Business news and markets: live

Business news and markets: live

13.33 Shares in London-listed South African bank Investec are on the back-foot today and have dropped 3.2pc after the group sounded a profit warning on its first-half earnings. The bank has been hit by the weak rand, which has tumbled against the dollar this year.

13.25 Is Scotland better off inside or outside the United Kingdom? Vote in our poll:

12.55 Scotland’s borrowing costs could rise sharply and the country may have to introduce steep spending cuts if it votes for independence from the United Kingdom next year, according to the National Institute of Economic and Social Research (NIESR).

The think tank said borrowing costs for an independent Scotland using sterling would be between 0.72 and 1.65 percentage points higher than those on a 10-year British government bond.

Scotland would also have to tighten its finances by 5.4pc of GDP, according to the report. Angus Armstrong, director of macroeconomic research at NIESR, and co-author of the report, said:

Quote For an independent Scotland to prosper it requires a ‘hard’ currency; one in which investors are willing to hold long-dated Scottish government debt at a reasonable price.

12.35 Back to France, which is reportedly mulling the introduction of a new bank tax, based on the size of lenders’ balance sheets.

Tax revenues, estimated at around €50m, would be used to boost lending to local businesses, financial newsletter Agefi reported.

According to Agefi, BNP Paribas would be hardest hit by the new tax, even though it has just a 1.3pc share of the municipal lending market.

12.24 Anthee Carassava, our correspondent in Greece, has filed this update from Athens:

QuoteOn Tuesday, Greece’s powerful teachers union OLME moved to set up a “strike fund” to suppplement strikers’ lost pay.

More than 90pc of the country’s state teachers have joined in the strike action that kicked off Monday with five-day rolling strikes.

Prime Minister Antonis Samaras on Monday said the country would need another six years to see financial recovery. Today, however, he took to Brussels to meet with senior European officials in hope of convincing his European partners to ease up on austerity that has eaten away at least 25 percent of incomes and sent 1.4 million to unemployment lines.

His visit comes amid heightened talk that Athens will need a third bailout to fix its finances. Although the government is no longer spending more than it receives, the Greek economy isn’t producing enough to warrant getting out of emergency bailout programmes first put together in 2010.

Debt inspectors from the European Union and the International Monetary Fund are already in Athens poring over fiscal finances they have warned my require corrective measures to plug a 10 billion euro gap through 2015. Greeks fear those measures could spell a fresh onslaught of austerity.

A Greek teacher holds a sign during a protest by teachers in Athens yesterday (Photo: AP).

11.56 Another day, another wave of strikes in Greece. This time, doctors have taken to Athens’ streets to oppose government plans to merge hospitals in a bid to save cash.

Teachers from schools and universities, civil servants and lawyers are also on strike to protest against plans to sack state workers.

We’ll bring you pictures from today’s strikes as we get them.

11.42 French public debt will climb to almost €2 trillion (£1.7 trillon) by the end of next year, according to reports in French daily Le Figaro. This is equivalent to 95.1pc of gross domestic product (GDP), and higher than government estimates of 94.3pc.

When asked about the revised figures in a television interview, finance minister Pierre Moscovici – who will unveil France’s debt predictions next week – did not reject the new figure. He said:

QuoteDebt will reach a maximum (level) and then it will decrease.

EU rules require public debt to be no more than 60pc of GDP, or falling towards this ratio.

11.26 The bulls at Citigroup are stamping their hooves. Strategists at the bank reckon the FTSE 100, which is currently trading at 6,601, will reach 8,000 by the end of next year. The Citi experts said they were taking the “handbrake off” and explained they were positive on the market because the economy, company earnings and appetite for risk are all improving :

QuoteWe stay bullish on UK and European equities over the coming 12-18 months: 1) better macro, 2) better earnings, 3) rising risk appetite. There may be better nearterm entry points, but we see healthy c.25pc returns to the end of 2014.

11.15 Over to Germany now – a German index of economic optimism among investors rose more than expected in September, underlining stronger growth prospects in Europe’s largest economy.

The ZEW index rose to 49.6 points from 42 in August. Market analysts had expected an increase to 45.

The head of the ZEW think tank, Clemens Fuest, said Tuesday in a statement that “the financial market experts hold the view that the German economy is still gaining momentum.”

Fuest said optimism rose due to improved prospects for the 17 countries that use the euro. A crisis over high public debt has eased in the past year as market fears of a government default have ebbed.

