Sunday newspaper round-up: S&P, India, North Sea, Strikes

25th Dec 2011 13:06

In this weekend´s edition of the Financial Times John Authers argues that investors should not buy into the theme that "stocks are cheap". In his opinion, if they seem to be so it is only because," traders are sensibly discounting a likely fall in profits."He does admit, however, that for countries such as the United States recession is more a risk ("although recent data are more promising") rather than a virtual certainty, as is the case for the Eurozone. Nonetheless, he is inclined to think that, in general, the economy is unlikely to drive a rise in revenues. That means that those who, by calculating cyclically adjusted p/e ratios, argue that stocks are not cheap -such as Robert Shiller of Yale University- may be correct when they say that prices would need (for the S&P 500 apparently) to halve before they look cheap. "Take all of this together, and it is little wonder that Rajiv Kumar, the director-general of the Federation of Indian Chambers of Commerce and Industry, is so cutting about his country´s business leadership. "One can surely blame the government for doing too little, but we went along with them," says Mr. Kumar. "We became complacent as we started believing in the myth that in India there were structural reasons that would keep growth above 7% for good." Many analysts predict worse is to come. The next quarterly corporate reporting season begins in mid-January, when many businesses will be seen to have suffered from slowing growth and unhedged currency exposure," The FT´s Weekend edition says.The European Central Bank's (ECB) unprecedented provision of a €489bn (£407.5bn) in cheap loans will "buy valuable time" for Eurozone banks but has not improved their credit outlook, a director of Standard & Poor's (S&P) has warned. Amid a fresh raft of poor Eurozone economic data, Scott Bugie, head of S&P's financial institutions division doused the key cause for pre-Christmas optimism. Although he agreed Wednesday's long-term refinancing operation was a "big deal", Mr Bugie told Reuters: "It is not solving the fundamental issues though ... It's kicking the can a long way down the road rather than just a little bit, but in the end it is still kicking the big old can down the road." He said the action did not "change the fundamental picture but it does buy valuable time," The Telegraph writes.Lloyd's of London insurer Amlin has shielded itself against heavy future payouts for natural disasters as the market reels from near-record losses following a string of catastrophes this year. Amlin has taken out a $150m policy with Tramline Re, a reinsurer that specialises in assuming risks already underwritten by insurers. But, in a first for Amlin, Tramline has issued catastrophe bonds in the capital markets, which will provide a buffer for the insurer if its claims losses breach an agreed level. The bonds pay a hefty interest rate of 16.7% above the return for US Treasury bonds, presently just below 2%, but investors risk losing their money if costs from natural disasters rise too high. Under the terms of the deal, Amlin can draw on the bonds if hurricanes and earthquakes in America or wind storms in Europe leave it exposed to claims of more than $630m in a single year, The Sunday Times reports.The Government's windfall tax on the North Sea energy industry has helped to pull third-quarter gas production down by a record 29%, leaving Britain increasingly exposed to expensive imports. Analysts decried the "alarming" rate of decline, the biggest year-on-year quarterly fall since records began in 1996 and much higher than official forecasts. The trade body Oil and Gas UK blamed the slump on the tax announced in the Budget, as well as on general, longer-term uncertainty around the Government's policy in the North Sea. Centrica shut down its Morecambe Bay gasfield, one of the Britain's largest offshore fields, during part of September as a result of the tax increase. The owner of British Gas said that it would no longer produce gas from the field throughout the year, turning it on only when gas prices were high enough to make it commercially viable, writes The Times.Consumer groups have welcomed the Treasury's decision to stamp out "excessive" charges for the use of credit and debit cards - but budget airline Ryanair has hit back at the move, claiming it will be allowed to retain its fees. The decision will see all large credit and debit card charges banned by the end of 2012 in all areas of retail. Firms will be allowed to add just a small charge to cover their actual costs - which in many cases is pence, rather than running to pounds. Card transaction fees passed on by banks range between 2% and 6%. Discount airlines such as Ryanair and easyJet have previously been regarded as the worst culprits, charging up to £6 per passenger for each leg of the journey for the privilege of paying for flights online. The Office of Fair Trading (OFT) has estimated that British consumers spent £300m on such fees in 2009 - with the vast majority of that believed to have come from the airline industry, according to The Scotsman.Christmas has been cancelled on the majority of the UK's rail network as services wound down last night for up to 60 hours of train-free yuletide timetables. As millions of families made their festive getaway, train services started to run down in advance of a complete shut-down of the rail network today, with services axed in most areas on Boxing Day, and a late start to a limited Bank Holiday service on Tuesday. East Coast, Virgin West Coast, First Great Western, Northern Rail, Cross Country, South West trains and South Eastern are among those writing off the majority of Christmas with blank departure and arrivals boards. And many of those trains which do eventually run between Christmas and New Year will be subject to delays, diversions and cancellations caused by engineering works and the dreaded bus replacement services. In Scotland, railway signal workers started a 72-hour strike yesterday in a dispute over career progression, the Financial Mail on Sunday reports.AB