Tuesday newspaper round-up: Sterling, British Airways, Prudential

11th May 2010 06:34

Sterling dropped by more than a cent against the dollar, while the euro gained a penny against the pound, after Gordon Brown's unexpected announcement that he will manage negotiations with the Lib Dems before standing aside as Labour leader.His announcement came only minutes after the FTSE 100 completed its biggest one-day rise since December 2008 on the back of the eurozone plans to create a rescue fund for stricken European nations, and investors warned that it could presage a rocky day of trading on Tuesday, the Telegraph reports. The European Central Bank risks irreparable damage to its reputation by agreeing to the mass purchases of southern European bonds in defiance of the German Bundesbank and apparently under orders from EU leaders. Jean-Claude Trichet, the ECB's president, denied there had been any political interference. "We are fiercely and totally independent," he said. It is clear, however, that the two German members of the ECB's council voted against the move, a revelation that may cause a catastrophic political backlash in Germany, the Telegraph reports.British Airways has hinted that it might refuse to pay a £121m price-fixing fine after four of its executives walked free from their criminal trial yesterday. The Office of Fair Trading's prosecution of the BA quartet collapsed as new evidence emerged. Andrew Crawley, Martin George, Iain Burns and Alan Burnett had been accused of conspiring with Virgin Atlantic to set fuel surcharges. Yesterday, BA said: "Like the OFT, we will consider the implications of the trial outcome for the civil settlement we agreed in 2007," the Times reports.In another possible twist, the OFT said it would now "review the role played by Virgin Atlantic and its advisers in light of the airline's obligations to provide the OFT with continuous and complete co-operation. This may have potential consequences for Virgin's immunity from penalties." That followed remarks by its counsel, Richard Latham QC, that obtaining material had been "contentious" and that it had only become apparent last Wednesday "that there remained some relevant material in the hands of Virgin Atlantic which was, as yet, undisclosed to the defence," the Telegraph adds.3i, Britain's oldest private equity company, is being sued for more than £6m by the former bosses of two gaming companies over the closure of the fund that the pair were brought in to run. Richard Segal, the former chief executive of PartyGaming, and Stephen Hill, erstwhile chief executive of Betfair, were asked to set up and run a £400m 3i fund to invest in small to mid-cap listed equities. Segal and Hill are suing 3i in the High Court in London, claiming that they are owed the equivalent of £3.06m each in shares and two years of undisclosed cash performance bonuses, the Times reports.Banks could be prevented from taking the "other side" of investments that they create for clients, as the Goldman Sachs fraud allegations continue to reverberate on Wall Street. Senators who accused Goldman last month of "betting against its customers" yesterday revealed new legislation that would stop banks from holding a proprietary short position on investments in which they acted as a securities underwriter, the Times reports.AIG and Prudential are in advanced talks to restructure the $35.5bn (£24bn) sale of AIA, the US group's Asian unit, in a move that would cut the cash consideration by about $2bn but could answer UK regulators' last-minute objections to the deal. People close to the situation said the Pru had approached AIG in recent days to press for a change in the terms of the deal, which was agreed in March, in an effort to allay the concerns of the Financial Services Authority over its capital position, the FT reports.Prudential's proposed $35.5bn punt on Asia was likened yesterday to Marconi's catastrophic foray into internet and telecoms businesses at the peak of the dot-com boom. Robin Geffen, the founder of Neptune Asset Management, drew the parallel as he launched a website intended to orchestrate a shareholder rebellion against the Pru's ambitious deal. The proposed purchase of AIA would be disastrous for the Pru, preventing it from paying dividends for a decade, Mr Geffen claimed, the Times reports.Kraft Foods' controversial £11.7bn takeover of Cadbury, the chocolate maker, has again come under the spotlight after the US group opened talks to cut up to 600 British jobs. The new owner of Dairy Milk and Trident gum plans to close Kraft's UK head office in Cheltenham and transfer operations to existing Cadbury sites in Bournville and Uxbridge, the Telegraph reports.The growing row over Australia's proposed 40% tax on mining profits intensified yesterday when Xstrata said it was halting copper exploration in the country. The company said it needed more "certainty" about the so-called Henry tax before committing about A$30m (£18m) over the next three years. Its decision is the latest threat from the mining industry, which will face an effective tax rate of 58 per cent if the plans become law. However, the Swiss-based miner is not cutting production in Australia, the Independent reports.Thousands of British Airways passengers have had plans for school holidays and to see the World Cup in South Africa thrown into disarray after the airline's cabin crew said they would stage nearly three weeks of industrial action from next week.The Unite union that has represented BA flight attendants in a long-running row over staffing levels said a 20-day wave of strikes would start from May 18 until May 22, the FT reports.