Berlin

11.07 The full story of house prices in England hitting a record high can be read here.

Our economics editor Philip Aldrick writes that England’s house prices are up on the back of a soaring London property market.

Prices in England are now 0.9pc higher than their previous peak in January 2008.

However, the data revealed huge regional differences in the UK market. London prices jumped 9.7pc in the year to July, as the South East saw a 2.6pc rise. Together they drove a 3.3pc increase in UK prices, up from 3.1pc in June, with the average house now costing £245,000.

Excluding London and the South East, though, UK prices increased by just 0.8pc, and the average house cost £192,000.

One Hyde Park, one of London’s most expensive addresses

10.52 Full reaction to those inflation figures can be found here.

General view is the dip gives the Bank of England some breathing space.

10.41 Aside from Lloyds, the other state-backed lender, Royal Bank of Scotland, is also in focus today. Shares in the bank have fallen 1.6pc after analysts at UBS issued a downbeat note. Cutting their recommendation on RBS to “neutral” they said:

QuoteWhile we like the idea of investing in a self-help story with improving fundamentals under a new “business focussed” management team, we think RBS’s valuation is up with events and with political uncertainty still remaining, there are likely to be better entry points for the stock.

Meanwhile, a revival of bid chatter around Severn Trent has lifted its shares 3.1pc.

10.32 Following the news that the government will sell a 6pc stake in Lloyds, Chancellor George Osborne has written a letter to Andrew Tyrie, chair of the Treasury Select Committee.

Osborne confirms government has sold 6pc of Lloyds’ shares to institutional investors for 75p, raising £3bn. He notes that the sale price is 1.4p higher than the 73.6p the Labour government bought them at when it bailed out the bank.

As a result of the sale the national debt has decreased by £586m, he says.

10.21 Howard Archer, economist at IHS global, agrees that the dip in inflation is good news for the UK’s central bank.

QuoteAugust’s dip in inflation will be well received by the Bank of England as it supports hopes that consumer price inflation is near to peaking, and may even have done so.

This may slightly reduce market expectations that the Bank of England could raise interest rates as soon as early-2015 or even late-2014

10.18 The slight fall in inflation may have helped the Bank of England “maintain the status quo, at least for now”, says Kathleen Brooks, head of research at Forex.com.

QuoteThe Bank has found it difficult to communicate its forward guidance policy. The pledge to keep interest rates low for the long-term is full of caveats that make it hard to understand.

The BOE is finding out that forward guidance only seems to work if it is firm, the BOE’s forward guidance may not be firm because there are too many caveats that could knock the BOE’s pledge out of action.

However, receding inflation, even at quite a slow pace, gives the BOE some breathing space and could keep the market off its back, at least for the short term.

10.14 Back to inflation. In a statement from the Treasury it says the figures show the “economy is turning a corner”.

QuoteBut the recovery is in its early stages and risks remain. The only way to deliver a sustained improvement in living standards is to tackle the economy’s problems head on and deliver a recovery that works for all.

The Government knows that times are tough and that is why we have taken action to help with the cost of living including increasing the tax-free personal allowance, introducing tax-free childcare and freezing fuel duty and council tax.

10.11 More data to raise the fear of a housing bubble – ONS data shows that while the UK House Price Index is still below the peak of January 2008, the index for England is now 0.9pc higher than at the previous peak in January 2008

10.08 As other surveys have shown, while house price growth remains stable across most of the UK, they are rising faster than the UK average in London.

Annual house price increases in England were driven by London (9.7pc), the South East (2.6pc) and the East Midlands (2.4pc).

Excluding London and the South East, UK house prices rose 0.8pc in the year to July.

Source: ONS

10.04 Year-on-year prices rose 3.7pc in England and 1.8pc in Northern Ireland, offset by falls of 2pc in Scotland and 0.7pc in Wales.

Source: ONS

In July, prices paid by first-time buyers were 4pc higher on average than in July 2012. For existing homeowners prices increased by 3pc for the same period.

10.01 ONS has also released figures showing house prices rose 3.3pc in the year to July, up from a 3.1pc increase in the 12 months to June.

The average price of a house in the UK cost £245,000 in July.

Source: ONS

09.47 RPI inflation was above expectations, at 3.3pc last month, up from 3.1pc in July and ahead of a 3.2pc consensus.

ONS figures last week showed wages rising by just 1pc, so real income still falling.

