American financial markets plunged as a re-elected President Obama returned to the White House to face a looming crisis over the nation’s finances, and a Congress still divided over how to fix them. Hours after Mr Obama’s decisive win, markets in New York began to slide at the prospect of a return to gridlock in Washington and a severe cut in the forecast for European growth. Republicans smarting from their defeat said that they were “ready to work with” Mr Obama on tax reform and deficit reduction, but billions had already been wiped off the value of big US defence companies as the Dow Jones fell by 312 points in the worst day’s trading this year. In London the FTSE 100 closed down 93.27 points, or 1.6 per cent. The sell-off came after a terse initial statement from John Boehner, the Republican House Speaker, who said that his party’s continued control of the House of Representatives meant that Mr Obama had “no mandate for raising tax rates,” according to The Times.
International Airlines Group, owner of British Airways and Iberia, is looking at mounting a full takeover of Vueling, Spain’s second biggest domestic airline. In a statement released after the close of markets on Wednesday, IAG said its board would discuss at a meeting on Thursday making an offer for 100% of the share capital of the Barcelona-based low cost carrier. IAG’s Spanish business, Iberia, already owns a 45.85% stake in Vueling, acquired in 2009. The airlines group said “no decision to make an offer has yet been reached nor, accordingly, on any of its potential terms, including in particular the price”. “Further announcements will be made in due course when a decision is made,” IAG added. Vueling, which has a market cap of €171m, carries about 12m passengers a year and made a pre-tax profit of €14.8m (£11.m) in 2011, The Telegraph says.
Andrew Sentance, PricewaterhouseCoopers’ senior economic adviser and a member of the MPC until earlier this year, set out his opposition to another round of quantitative easing and said rates needed to rise to 3 per cent by 2015 to reduce the risk of “distorting” the economy. His comments came as the European Commission warned that the Chancellor is likely to miss his debt reduction target when the Office for Budget Responsibility updates its forecasts next month. “It appears that the Government may miss its target of having debt fall as a share of GDP by 2015-16 if no new measures are introduced in the Autumn Statement on December 5th,” the EC said in its economic update. While acknowledging the role quantitative easing (QE) played “in stabilising the UK economy in 2009 and helping bring about a return to growth”, Mr Sentance said the MPC should vote against money printing at today’s meeting, The Telegraph explains.
One of Britain’s leading shareholder advisory groups has urged Xstrata investors to reject the commodities trader Glencore’s $33bn (£21bn) takeover offer. Pirc said it was concerned over the level of due diligence carried out on Glencore and insufficient independent board representation at Xstrata. It is also concerned about the “rather lucrative package” for executives should the deal go through. Xstrata investors will be able to vote on the merger and associated pay deals on 20 November, The Independent writes.
BAE Systems is on the cusp of sealing a deal to sell 60 Typhoon fighter jets to the United Arab Emirates. Reports on Wednesday said Prime Minister David Cameron, who is on an trip to boost British exports across the Middle East, had secured ‘political agreement’ to make the multi-billion pound sale. Both countries said earlier this week they planned to strike up a partnership over the Typhoon jet, which was used in combat operations by the RAF over Libya and secured Britain’s airspace during the London Olympics, The Daily Mail reports.
UK pension funds are holding more bonds than equities for the first time since the so-called cult of equity in the 1950s, say leading City fund managers. The switch into bonds, which began in about 2002, is the most significant shift in market allocation since the late George Ross Goobey made a landmark speech praising equities as a way of generating inflation-linked growth in 1956. Alasdair MacDonald, head of investment strategy at consultants Towers Watson, said: “This is a watershed moment for UK pensions.” Alan Wilde, head of fixed income and currency at Barings, added: “The cult of equity is dead or has at least been on life support since 2002/3 following the dotcom crash and corporate problems in the US with the likes of Enron,” The Financial Times says.
Living more than a century will soon be “the norm” and make ageing the greatest threat to the UK’s economic future, warned Otto Thoresen, director general of the Association of British Insurers (ABI). “We are living longer, of which I know you are all very aware. I know of several insurers, and you may be among them, who are now modelling pensions and retirement savings products on the assumption that customers could live to be 120 or 125 – and with very different patterns of retirement,” he said in a speech at an actuarial conference last night, The Telegraph reports.
Conservative and socialist lawmakers from Greece’s three-party coalition government voted to adopt the €18.5bn budget cuts by 2016 despite protests earlier in the day by more than 70.000 people who massed outside the parliament. Violent protesters threw fire bombs and rocks at police, who responded with stun grenades, tear gas and the first use of water cannon in Greece in years. Inside the building, lawmakers interrupted the debate as Parliament employees went on strike to protest wage cuts. According to Athanassios Nakos, second deputy speaker of the parliament, 153 out of 299 lawmakers voted in favour of the bill that includes spending cuts and reforms to be implemented by 2016, while 128 voted against, The Telegraph writes.
