Sunday newspaper round-up: MPC, IMF, BG Group

22nd Apr 2012 17:20

Is the Monetary Policy Committee about to do a U-turn in its approach to inflation? So far, the Committee has been relaxed about above-target inflation. Even though inflation hit over 5pc late last year and has averaged around 3.5pc over the past four years, the MPC has kept interest rates at a record low of 0.5pc and has recently been injecting money into the economy through a renewed programme of Quantitative Easing (QE). However, the message appeared to change last week when the decline in inflation stalled. In January, when the VAT rise dropped out of the calculation, CPI inflation dropped to 3.6pc. But there was only a small drop in February - to 3.4pc. And the March figure released last Tuesday showed a rise to 3.5pc, writes Andrew Sentence, a former member of the Bank of England´s Monetary Policy Committee, in the Sunday Telegraph. Much of the $430bn global bail-out fund agreed in Washington over the weekend may not be available until next year, it has emerged. Britain pledged an extra £10bn ($15bn) to the International Monetary Fund but Treasury officials stressed the contribution is contingent on the US ratifying an agreement struck two years ago in Seoul. The US, though, is not expected to sign it off until after November's presidential election at the earliest. According to IMF officials, a number of other countries have attached similar conditions to their contributions, potentially limiting the new bail-out fund's firepower. Although the weekend's agreement to double the IMF's war chest to around $800bn has been widely welcomed, the small print could partially undermine rescue efforts and confidence in the deal, The Sunday Telegraph reports.The Foreign Office has sought to reassure British and American banks threatened by the Argentine government over their involvement in the Falkland Islands oil industry. The Government, in a move designed to ease concern among the investment community about the Argentine legal threats, has written to some 15 banks and oil exploration companies operating in the region. The move comes as Argentina faces international condemnation for its seizure of Repsol's majority stake in YPF, Argentina's largest oil company, last week. In the new letter, the Foreign Office says it is "deeply sceptical" that Argentina would be able to enforce "any penalties" in courts outside its own borders. It adds that the government of the Falklands "is entitled to develop" oil and fishing industries in its own waters "without interference from Argentina," The Sunday Telegraph reports. A financial lifeline will be thrown this week to about 350 companies struggling to fund deluxe final salary pension schemes against the backdrop of a faltering economy. The unprecedented 'pragmatic' move by The Pensions Regulator is designed to safeguard the pensions of hundreds of thousands of workers by giving employers more time to address yawning deficits. Without the regulator's decision to relax its approach to the funding of pension deficits - estimated to total about £255bn - it is feared that many scheme sponsors would be in danger of failing to meet their pension promises The Mail on Sunday reports. A rollercoaster of profits warnings marked the first three months of the year, according to accountant Ernst & Young. In total, 73 companies issued alerts in the first quarter, Ernst & Young's regular survey of announcements showed. This was down slightly on the 75 warnings in the same period last year. In January and February there were 57 warnings - including the shock announcement from retailing giant Tesco - the highest rate since 2008 when the City was in the grip of the financial crisis. Last month was far calmer with the number of alerts dropping to just 16, its lowest March figure for nine years, according to The Financial Mail on Sunday. Advice from Cabinet Office minister Francis Maude last month that Britons should stock up on jerry cans in case of a fuel drivers' strike helped push up retail sales by the biggest amount in more than a year. Mass panic buying of petrol drove up car fuel sales volumes by 4.2% ? the largest monthly jump since January last year, according to the Office for National Statistics. This in turn helped to boost overall sales volumes by 1.8% in March, compared with a 0.8% drop in February and expectations for a 0.5% rise. The much better than expected numbers were also helped by sales of summer clothes, which rose by 2.8% because of the unseasonably warm weather, The Sunday Times says.Shares in garden supplies specialist William Sinclair should move forward as the company improves its green credentials by cutting down the amount of peat used in its products. The company specialises in composts, but the industry has become dogged by controversy in recent years because shop-bought varieties often contain peat and environmentalists say its widespread use damages habitats and adds to greenhouse gas emissions. Profits for the company in the year to September 2012 are forecast to increase by about three per cent to £3.3m. This sounds relatively pedestrian, but profits for 2011 were boosted by several one-off items, including a buoyant year for one of Sinclair's products, vermiculite, an ingredient used in potting compost. Encouragingly for shareholders, the dividend is expected to rise by eight per cent this year to 6.7p. William Sinclair is an established, well-run business operating in a sector that brings pleasure to millions of people. The shares are trading at 189 1/2p and should move higher. Buy, says The Financial Mail on Sunday´s Midas column. The move last week by Argentina to nationalise oil company YPF came as a bolt from the blue and stunned the markets. Spanish oil group Repsol will lose its controlling stake in YPF. It is not yet known how much the government in Buenos Aires proposes to compensate it, but whatever that sum might, be it will not be enough to assuage the concerns this act has prompted. This might seem like a distant event, but in the global market everything is interconnected. Britain's BG Group is in a minor way directly exposed to this issue. It holds a majority stake in a group called Gas Argentino, which runs a distribution business with about two million customers. The owner of the rest of that stake is YPF and so speculation is rife that BG may also see its stake taken from it, writes The Financial Mail on Sunday.AB