The Business: Wednesday 22 May 2013
Company news, markets and financial talking points, available from 8am Monday to Friday
Europe faces a lost decade of stagnation unless it takes the “bold” policy measures seen in Japan, says Mark Carney, the incoming Bank of England Governor. In his last speech as governor of the Bank of Canada before moving to the UK, he said: “Europe can draw lessons from Japan on the dangers of half measures... Europe remains in recession. Deep challenges persist in its financial system. Without sustained and significant reforms, a decade of stagnation threatens.” His words have underlined his status as a monetary activist and fuelled speculation that he will try to relaunch quantitative easing when he arrives in the UK, says the Daily Telegraph.
Apple chief executive Tim Cook mounted an emphatic and unapologetic defence of the company's tax practices yesterday, reports the Financial Times. Quizzed by US senators over congressional charges that the company has avoided billions of dollars in taxes on international profits, he said: “We pay all the taxes we owe, every single dollar. We not only comply with the laws, but we comply with the spirit of the laws.” However, Democrat Carl Levin noted that in 2012, Apple exploited tax loopholes allowing it to avoid $9bn in US taxes, or $25m per day. Levin said such practices did “real harm” to the US economy, adding: “You shifted the golden goose to Ireland.”
Shares on Wall Street reached a new all-time high as investors bet that the US central bank would continue supporting the economy, reports the BBC. The Dow Jones rose 0.34% to 15,387.58 - a record close. The S&P 500 index also set a record, creeping up 0.17% to 1,669.16. Federal Reserve officials have encouraged investors to think the bank will continue to support the economy with its bond-buying programme, something economists feared it would retreat from. However, investors across the world will be closely watching Federal Reserve chairman Ben Bernanke’s testimony before Congress today for more clues on monetary policy direction.
Sliding petrol prices and an early Easter combined to drive inflation down to its lowest level in seven months, reports The Times. Official figures showed that consumer prices inflation fell from 2.8% in March to 2.4% in April. However, while inflation is below the City’s expectations of 2.6% and less than half the peak in 2011, it remains above the Bank of England’s official target of 2% and continues to outpace wage growth, which expanded by only 0.8% in the three months to March — the slowest rise since records began in 2001. Economists expect inflation to rise again in the coming months, stating that most of the factors driving it down last month were temporary.
A government sell-off of Royal Bank of Scotland and Lloyds Banking Group could move one step closer after the IMF urged George Osborne to accelerate his disposal of the £65bn stakes in the two bailed-out banks. The Guardian reports that the Washington-based fund has told the government that disposal of the share stakes should be a priority. Speculation of a sell-off of the 39% stake in Lloyds and 81% stake in RBS has risen as their share prices climbed. On Tuesday, shares in Lloyds closed just above 61p, the level which the Treasury has signalled it now regards as break-even for the taxpayer, while RBS was at 342p, still below any break-even targets set by the government.
Vodafone responded to accusations of tax avoidance yesterday, insisting that it made an "absolutely huge" contribution to the UK treasury, reports The Independent. Chief financial officer Andy Halford admitted that the firm had not paid much UK corporation tax in some years, but stated that the company has put £7bn into the Treasury's coffers for airwave spectrum. "It's a huge, huge investment,” he said. “The collective of what we're paying the UK Exchequer is absolutely huge. It may not be the corporation tax line [in the accounts] but it's absolutely huge." Vodafone also announced that its pre-tax profits crashed by two-thirds to £3.26bn for the year to 31 March.
FTSE-100: up +0.71 to 6803.87
Dow Jones: up +0.34 to 15387.58
Dax: up +0.19 to 8472.20
Cac-40: up +0.33 to 4036.18
Nikkei: up +2.07 to 15699.23
Hang Seng: down -0.61 to 23224.20
US dollar: buys €0.77450 and £0.66030
Sterling: buys $1.51470 and €1.17330
Oil: Brent crude futures $103.60 down 1.2 percent