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#31

British Business - July 16

REGULATOR PLANS 15 REFORMS TO STOP FOREX CHEATS

The Financial Stability Board has proposed 15 reforms in the wake of allegations of manipulation, and the launch of dozens of investigations around the world into banks. (thetim.es/1l117Y8)

CARNEY'S RATE-RISE REMARK WAS 'MEANT TO STOP BOND CRASH'

The governor of the Bank of England revealed that his surprise comment about interest rates last month was designed to puncture the complacency of markets and reduce the risk of a destabilising 1994-style bond market crash. (thetim.es/1mfsCwP)

BLINKX PLANS BUY-BACK TO 'BURN THE SHORTERS'

The management of Blinkx, the online video company hit by a bear raid earlier this year, is poised to launch a share buyback programme to shore up support for its stock after investors told the company to "burn the shorters". (thetim.es/Wg2soV)

The Guardian

UK INFLATION RISES IN JUNE ON FOOD AND CLOTHES PRICES

Food price rises and delayed summer clothes sales by high street retailers lifted Britain's inflation rate to a five-month high in June, well above forecasts. (bit.ly/1t0HAfO)

RICHARD BAKER TO TAKE OVER AS CHAIRMAN OF WHITBREAD

Richard Baker has taken his first prominent City role since the private equity-backed takeover of Alliance Boots in 2007, succeeding Anthony Habgood as chairman of Whitbread. (bit.ly/1jNxOhb)

TESCO CLASHES WITH FARMERS' UNION OVER NEW ZEALAND LAMB

Tesco is facing criticism from farmers for promoting New Zealand lamb at the height of the British season for the meat, despite its promises to back local producers. (bit.ly/1t0gWnb)

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#32

U.K. Unemployment Lowest Since 2008

The U.K. unemployment rate declined to the lowest since 2008 as employment hit record high, but earnings growth remained weak squeezing consumers' purchasing power.

The ILO jobless rate for March to May fell to 6.5 percent of workforce, the lowest since the last quarter of 2008, the Office for National Statistics reported Wednesday.

The rate was in line with economists' expectations. This was down from 6.9 percent seen in December to February and 7.8 percent in the same period last year.

During March to May, there were 2.12 million unemployed, 121,000 fewer than from December to February. The number of people in work surged 254,000 from February to 30.64 million, the highest on record.

In June, the claimant count fell to 3.1 percent, the lowest since September 2008, from 3.2 percent in May. The rate matched economists' expectations.

The number of people claiming Jobseeker's Allowance declined by 36,300 from May to 1.04 million, when it was forecast to drop by 27,000.

Despite the decline in unemployment, wage growth eased further squeezing purchasing power of consumers.

Pay including bonuses for employees for March to May was 0.3 percent higher than a year earlier, the weakest expansion since May 2009. It was slower than the 0.5 percent rise forecast by economists.

At the same time, earnings excluding bonuses were up by 0.7 percent, the slowest on record.

Ongoing very low earnings growth suggests that there is still an appreciable amount of labor market slack with little pressure on inflation coming from pay, IHS Global Insight's Chief UK Economist Howard Archer said.

The labor market statistics gained much importance after the Bank of England linked its interest rate to unemployment last August. The central bank then modified its forward guidance as unemployment started falling more sharply than anticipated.

Early this year, the BoE said the interest rate would not be raised from 0.50 percent until the slack in the labor market is exhausted.

Although employment has continued to grow rapidly, there still appears to be enough slack in the jobs market to prevent pay from picking up, Samuel Tombs, a senior UK economist at Capital Economics said.

With the majority of the evidence pointing to the economy still seeing healthy growth and the unemployment rate coming down markedly, IHS Global Insight's Archer believes that the first interest rate hike to 0.75 percent from 0.50 percent is more likely to occur in late-2014 than early-2015, but said it is a tight call.

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#33

Pound Rises to 22-Month High Versus Euro as Jobless Rate Drops

The pound rose to the strongest level in 22 months against the euro as a report showing U.K. unemployment slid to the lowest since 2008 added to signs the economy can withstand higher interest rates.

Sterling was about 0.3 percent from an almost six-year high versus the dollar. Today’s data added fuel to a resurgence in the pound’s world-beating rally that was given impetus yesterday when inflation exceeded economist estimates, spurring bets Bank of England Governor Mark Carney will hasten plans to increase borrowing costs. The report, which also showed slower pay growth, pushed a gauge of future price swings for the pound versus the euro to the highest in a month.

