Tuesday morning business bulletin
World markets rallied today as investors bet on expectations that the US Federal Reserve will cut interest rates again this week.
Tokyo’s Nikkei 225 stock index set the pace after putting back most of its 4% decline seen on Monday, while the FTSE 100 Index followed suit in London to gain 56.5 points to 5845.4 in the first hour of trading.
Wall Street had earlier taken a dismal new home sales report as a sign the Fed will lower interest rates on Wednesday.
Travel companies posted the biggest gains of the session, as trading figures from Thomson owner TUI Travel allayed fears that the economic slowdown had altered the travel plans of UK consumers.
Mortgage bank Alliance & Leicester today said it had further strengthened its funding position, despite a greater-than-expected £185m hit amid the credit crunch.
The group confirmed that it was now funded to the end of the year in a bid to allay liquidity concerns in the wake of the Northern Rock crisis.
But A&L revealed that losses from investments knocked by the credit squeeze and those linked to US sub-prime mortgages would be more than three times the £55 million it estimated last November.
The group added that chief executive David Bennett was taking a temporary leave of absence due to illness, to be replaced in the interim by group finance director Chris Rhodes. Alliance shares rose 2% today.
The UK’s biggest pubs operator said today its finance director had resigned after a disastrous bet on interest rates cost the company £274m.
Mitchells & Butlers also said chief executive Tim Clarke had tendered his resignation, but this was declined by other board members.
The group, which runs chains including All Bar One and O’Neills, hedged against rising interest rates last summer as part of a £4.5bn property deal with entrepreneur and major shareholder Robert Tchenguiz.
But potential investors pulled out following the credit crunch - causing the plans to be shelved - and with interest rates now on the way down, the group has drawn a line under the matter at a cost of £274m post tax.
As a result of the loss, Mitchells said all executive directors, including departing finance director Karim Naffah, will forego their 2007 bonuses.
The pound at 9am was US$1.9855 compared to US$1.9863 at the previous close, while the euro at 9am was £0.7434 compared to £0.7447 at the previous close.
