanding clients, every pound and every move under scrutiny, I bet they never get chance to scream “REF!!!!” across the trading floor.

Euro 2012 kicks off in 2012 but with ECB research showing inattentive trading during national football matches what impact for the Eurozone? (Image:Euro2012media.com)

Interesting then, that according to the latest bit of research from the European Central Bank, that’s exactly what happens. Its White Paper “The pitch rather than the pit – Investor inattention during FIFA world cup matches” looks at trading data during 2010 World Cup matches and draws some interesting conclusions. My favourite excerpts from the three key findings include:

First, we find strong evidence of decreased activity in stock markets during soccer matches at the 2010 World Cup. Trading activity dropped markedly, especially if the national team was one of the competitors. Compared to normal market circumstances, the median number of trades dropped by 45% if the national team was playing, while the volume dropped by around 55%.”

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FPS’ Friday Fiver

posted by Edward Jones

Well, an eventful week to say the least. We in the FPS team have looked beyond the obvious to find five other things that have happened this week. Enjoy.

Moody clouds hover over USA ratings

Photograph: Ryan24

This week, Moody’s threatened to revise down the USA’s AAA credit rating. Back in April, Standard and Poor’s revised to negative the outlook on USA ratings, a monumental move given that this was the first time that the USA’s outlook was revised down since Pearl Harbour. As the USA’s Congress and President continue to grapple over debt negotiations, it is looking increasingly unlikely that they will be able to come to an agreement before the 2nd August, after which the USA would literally run out of money and not be able to match its debt commitments.

Elsewhere financial markets are getting increasingly jittery as this week Ireland became the third Eurozone country to be downgraded to junk status –Ba1 – alongside Greece and Portugal. This downward pressure continues to strengthen fears that Italy and Spain will soon follow suit. One wonders if any country will escape what feels like a tidal wave of downgrades.

Bonuses back in vogue?

Photograph: Sky

We read with interest this week Sports Direct’s average £44,000 payout to staff after hitting profit targets. Out of 18,000 employees, 2,200 staff qualify for the bonus. This is on the basis of their employment being permanent over the last 12 months, irrespective of their position. According to the Times (£) the scheme is the most generous in the retail sector.

The move offers an interesting parallel to bonuses paid in the banking sector and the justification offers hope to the City: “There is nothing more powerful… in terms of  getting everyone pulling together… we wanted them [the staff] to see everyone is going to benefit” said Sports Direct’s Chief Executive Dave Forsey. One wonders if the banks presented their bonus schemes with the same clarity and distributed the fruits of their labours more equitably, they might not receive so much stick. Does this move represent a shift in other sectors towards a model whereby staff are incentivised to deliver for their employer? We are all aware of the success of the John Lewis Partnership, Sports Direct’s scheme seems a very positive sign in a sector which has struggled of late and could offer a way forward in overcoming low staff morale.

The cost of living (longer)

How much does it cost to retire in the 21st century? If you’re talking purely about the level of income people should have, then the Joseph Rowntree Foundation reckon that around £15,000 should be sufficient. If however, you’re asking how much it costs the state for you to retire, that’s a very different question. The bad news is the cost is rising as we continue to live longer lives.

The OBR released its first Fiscal Sustainability Report this week which provides long-term projections on how much the government will have to spend on welfare and healthcare by 2060. The answer, in a nutshell, is a lot more. Spending on health is going to increase from 8.2% of GDP now, to nearly 10% in 2060 and the separate cost of long-term care is going to increase as well. At the same time, the amount spent on the state pension will increase by over 2% of GDP to 7.9%. Put the whole package together, and ‘age-related spending’ increases from 24.6% of our GDP to 27.3%.

So what can be done about the rising cost? One answer is to raise the retirement age and hence lessen the number of years people receive their state pension, though this is proving deeply unpopular. Another is to prepare the population better for old-age and try to keep them healthier in it, which is no easy thing. This still isn’t enough though – which is why the OBR suggested we will need to raise an additional £22bn in tax each year from 2016 onwards to stop national debt spiralling away. Not what consumers who believe their disposable incomes are already shrinking want to hear as The Economist notes today.

Baby Boom to Boomerang

Our parents were the baby boomers- tuition fee free, riding on the crest of 80’s affluence, buying up property and reproducing. Whilst we are the boomerangers saddled with the debt of our education and the country and forced to return to the nest that our parents bought.  Returning home post Uni would once have made you a failure or at least a social embarrassment for the parents having to hide a 30 year old console loving son in their annexe.  But now 1 in 4 graduates are returning home and frankly, who can blame them?

Photograph: Paul Barton/Corbis available at Guardian.co.uk

New findings from Endsleigh show that most rental prices in the UK have increased steadily in the last two years with the average rent now standing at £688 per month, rising to almost £1,372 in London where most grads head in search of that increasingly elusive goal ‘employment.’ Demand is also increasing in the rental market as more and more first-time buyers are finding themselves frozen out of the mortgage market due to tighter lending criteria and a lack of finance.  And this would probably account for why 41% of the three million adults living with their parents returned home to save money whilst three in ten cited that they were unable to pay mortgages.

The introduction of tuition fees of up to £9,000 a year from 2012 will increase the pressure on graduates even further, with the number returning to the family home likely to rise.

Hungry for Growth

Photograph: Reuters

This week, the GE Capital (client) team were hitting the phones to secure coverage of the first ever ‘SME Capex Barometer’, a survey of 1,000 small and medium sized businesses across Europe looking at how much they plan to invest in replacing equipment ranging from plant machinery to IT hardware to photocopiers.

In the UK, 92% of SMEs are planning to spend a staggering £74.9 billion in the coming year, although businesses in Germany and France were looking to invest even more.  Reflecting the challenges involved with pulling out of recession, businesses reported missing out on over £8bn of new businesses as a result of out-dated equipment.

As John Jenkins, CEO of GE Capital put it: “Despite popular belief, the appetite for investing in growth amongst UK SMEs is actually very strong, with many businesses having reached a tipping point where putting off investment is no longer possible without compromising their ability to create revenue”.