Super Seat Celebration BUSINESS WITH PERSONALITY FOOTBALL BANKS FIGHT TO SURVIVE TRANSFERS IN BRAVE NEW WORLD EX-ENGLAND STAR TREVOR STEVEN’S OUR GUIDE TO THE UPHEAVAL P7-9 VERDICT PAGE 30 Issue 1,459 Friday 2 September 2011 www.cityam.com FREE LSE mulls a MANUFACTURING bid for LCH Clearnet GRINDS TO A HALT ▲ CAPITAL MARKETS BY ALISON LOCK ▲ WORLD ECONOMY THE London Stock Exchange is BY JULIAN HARRIS mulling a bid for a majority stake in European clearing house THE global economic slowdown is LCH.Clearnet, just three months after hammering factories throughout ruling itself out of the race to own the most major Western economies. prized trading asset. Manufacturing survey scores The LSE’s move to take control of declined in all but one of the G7 coun- the last independent clearing house tries last month, with factory sectors in Europe follows the collapse of its actually contracting in the UK and the merger with Canada’s TMX Group Eurozone. and comes ahead of the looming Manufacturing growth in the UK merger between Germany’s Deutsche plummeted to a 26-month low in Boerse and NYSE Euronext. August, according to the latest pur- A takeover of LCH would give the chasing managers’ index (PMI). LSE control of a vital part of the trad- New export orders suffered the ing process and strengthen it against most devastating collapse since May the newly-merged rival European 2009, with companies reporting weak- exchange, which would have a huge er demand from the US and the rest of market-leading presence in both Europe. The British sector had been derivatives trading and clearing. expanding healthily until early this The LSE currently has no clearing year, with analysts hoping it could facility of its own and clears its UK drive the recovery forwards. equity trades through LCH, which is Yet since January the index has shed also London-based. 12 points. The only steeper drop in its But LCH, privately owned by 98 20-year history was in the aftermath of banking and broking groups, is the Lehman Brothers collapse. already considering proposals from “Recent months have seen a steep est readings for over two years – while warned against complacency: “Make August, yet remains at an unspectacu- other exchange and post-trade servic- deterioration in growth of key overseas contraction was even more severe in no mistake, this survey is still sig- lar 50.9 as concerns about the global es operators including Markit, with markets, especially in the Eurozone,” Spain (45.3) and Greece (43.3). nalling a worryingly slow rate of economy linger. the backing of the NYSE Euronext. said Chris Williamson of Markit, New export orders from the growth,” he said. “The survey’s near- Brazil’s central bank shocked US exchange Nasdaq OMX also said which compiles the data along with Eurozone plummeted at their stagnation signalled the weakest per- onlookers this week by slashing its in June it had bid for a minority stake the Chartered Institute of Purchasing sharpest rate since January 2009. formance since the US PMI rose above interest rates by 0.5 percentage points in the clearing house, which is consid- and Supply. In America and Germany, key man- neutral 50 level in August 2009.” in one go, citing a “substantial deterio- ered a sought-after asset. The offers The UK sector slipped to a PMI score ufacturing industries have ground to a New orders have shrunk for two ration” in the international outlook. tabled are thought to value LCH at up of 49, down from 49.4 in July. All scores halt, slipping to 50.6 and 50.9 respec- straight months in the US, boding ill Meanwhile Germany’s second quar- to €1bn (£885m). under 50 signal economic decline. tively – close to stagnation. for the world’s largest economy. ter GDP was yesterday confirmed at a The London Stock Exchange and Manufacturing also shrank in While worse figures had been In China, however, manufacturing depressingly sluggish 0.1 per cent. LCH.Clearnet both refused to com- France (49.1) and Italy (47) – their low- expected for the US, Williamson PMI rose slightly, by 0.2 points, in ALLISTER HEATH: PAGE 2 ment last night. ▲ ▼ ▼ ▼ ▲ ▼ Certified Distribution FTSE 100 5,418.65 +24.12 DOW 11,493.57 -119.96 NASDAQ 2,546.04 -33.42 £/$ 1.62 -0.01 £/¤ 1.14 +0.01 ¤/$ 1.43 -0.01 04/07/2011 till 31/07/2011 is 93,093 2 News CITYA.M. 2 SEPTEMBER 2011 Why more QE would be wrong for UK NEWS | IN BRIEF Banks shun UK to lower their tax European banks are looking for ways to move as much of their trade as possible annual growth to 2.2 per cent – the Henderson’s broader measure of liq- out of the UK and end up fuelling through low-tax jurisdictions to cut their fastest since December. Of course, this uidity confirms that more QE is not global commodity and food prices. tax bill, it emerged yesterday. The insti- remains feeble – and the quantity of needed. The total value of money as The UK economy faces