Worries about world food prices are increasing, stoked by a 10 per cent rise in US corn and wheat prices in just a week. The jump was driven by the current spell of hot, dry weather in the US Midwest, which is suffering record-breaking temperatures in some areas. Similar weather back in 1988, creating one of the most damaging droughts in US history, cut the country’s corn production by more than 30 per cent. Food price inflation is already a headache for policymakers around the globe, faced with the pressures of growing populations, rising urbanisation and changing diets. That means the latest surge in crop prices state-side, with the US producing more than 40 per cent of global corn exports, is causing some concern. The dry weather is also affecting the Black Sea producers, as well as those on the North China Plain, according to The Telegraph.
Britain´s embattled banking sector will come under fresh assault this morning with the publication of an authoritative survey showing that UK banks have plunged in international strength and stature. Against a backcloth of surging competition from Chinese banks, the report shows HSBC is the only one of Britain’s four major banking players to remain in the world’s top ten based on the capital reserves they have to back their loans, known as tier 1 capital. The survey from The Banker magazine, widely regarded as the industry bible, reveals that Royal Bank of Scotland has fallen from tenth to 12th place in terms of capital strength, displaced by Agricultural Bank of China, one of four Chinese banks now in the top ten, writes The Scotsman.
The market-rigging scandal that has shaken the City took two major new twists last night as the chairman of Barclays prepared to resign and the Deputy Governor of the Bank of England was drawn into the investigation. Marcus Agius will step down from the troubled bank this morning after Barclays directors gathered to discuss the fallout from traders manipulating markets and cheating customers. Paul Tucker, the favourite to succeed Sir Mervyn King as Governor of the Bank of England, faces the possibility of being called to appear before MPs after it emerged that Barclays believed that he had encouraged the practice, The Times says.
House price growth ground to a halt in June after three consecutive months of price rises, according to Hometrack, the property market analyst. The strength of the London market helped the UK as a whole to avoid house price falls, according to the monthly survey of estate agents and surveyors, but Hometrack warned that lower demand over the summer would put further pressure on property values. The percentage of postcodes recording monthly house price falls in June — 23.4% — was more than double the 10.8% that reported price increases. New buyer registrations fell by 0.5% in June — the first monthly decline in five months. Hometrack said that economic uncertainty stemming from the Eurozone crisis and the start of the seasonal summer slowdown were to blame for low demand, while the Jubilee bank holiday was also a contributing factor, The Times says.
Hu Jintao flew to Hong Kong to swear in its new leader at the weekend. His appearance coincided with the celebrations for the 15th anniversary of the return of the former British colony to Chinese rule. At the same time, his economic henchmen gathered in Shanghai at the fifth financial forum in Lujiazui, China’s answer to Wall Street. Speech after speech renewed Shanghai’s grand ambition to become a global financial centre by 2020 — a pledge given hearty support from visiting officials from London and New York. However, some economists say that if China does not move quicker to open up its financial markets and liberalise interest rates, it will risk creating another Tokyo, whose early promise as a global financial centre dwindled with economic malaise. Mr Boleat said that protectionism was “probably” his biggest concern: “To be an international financial centre you can’t discriminate against foreigners — China has to be open.”
Bad debts in the Eurozone are a “ticking time bomb” for the continent’s economy, with the worst effects expected to be felt next year, a report has warned. Banks’ balance sheets will contract by a record margin in 2012, further constraining the supply of credit to businesses and consumers, according to Ernst & Young, but the “real impact” of Europe’s debt crisis will not arrive until 2013. The accountancy firm said banks will shrink their balance sheets by €1.6tn (£1.3tn) this year as the result of asset disposals and a contraction in their lending activity – a sharper decline than during the financial ¬crisis. As a result, it predicted that corporate lending will contract by 4.8% in 2012, while consumer loans will fall by 6.6%, which would represent the fastest pace of lending contraction on record for the Eurozone. However, next year looks even more “bleak” as the fallout from bad debts is felt across Europe, Ernst & Young’s Eurozone Financial Services Forecast said.
Iran´s oil minister yesterday called for an emergency meeting of energy cartel Opec, arguing that the current market value of oil had become “illogical”. A local news agency quoted Rostam Ghasemi as saying that, at a recent meeting of the Organisation of the Petroleum Exporting Countries, member states agreed to hold an emergency meeting if oil prices fell below $100 per barrel. International crude benchmarks posted their biggest quarterly declines on Friday since the fourth quarter of 2008 due to weak demand, ample supply and economic worries. However, prices rebounded later on Friday on a deal by European leaders to shore up Eurozone banks. Brent crude rose more than $6 a barrel to near $98, while US light crude jumped by more than $7 to settle just below $85, The Scotsman reports.