“The U.K. economy is on every measure outperforming euro land,” said Nick Parsons, head of research for U.K. and Europe at National Australia Bank Ltd. in London. “The fall in the jobless rate is clearly good news. Slowing wage growth is a temporary statistical phenomenon, which will be reversed. This is an opportunity to reload with sterling longs.” A long position is a bet an asset will appreciate in value.

The pound strengthened 0.2 percent to 78.98 pence per euro at 4:23 p.m. London time after touching 78.90, the strongest level since September 2012. Sterling was little changed at $1.7135 after appreciating to $1.7192 yesterday, the highest since October 2008.

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#34

U.K. Firms Raise Marketing Budgets For Seventh Quarter

U.K 's marketing budgets was increased for the seventh straight quarter in the second quarter of 2014, as firms took advantage of a strengthening business climate, results of a survey by Markit Economics and IPA showed Thursday.

The Bellwether survey showed that a net balance of 15.2 percent of companies raised their advertising budgets in the second quarter.

This was the second highest reading in 14-year survey history and down from the survey high of 20.4 percent recorded in the first quarter. The survey also revealed the longest period of continuous growth.

Spending on internet marketing was raised the most in the second quarter as this allowed companies to target specific clientele in a cost effective manner. The net balance rose to 14.7 percent.

Also, high profile media campaigns were also used to maintain a competitive edge. Main media advertising balance increased to 11.5 percent in the second quarter, slightly below the record 11.7 percent in the first three months of the year.

Other sub-categories, such as direct marketing, events, PR and sales promotions, also recorded moderate growth. However, the balance for market research was negative in the second quarter.

Going forward, firms expect to raise their marketing budgets on the back of continued optimism regarding their own and wider industry financial prospects, the survey found. That said, cost pressures continue to weigh on budgets.

The U.K. economy is likely to expand at least 3 percent this year, according to the survey. The survey also raised their adspend growth forecast for the year to 6.1 percent from 4.7 percent seen in the first quarter. Adspend is projected to grow 3.8 percent in 2015.

Markit Chief Economist Chris Williamson said, "This year's budgeted spend, which was already set higher than last year, has been revised up again in the second quarter, setting the scene for a bumper year."

"The survey also adds to a growing body of data which points to the UK economy sustaining strong growth as we move into the second half of the year."

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#35

GBP/USD edges lower as sentiment wanes

The pound edged lower against the U.S. dollar on Thursday, as recent comments by Federal Reserve Chairwoman Janet Yellen continued to support demand for the greenback and fresh concerns over tensions in Ukraine dampened market sentiment.

GBP/USD hit 1.7108 during European morning trade, the pair's lowest since July 15; the pair subsequently consolidated at 1.7111, slipping 0.15%.

Cable was likely to find support at 1.7060, the low of July 15 and resistance at 1.7192, the high of July 15 and an almost six-year high.

The greenback strengthened broadly after Ms. Yellen said Tuesday that rates could rise sooner if the economic recovery continued to improve. However, the Fed chair also said that if the recovery was disappointing monetary policy would remain accommodative.

Separately, markets were jittery as the U.S. and the European Union announced on Wednesday a fresh round of sanctions against Russia, following the annexation of Crimea in April and ongoing tensions in the rest of Ukraine. The U.S. package was the largest round of penalties so far.

In reponse to the sanctions, Russian President Vladimir Putin said that relations with the U.S. are in danger of reaching a "dead end" and could damage U.S. business interests in his country.

The pound remained mildly supported however, after data on Wednesday showed that the U.K. unemployment rate fell to 6.5% in the three months to May, the lowest since late 2008. However, wage growth in the same period remained weak, slightly tempering expectations for a rate hike by the Bank of England this year.

Elsewhere, the euro pulled back from almost two-year lows against sterling, with EUR/GBP up 0.18% to 0.7907, off lows of 0.7889.

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#36

Pound Retreats From Two-Year High as BNP Warns on Scotland Vote

The U.K. pound retreated from its strongest level in almost two years against the euro as BNP Paribas SA said sentiment toward the currency may be unsettled as Scotland’s independence referendum nears.