09.42 Full breakdown of consumer prices last month.

Source: ONS

09.38 Following those inflation figures the pound has dropped against the dollar.

Pound against dollar on Tuesday. Source: Bloomberg

09.33 The fall in inflation is exactly in line with expectations.

The figures from the Office for National Statistics says the biggest contributor to the dip in consumer prices was a fall in air fares, along with a fall in recreation and culture, and clothing and footwear.

A rise in petrol and diesel prices partially offset the fall.

Source: ONS

09.30 Breaking: UK inflation slips to 2.7pc in August, down from 2.8pc a month earlier.

09.17 More on the government selling a 6pc stake in Lloyds. The government is set to make a £61m profit.

The shares were placed at 75p a share, a 3pc discount to Lloyds’ closing price on Monday, said UK Financial Investments (UKFI), the body that manages the Government’s shares in UK banks, on Tuesday.

The sale to financial institutions reduces the government’s stake in the bank to 32.7p from 38.7pc.

The price achieved is expected to be welcomed by George Osborne, the Chancellor.

08.58 Shares in Lloyds Banking Group have slipped 2.2pc to 75.665p but are holding up above the 75p apiece placing price the stock was sold to institutional investors. Investec‘s well-followed banking analyst Ian Gordon said:

QuoteUKFI has, quite sensibly in our view, chosen to take advantage of recent strength in the Lloyds share price by disposing of an initial 4.3bn shares at 75.0p – a 3.1pc discount to last night’s close. The sale represents 15.5pc of the UK Government’s 38.7pc stake – so 32.7pc still to go, albeit covered by a “soft” 90-day lock-up.

We regard the Government’s timing as impeccable, and it appears credible to suggest that it could yet be out in full by the election.

08.53 EU car sales for first eight months of the year the lowest since records began.

Passenger car sales were off 5.2pc to 7.84 million between January and August compared with the same period last year, the lowest figure since the European Auto Manufacturers’ Association started keeping track in 1990.

Meanwhile, new car registrations in August fell 5pc from a year ago to 653,872, the association said.

The monthly downturn was distributed across Europe’s biggest markets – Germany dropped 5.5pc, France fell 10.5pc, Spain was down 18.3pc, and Italy slid 6.6pc.

Britain’s was the only major market to expand, rising 10.5pc.

Source: European Auto Manufacturers’ Association

08.45 Nobody surprised to see markets trading lower this morning.

Jonathan Sudaria, dealer at Capital Spreads, says:

Considering that most equity indices are either on or are approaching all time highs, the belief that the economic fundamentals really have turned a corner must be setting in or that the Feds reduction in asset purchases won’t be so much of a tapering but more a very gentle ‘sanding’.

Either way, with such a large inflection point ahead, we don’t see markets making any major moves until after the FOMC.

08.35 European markets also in the red this morning.

In Germany the Dax is down 0.18pc

In France the Cac is down 0.28pc

In Spain the Ibex is down 0.48pc

In Italy the FTSE Mib is down 0.48pc

08.17 After surging on Monday amid investor relief Larry Summers had pulled out of the race to lead the Federal Reserve, the FTSE 100 has dipped 12 points, or 0.2pc, to 6,611 as the market looks ahead to the conclusion of the Fed’s policy-setting committee tomorrow.

A slow-down of the pace of the central bank’s quantitative easing programme is expected by the market.

08.15 Shares in Lloyds Banking Group are down 1.3pc following news that the government is to sell 6pc of its holding.

Reuters is reporting that the sale of the shares at 75pc is 2.8 times covered, says a source with direct knowledge of the transaction.

08.05 Also of note today – Danny Alexander, Chief Secretary to the Treasury, will be speaking at the Lib Dem conference in Glasgow today.

08.01 Bit of corporate news out this morning as Louise Armitstead reports her in City Briefing morning email.

The boom for housebuilders continues: Crest Nicholson has reported a 46pc jump in open market reservations since the start of May, with forward sales for 2014 up 92pc from last year to £145m.

The company has credited both the Funding for Lending scheme and Help to Buy for the boost.

In a trading update Debenhams has announced a 1.9pc rise in group like-for-like sales of the last quarter taking full-year growth 2pc.

The retail chain, which celebrates its 200th anniversary in November, has said online sales over the year have soared 46.2pc.

IG Group has announced a 15pc rise in first quarter revenues to £93.6m.

The boom for housebuilders continues

07.50 Few things to keep an eye out for today.

In the UK, the latest inflation figure will be out at 09.30.

