Sunday newspaper round-up: BoE, RBS, Weir

29th Jul 2012 17:57

The British Chambers of Commerce and the Ernst & Young Item Club, the only forecasters to use the Treasury's economic model, have both urged the Bank of England to take bold action to boost growth at Wednesday's meeting of the Monetary Policy Committee [MPC]. The economy has shrunk for three successive quarters according to figures published by the Office for National Statistics last week, which said the UK's GDP fell by 0.7 per cent between April and June. Andrew Goodwin, senior economic advisor to Item, said: "We do think there should be a rate cut. The Bank could go down to the rates in the US - 0.0 to 0.25 per cent. It is not the only answer, but it would help." Since March 2009 the Bank base rate has remained at 0.5 per cent - the lowest level in the Bank's 300 year history. A further rate cut could reduce mortgage repayments for millions of homeowners and would ease borrowing costs for businesses, The Sunday Telegraph reports.Stephen Hester has warned that Royal Bank of Scotland is facing a huge fine over the Libor scandal that has engulfed Barclays. The chief executive said the taxpayer-backed bank will "have our day in the spotlight" over the rate-rigging that has cost its rival £290m in fines and three executives, and reignited the public's anger towards bankers. "RBS is one of the banks tied up in Libor. We'll have our day in that particular spotlight as well," Mr Hester told the Guardian. He did not know the size of the fine but said that the investigation by the Financial Services Authority was "in process". The Sunday Telegraph understands that any possible fine is likely to be significant. Britain could suffer a triple-dip recession next year after a brief recovery fuelled by the Olympics, leading economists have warned. They fear the Eurozone crisis could push the country back into recession next spring, after a Greek exit early in the year. A "triple dip" would be unprecedented and would pile more pressure on the government's economic strategy. It could also jeopardise Britain's prized AAA credit rating. Azad Zangana at Schroders predicts GDP will bounce by 0.5% in the current quarter, following the shock 0.7% decline from April to June unveiled by the Office for National Statistics (ONS) last week. The economy will continue to grow until March, he said, before two consecutive quarters of negative growth. "A renewed crisis in the Eurozone will lead to a further collapse in business confidence and investment," Zangana said, according to The Sunday Times.Aviva is preparing to sell its US division after receiving approaches for the business it bought for £1.8bn in 2006. The arm is now valued at £1bn. The FTSE 100 insurer, which is going through a restructuring following the departure of chief executive Andrew Moss and the appointment of executive chairman John McFarlane, is understood to have received a number of unsolicited approaches from financial and private equity buyers for its US life division, known as Aviva USA. The news will be welcomed by investors ahead of the insurer's interim results on August 9, at which it is expected the current dividend will be maintained as a result of capital management by Aviva's new executive team, The Sunday Telegraph reports. The long-standing partnership between Qantas and British Airways may be severed as part of a deal between the Australian carrier and Emirates. Qantas last week confirmed it was in talks with Emirates and other airlines about forming an alliance. It is thought they are discussing the possibility of routing Qantas flights between Australia and London through Dubai instead of Singapore. Reports in Australia say Qantas management have accepted that the 17-year relationship with BA would be the price of any deal with the Dubai-based Emirates. Any tie-up with Emirates could also damage Qantas's relationship with partners in Oneworld ? the powerful alliance of 11 airlines that it co-founded with BA in 1998, The Sunday Times says.Sir Andrew Witty, chief executive of Glaxo Smith Kline, has accused Europe's rich countries of cashing in on the pharmaceutical industry's back-door aid for Greece. The world's biggest drugs companies have made a secret pledge to keep supplying struggling European countries with medicines, even though they are owed millions in unpaid bills. The industry has also agreed to price cuts and discounts in Greece, Spain, Portugal, Italy and Ireland. Witty claims richer European nations have demanded that they too benefit from cheaper drugs. If they continue to do so, he warned, the big pharmaceutical companies will move high-paid research jobs overseas. Witty laid out his complaint in a letter to European leaders, sent in his capacity as president of the European Federation of Pharmaceutical Industries and Associations (EFPIA), writes The Sunday Times. Of all the shares listed on the UK's benchmark index, pump and equipment group Weir's shares are by far the most borrowed, a proxy for the level of interest from short-sellers who are betting that the share price will fall. Weir publishes its interim results on Tuesday. Weir has 18% of its total shares out on loan, which is more than 10 times the index average of 1.7%, according to data from Markit, the financial information services company. Short sellers are motivated by concerns over Weir's exposure to the American fracking industry for natural gas. As the gas price falls so the need for Weir's fracking equipment decreases. Although short interest in Weir remains high, the number shorting the stock has started to shrink. "Short-sellers have covered their positions slightly in the run-up to the earnings, having taken profits from the high in short interest seen in early June when over 25% of the total shares were on loan," said Alex Brog at Markit, The Telegraph says.AB