Sterling has posted the biggest gain in the past year among 10 developed-country currencies tracked in Bloomberg Correlation-Weighted Indexes amid bets an intensifying recovery will prompt the Bank of England to raise interest rates. The referendum “stands to unsettle sterling at a time when sentiment is otherwise supportive,” Phyllis Papadavid, a London-based senior global-currency strategist, wrote in a client note today.

With just two months before the Sept. 18 vote, polls show more people want to remain within the U.K. than end the 307-year-old union, though enough are undecided to make an upset possible. The future of the pound has been central to the debate, with Prime Minister David Cameron ruling out sharing sterling with a newly independent state, while nationalists threatened to walk away from Scotland’s liabilities, which would increase Britain’s debt as a proportion of gross domestic product.

“The market’s attention to the referendum is growing and will continue to grow as we head into September,” Papadavid said in a telephone interview. “Our base case is that they don’t vote for independence but the risk in the run up to the vote and the potential uncertainty around the actual vote will boost sterling volatility.”

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#37

U.K. Bank Lending To Businesses Improves: BoE

U.K. net lending to businesses was positive in the three months to May, while mortgage approvals for house purchases declined, the Trends in Lending data released by the Bank of England showed Friday.

Lending to businesses increased in three months ended May, in contrast to a negative flow in the previous period, it said.

Nonetheless, the annual growth rate in lending to both small and medium-sized enterprises and large business remained negative.

Meanwhile, data revealed that mortgage approvals by all UK-resident mortgage lenders for house purchase fell, partly due to delays associated with operational requirements arising from the introduction of the Mortgage Market Review.

Gross secured lending in the three months to May was broadly similar to the previous period. At the same time, consumer credit flows were GBP 2.4 billion, higher than the previous period.

Spreads over reference rates on new lending were unchanged for small businesses, while it fell significantly for medium-sized and large businesses in the second quarter.

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#38

GBP/USD forecast for the week of July 21, 2014

The GBP/USD pair went back and forth during the course of the week, showing the 1.70 level to be supportive yet again. Ultimately, we did not have that larger range, but we do recognize that the market is still positive as long as we are above the aforementioned 1.70 handle. A supportive candle could get us to start buying, just as a break of the top of the range for the previous week would. We believe that the market should go to the 1.75 handle given enough time, and that is our longer-term target.

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#39

GBP/USD weekly outlook: July 21 - 25

The pound fell to three-week lows against the dollar on Friday amid concerns over escalating geopolitical tensions between Russia and the West before recovering slightly late in the session.

GBP/USD touched lows of 1.0737, the weakest since June 30 before pulling back to 1.0786 late Friday, ending the day down 0.08%. For the week, the pair lost 0.20%. It was the second straight week of losses after the pair hit an almost six-year high of 1.7190 on July 15.

Cable is likely to find support at around the 1.7000 level and resistance at 1.7150.

The drop in the pound came amid increased demand for save haven assets following the shooting down of a Malaysia Airlines jet in eastern Ukraine. Moscow has denied involvement in the crash, which came a day after the U.S. announced a fresh round of sanctions against Russia for supporting separatists in east Ukraine.

Markets were also unsettled as Israel expanded its ground offensive in Gaza.

Demand for the dollar continued to be underpinned after Federal Reserve Chair Janet Yellen indicated earlier in the week that interest rates may rise sooner if the economy continues to improve.

The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was at 80.60 late Friday, after rising to one-month highs of 80.75 earlier in the session.

Elsewhere Friday, sterling also edged lower against the euro, with EUR/GBP touching highs of 0.7934 before easing back to 0.7914 at the close, not far from Wednesday’s 22-month low of 0.7880.

The single currency remained under pressure after the Bank of Italy cut its growth forecast for 2014 to 0.2% from 0.7% on Friday and warned that risks to the economy remained to the downside.

The announcement underlined concerns over the faltering economic recovery in the currency bloc.

Earlier in the week European Central Bank President Mario Draghi said that large scale asset purchases are “squarely” within the bank’s mandate. The remarks were the latest indication that the central bank is open to further monetary easing measures to stave off the risk of deflation in the euro area.

In the week ahead, the U.S. is to release what will be closely watched data on consumer prices, home sales and manufacturing orders. Investors will also be awaiting data on second quarter growth from the U.K.

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#40

Sterling slips lower against dollar

The pound edged lower against the dollar on Monday as concerns over escalating tensions between Russia and the West weighed on market sentiment, underpinning safe haven demand.