lots of prob- tutions are finding ways to restructure money is falling after accounting for usually defined (cash and bank lems, none of which are due to a lack their entities to avoid paying onerous inflation of 5 per cent. As Simon Ward accounts) as well as Treasury bills, of liquidity: inflation at 5 per cent on tax rates in jurisdictions such as the UK, of Henderson, the fount of all wisdom National Savings instruments, foreign the retail price index is slashing take- tax specialists at Deloitte and PwC told on monetary data, points out, the currency bank deposits and other sim- home pay and hitting demand, Bloomberg. Up to 30 per cent of trade quantity of money grew by 6.3 per ilar products grew by a healthy annu- including for manufactured goods. values at major global banks could be EDITOR’S LETTER cent annualised between 1998-2003 in al 4.5 per cent in July. Low interest rates are helping those booked through hubs such as Hong Kong the pre-bubble years; usually, that One could even plausibly argue that with lots of floating rate debt but are or Singapore rather than Europe. Such ALLISTER HEATH would be the kind of growth that current rates of monetary expansion hammering savers, whose income has moves are likely to be increasingly wide- would seem sensible and conducive to are too high to ensure the two per been slashed. Companies are worried ly used as revenues fall and regulatory IT is not looking good for the global decent economic growth but lowish cent inflation target is met, at least due to fiscal, monetary and Eurozone costs rise, a shift that has already led to economy, with manufacturing output inflation. But what counts is not just until the Bank raises interest rates, uncertainties. They are also facing widespread job cuts at banks. slowing or contracting in most coun- the amount of money available (to thereby making deposits more attrac- ever-higher regulatory costs. Elevated tries, including Britain. There is grow- buy goods or services or to invest in tive and slowing the rise in velocity. levels of public spending, sky-high Google puts deals on homepage ing talk that the Bank of England assets) – the rate at which money The other big worry about more QE is marginal tax rates and an exploding Search engine Google has promoted a could launch a fresh round of quanti- moves about from person to person that it would merely force down gilt national debt are all slowing activity. daily deals offer on its home page for tative easing as early next week. If so, and firm to firm matters just as much. yields to even more ridiculous levels, Demand for UK exports is weak. While the first time, a rare instance of the that would be a mistake. The British This – economists call it the velocity wrongly suggesting that the cost of still no disaster, it is not a pretty pic- internet giant using its prized online real economy faces many challenges but it of money – has gone up significantly, borrowing will remain at zero for ever. ture. Rather than another massive estate for advertising and a warning doesn’t need another boost to the compensating for the weak growth in More QE would push sterling even dose of pump-priming, what the UK shot to current market leader Groupon. money supply. the money supply. Velocity is rising lower; in the absence of much really needs is lower inflation, a sup- The pair are vying for advertising dollars The Bank of England’s favourite meas- because interest rates are so low and demand from the Eurozone for UK ply-side revolution – and above all a from local businesses, such as restau- ure of the amount of money circulat- inflation so high that savers and com- exports, the effect would be felt via really big dollop of good luck. rants and retail stores. Google made 96 ing in the economy registered a 0.6 panies don’t want to accumulate cash higher import prices and higher infla- [email protected] per cent of its $29bn (£17.9bn) revenues per cent rise last month, pushing in bank accounts. In any case, tion. Excess liquidity could also seep Follow me on Twitter: @allisterheath last year from advertising. 4th Floor, 33 Queen Street, London, EC4R 1BR Tel: 020 3201 8900 Fax: 020 7283 5334 Goldman pays Email: [email protected] www.cityam.com Editorial Editor Allister Heath Deputy Editor David Hellier US homes fine News Editor David Crow Acting Night Editor Marion Dakers Business Features Editor Marc Sidwell Lifestyle Editor Zoe Strimpel ▲ ENFORCEMENT Superintendent, Goldman agreed to Sports Editor Frank Dalleres BY ALISON LOCK reform its foreclosure practices to for- FRC chief executive Stephen Haddrill will make firms re-hire their auditor every decade Art Director Craig Gaymer give 25 per cent of mortgage loans for Pictures Alice Hepple GOLDMAN Sachs was hit by more US struggling homeowners who are 60 Commercial government action yesterday as it days in arrears on payments.