Expectation is for it to fall from 2.8pc to 2.7pc.

In Europe we can also expect to see the latest German ZEW survey for September.

The overall expectation is for an increase to 45 from 42, but given some of the weakness seen in recent data, there could be some room for caution.

Also, the latest EU new car registrations data for August

There is also US inflation at 13.30, which is expected to slip to 1.6pc, from 2pc.

07.41 European markets are expected to follow their Asian counterparts and open in the red.

Michael Hewson, senior market analyst at CMC Markets says:

QuoteWe can expect a more tempered start to Europe’s markets this morning with slightly lower opens, as markets look to close the Monday gaps from their Friday closes.

Yields on government bonds are also being affected, he notes.

Over the past few days we have seen US and UK borrowing costs slide back sharply from the 3% level as markets become more sanguine about the likelihood of some form of Fed tapering later this week.

QuoteThe disappointing US economic data seen towards the end of last week appears to have convinced investors that we will probably see a small taper at worst, while the news that Larry Summers had pulled out of the running to take over from Ben Bernanke as head of the Federal Reserve, also helped drag yields away from the 3pc level, as markets weigh up the timing of any possible tightening of monetary policy from either the UK or US central bank.

Larry Summers has pulled out of the running to take over from Ben Bernanke as head of the Federal Reserve

07.25 Markets are expected to be cautious today as the US Federal Reserve begins its two-day meeting later.

The Federal Open Market Committee meets today and tomorrow to consider whether to taper its $ 85 billion-a- month in bond buying. Consensus seems to be that it will most likely be cut by $ 10bn a month.

In Asia, markets have fallen back from four-month highs, as investors consolidated positions before the meeting at which the central bank is likely to start withdrawing stimulus.

Japan’s Topix slid 0.3pc as the equity market reopened after a holiday. South Korea’s Kospi retreated 0.4pc. Hong Kong’s Hang Seng sank 0.3pc and China’s Shanghai Composite lost 1.3pc.

Australia’s S&P/ASX 200 rose 0.1pc, to close at a five-year high. New Zealand’s NZX 50 added 0.1pc to a record high. Taiwan’s Taiex dropped 0.1pc and Singapore’s Straits Times advanced 0.1pc.

07.10 UKFI has confirmed that the placing price of the government’s sale of 6pc of its stake in Lloyds will be 75p.

The placing will take place on September 20.

That means the proceeds from the sale will be £3,211,525,582.

07.05 Top story on our finance page this morning is news US investors are set to buy as much as half of the £3.3bn of Lloyds Banking Group shares being sold by the Government in what amounts to a major bet on the recovery of the UK economy, writes James Quinn.

Sources close to the accelerated sale of a 6pc Government-owned stake in the British bank said that American institutional investors and hedge funds had registered levels of demand well above those expected.

One source directly involved in the process said that at certain price levels – it is up to the Government’s advisors as to what price the shares will be sold – US investors could buy as much as half of the 4.2bn shares on offer.

“That’s their bet on the UK economy,” said the source, who spoke on the basis of anonymity. The news will make welcome reading for George Osborne, the Chancellor, who is likely to use the share sale to emphasise that his economic policies are working.

Mr Osborne last night triggered the sale of the 6pc stake in Lloyds in an overnight process. The move will cut the taxpayer’s stake in Lloyds from 38.7pc to 32.7pc.

The Government received a stake in Lloyds in return for its £21bn bail-out of the bank in October 2008, the result of its merger with ailing HBOS.

Elsewhere, Barclays paid Qatar £322m in hidden fees to secure the gas-rich Gulf state’s support for its rescue fundraisings at the height of the financial crisis and keep the bank out of UK taxpayers’ hands, writes Philip Aldrick.

Barclays is now facing a £50m regulatory fine for failing to disclose the payments, which it dressed up as fees for “advisory services”. The details emerged in the prospectus for Barclays’ £6bn 1-for-4 rights issue, which was launched yesterday to plug a regulatory capital shortfall.

And next Wednesday, tens of thousands of pubs and restaurants are reducing prices by 7.5pc as part of a rebellion against the level of VAT, writes Rebecca Burn-Callander.

Tax Parity Day is an independent initiative from The VAT Club JB, headed by veteran VAT campaigner and entrepreneur Jacques Borel. Its aim is to cut the level of VAT levied across the hospitality sector from 20pc to 5pc.

07.00 Good morning and welcome to our daily business and markets live blog, your one stop shop for all the breaking business stories of the day.

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