GBP/USD touched lows of 1.7070 and was last at 1.7083.

Cable was likely to find support at around the 1.70 level and resistance at 1.7150.

Tensions between the West and Russia have mounted since the shooting down of a Malaysian airliner in eastern Ukraine late last week. The U.S. and other nations have accused Russia of complicity in the crash, which Moscow has denied.

Market sentiment deteriorated on Monday following reports that Ukrainian troops were moving in to the rebel held city of Donetsk, fuelling fears over an escalation in the region.

Concerns over Israel's ground offensive in Gaza also contributed to risk aversion in markets.

Sterling rose to almost six-year high of 1.7190 against the dollar last week amid expectations that the deepening economic recovery in the U.K. will prompt the Bank of England to raise interest rates before the end of the year.

However, the dollar received a boost after Federal Reserve Chair Janet Yellen indicated last week that interest rates may rise sooner if the economy continues to improve.

Elsewhere Monday, the pound was almost unchanged against the euro, with EUR/GBP at 0.7913, holding above Friday’s 22-month lows of 0.7888.

The single currency remained under pressure after recent comments by European Central Bank President Mario Draghi were seen as the latest sign that the bank is open to further monetary easing measures to stave off the risk of deflation in the euro area.

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#41

U.K. Consumer Confidence Falls For First Time In 2014

U.K. consumer confidence declined in June for the first time in 2014, according to Lloyds Bank Spending Power Report, published on Monday.

The overall consumer confidence index fell by a percentage point to 145 in June. However, spending growth on essentials was around 1 percent higher than a year ago, limiting the pressure on consumer wallets.

Patrick Foley, chief economist at Lloyds Bank, said, "Notwithstanding a modest easing in confidence, the economic backdrop for consumers remains positive, particularly so in light of continued gains in employment."

Data showed that sentiment towards employment situation remained relatively stable at -26 percent for June. Consumers' sentiment towards their own personal finances continues to maintain a positive balance, despite seeing a slight decline to 14 percent.

Feelings towards the housing market declined eight points to -12 percent in June. The balance of opinion on future discretionary income fell to zero from 6 percent in May.

Elsewhere, British Retail Consortium /Springboard Footfall Monitor showed that footfall was down 0.7 percent in June from a year ago, which was sharper than the 0.2 percent fall in May.

Footfall on high street was 1.7 percent down on the previous year for June, down from May's fall of 0.9 percent, it said.

Helen Dickinson, BRC Director General, said, "At first glance, this month's figures don't paint a rosy picture for the retail industry with the headline figure showing footfall shrinking once again." However, out-of-town shopping destinations continue to outperform high streets and shopping centres.

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#42

Pound Resilience Shows House-Price Drop No Barrier to Rate Bets

The pound was about 0.4 percent from a 22-month high versus the euro amid bets a cooling housing market won’t be enough to prevent the Bank of England from being the first major central bank to increase interest rates.

Sterling was little changed versus the dollar after Rightmove Plc said house prices in England and Wales fell for the first time this year in July. The pound has been the best-performer in the past 12 months among a basket of 10 major currencies as a strengthening economy spurred bets central-bank officials led by Governor Mark Carney will increase borrowing costs in the first half of 2015. U.K. government bonds were little changed before a sale of 10-year debt tomorrow.

“Little has changed in terms of the structural direction and there should be further pound strength ahead,” said Neil Jones, head of hedge-fund sales at Mizuho Bank Ltd. in London. “There is some profit taking on long sterling positions, some of the housing data may be coming in a little bit on the lighter side given the previous performance. But there’s more to come, there’s an underlying bid to the pound.”

A long position is a bet an asset’s value will increase.

Sterling was at 79.24 pence per euro at 5 p.m. London time after touching 78.89 on July 17, the strongest level since September 2012. The pound was little changed at $1.7066. It appreciated to $1.7192 last week, the highest since October 2008.

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#43

U.K. Public Sector Net Borrowing 9.51B vs. 9.20B forecast

U.K. public sector borrowing fell less-than-expected in the last quarter, official data showed on Tuesday.

In a report, National Statistics Office said that U.K. Public Sector Net Borrowing fell to a seasonally adjusted 9.51B, from 11.86B in the preceding quarter whose figure was revised up from 11.48B.

