BANKING & INSURANCEHBOS is worst hit by meltdown in marketsHBOS was the biggest casualty yesterday when London's leading shares plunged to a three-year low in the aftermath of the Lehman Brothers collapse (
Scotsman). The Financial Services Authority (FSA) took the unusual step of issuing a statement supporting Edinburgh-based HBOS on a day when its shares dropped by 40 per cent before rallying. Analysts suggested HBOS's woes were caused by City speculators making a "fast buck". Meanwhile, the Bank of England pumped £20 billion into frozen money markets – following the £5 billion injected on Monday – as banks, fearing losses, raised lending rates to one another. During a second day of market turmoil, experts predicted banks would now be less willing to lend to one another and the result would cause customers further headaches. And there were warnings that job losses in the financial sector – spearheaded by Lehman redundancies – would force the UK government to cut spending. But experts told The Scotsman a lack of economic activity could prompt a fall in oil prices, which would lead to a drop in inflation and potentially let central banks make interest-rate cuts.
US to take control of AIGTHE US Federal Reserve announced that it will lend AIG up to $85bn in emergency funds in return for a government stake of 79.9 per cent and effective control of the company - an extraordinary step meant to stave off a collapse of the giant insurer that plays a crucial role in the global financial system (
FT). Under the plan, the latest dramatic intervention by the US government to combat the global credit crisis, the existing management of the company will be replaced and new executives - as yet unnamed - will be appointed. It also gives the US government veto power over major decisions at the company. The Fed said it was acting to prevent "a disorderly failure of AIG" which would "add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance".
Read all today's banking news from scotsman.comECONOMYCentral banks fail to halt hike in interbank lending ratesA FRESH surge in the rate at which banks are prepared to lend to each other was triggered yesterday despite the Bank of England and other central banks pumping billions of pounds into the financial system (
Scotsman). The FTSE 100 index of Britain's blue-chip stocks crashed to a three-year low as it became clear that the co-ordinated action had failed to ease market nerves rattled by the crisis among Wall Street's leading financial institutions. There was also no boost to stock market sentiment from the Federal Reserve's meeting across the Atlantic as America's central bank decided to keep interest rates on hold. In London, banks suffered a second day of woes, with HBOS diving 22 per cent to close at 182p and Royal Bank of Scotland shedding 10 per cent at 189.1p. At one stage, the Footsie plunged below 5,000 points, before recovering to stand 3.4 per cent lower at 5,025.6.
Read all today's economics news from scotsman.comRETAILSales hit by economic climate – and rainSCOTTISH retailers today report their worst August sales figures for three years, as shoppers turned to "value" products and cut back on non-essentials (
Scotsman). Like-for-like sales last month crept ahead by just 0.7 per cent according to the Scottish Retail Consortium (SRC), while total sales rose by 6.6 per cent compared with August last year, reflecting the higher price of food and other goods. The news comes a day after two of the UK's largest supermarkets launched a fresh price war, with Asda slashing 5,000 prices and Tesco introducing 350 new "discounter" products. Across the UK, retail sales fell 1 per cent below their August 2007 levels, while Scottish retailers reported that sales in July and August were "much weaker" than in May and June, because of "unseasonable weather and the squeeze on household budgets". Meanwhile, a survey by Tesco suggested that consumers were more worried about food prices today than they have been at any point in the past 20 years.
Asda sees market share hit record 17.3%ASDA has taken its highest- ever share of the UK grocery market, figures published yesterday show as retailers seen as budget operators are benefiting from shoppers hunting for value (
Herald). The UK's second-largest supermarket, owned by US giant Wal-Mart, took a market share of 17.3% in the 12 weeks ended September 7, figures from analyst TNS Worldpanel show, a record high for the company and up from 17% in the same period last year. Discounters saw their turnovers increase massively with Aldi and Lidl posting increases of 20.8% and 11.1% respectively, although their market shares remain small at 2.9% and 2.4%. Freezer centre Iceland produced a 12.9% increase in sales, taking its share to 1.7% of the market. In contrast, Tesco, while maintaining its dominance of the sector, saw its market share slip by 20 basis points to 31.5% while Sainsbury fell by the same to 15.8%. The overall grocery market turnover grew 7.3% com-pared to last year, but TNS Worldpanel director of research Ed Garner said this hid static volumes with inflation of 9% boosting the numbers.
Read all today's retail news from scotsman.comTECHNOLOGYStandard Life adds flexibility with £24.2m Vebnet dealTECHNOLOGY company Vebnet is being bought by insurance giant Standard Life in a £24.2m deal that will net its prominent backers seven-figure sums and give the insurance company a chance to expand its corporate pensions offering (
Herald). Standard Life yesterday offered Vebnet investors 260p a share for their stakes, a 114% premium to the closing price on Monday evening and well above the shares' historic highs. Edinburgh-based Vebnet, which provides flexible benefits and online rewards schemes to 145 corporate clients, was set up in 2000 by former Royal Bank of Scotland banker Gerry O'Neill, the company's chief executive, and Edinburgh Partners boss Sandy Nairn, listing on the AIM market three years later. The pair will net £2.6m and £2.5m respectively from the transaction. The deal, which came on the same day as Vebnet announced an 85% increase in pre-tax profits to £910,000 for the year ended June 30, has received the irrevocable backing of 50.5% of investors including company directors and venture capitalist Cross Atlantic Holdings.
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