Analysts had expected U.K. Public Sector Net Borrowing to fall to 9.20B in the last quarter.

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#44

GBP/USD slides as U.S. inflation report firms dollar

The pound edged lower against the dollar on Tuesday after U.S. inflation data met expectations and while housing numbers beat forecasts, confirming market sentiments that the Federal Reserve remains on track to wind down stimulus programs this year and raise interest rates the next.

In U.S. trading on Tuesday, GBP/USD was trading down 0.13% at 1.7054, up from a session low of 1.7042 and off a high of 1.7084.

Cable was likely to find support at 1.7037, Friday's low, and resistance at 1.7100, Monday's high.

Geopolitical concerns in the Ukraine and Israel briefly took a back seat to U.S. data and firmed the greenback over the pound.

The Labor Department reported earlier that the U.S. consumer price index rose 2.1% in June, unchanged from the previous month and in line with forecasts, which drew applause for the dollar.

On a month-over-month basis, U.S. consumer prices were up 0.3% after a 0.4% increase in May, also in line with expectations.

Figures that met but did not exceed Wall Street expectations bolstered the dollar, as un upside surprise could have rattled nerves and sent many investors rethinking what the Federal Reserve will do with monetary policy.

Market talk points to the Fed ending its bond-buying program around October and then raising interest rates some time in 2015, though the length of time that will pass between those two policy moves remains up in the air.

June's core inflation rate, which excludes food and energy costs, rose by just 0.1% from May and 1.9% on year, slightly below market calls for 0.2% and 2.0% readings, respectively, which illustrated how gasoline was driving the CPI up, though markets viewed the numbers as fundamentally healthy anyway.

Elsewhere, the National Association of Realtors reported earlier that existing U.S. home sales rose 2.6% to 5.04 million units in June from 4.91 million in May, beating market forecasts for a 2.0% rise to 4.97 million units.

Meanwhile across the Atlantic Ocean, the Confederation of British Industry said that its index for industrial order expectations declined to 2 this month from 11 in June, missing expectations for a fall to 8.

Elsewhere, sterling was up against the euro, with EUR/GBP down 0.30% at 0.7896, and down slightly against the yen, with GBP/JPY down 0.01% at 173.13.

On Tuesday, the Bank of England is to publish the minutes of its latest policy meeting, which contain valuable insights into economic conditions from the bank’s perspective. Later in the day, BoE Governor Mark Carney is to speak.

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#45

BoE Minutes And Eurozone Consumer Sentiment On Tap For Wednesday

The minutes of the Bank of England's July monetary policy announcement, eurozone consumer sentiment report and French business confidence figures are among the economic data scheduled for release on Wednesday.

At 4:30 am ET, the Bank of England will release minutes of its July Monetary Policy Committee meeting.

At 2:45 am ET, French Statistical Institute INSEE is due to release its business confidence index for France. The index is expected to remain stable at 98 in July.

At 3:30 am ET, Statistics Netherlands is scheduled to release its consumer spending figures. Consumer spending is estimated to fall 1.4 percent year-over-year in May after the 0.1 percent decline in April.

The Central Statistical Office of Poland is expected to release its retail sales and unemployment reports at 4 am ET. Retail sales are estimated to rise 4 percent year-over-year in June following the 3.8 percent increase in May. The jobless rate is expected to decrease to 12.1 percent in June from 12.5 percent in May.

At 4:30 am ET, the British Bankers Association will release its mortgage approvals data for the U.K. the number of mortgage approvals are expected to decline to 41,375 in June from 41,757 in May.

The Croatian Bureau of Statistics is due to release its unemployment report for June at 5 am ET. In May, the jobless rate was 19.6 percent.

At 6 am ET, the Confederation of British Industry is scheduled to release results of its distributive trade survey for the U.K. The distributive trade balance is expected to increase to 15 percent in July from 4 percent in June.

At 10 am ET, Eurostat is expected to release the preliminary results of its consumer sentiment for the eurozone. The consumer confidence index is estimated to remain at-7.5 in July, the same as in June.

Speeches

At 7:45 am ET, Bank of England's Mark Carney is scheduled to participate in a debate on the Global Economy at the Glasgow University. Leader of the U.K. House of Commons William Hague will take part in a Panel discussion in Brussels at 12 pm ET. Marek Belka, president of Narodowy Bank Polski, is due to speak to the Polish Parliament.

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