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Business - Need to Know

Afternoon Edition

The financial crisis has finally ended thus fulfilling the biblical rule-of-thumb forecast that famines and feasts generally have a duration of seven years.

Of course the financial crisis may not yet be over but news from the Bank of England of its “stress tests” for our big banks seems to suggest they all have the minimum amount of capital requirement to withstand a severe global financial meltdown like 2008.

However, in a new definition of the phrase “bad bank”, two of our chaps, Royal Bank of Scotland and Standard Chartered, only managed to pass their examination by the Bank after taking some remedial action. For the record, the best of the good banks was Nationwide, not even a bank but a good old fashioned building society.

One of the stress tests the Bank runs is the impact of a sharp downturn from the Chinese economy. Lo, out this morning, is data from the People’s Republic that Chinese factory activity has fallen to a three-year low.

Talking of which, UK manufacturing isn’t looking as healthy as it was, with the official index of activity at the factory gate falling from 55.2 in October to 52.7 in November. That indicates the sector is still growing but at a sharply lower rate. Manufacturing for export looks like it is to blame which isn’t surprising with sterling on steroids and a quid buying you €1.42.

Northgate, the purveyor of vehicles for rental to the legendary White Van Man, can be taken as a proxy for the health of the economy given that its clients are small retailers, the building trade and small businesses generally. Vehicles for hire are down as are profits as is its share price - by 33 per cent since high summer.

Elsewhere, research by Ofwat has found that can’t pay/won’t pay water bill dodgers are adding £21 to the average annual bill to those that do. The water regulator wants the suppliers to do more about won’t-pay bad debtors and to do more to help the can’t-payers to contribute something.

Still upcoming today is time for Chancellor Catchphrase Bingo again. George Osborne is up before the treasury select committee and is due to talk about the European Union membership and his recent autumn statement.

He won’t be able to help himself so will almost definitely refer to the mythical “northern powerhouse”. He has had to ditch “march of the makers” (qv latest manufacturing data), so there could be another outing his new most favourite phrase: “For we are the builders.”

And does the Chancellor still have John McDonnell’s Little Red Book flung across the chamber at him last week? Maybe Mr Osborne will share the wisdom of Mao: “In times of difficulty, we must not lose sight of our achievements.”

Robert Lea
Industrial Editor
The Times
robert.lea@thetimes.co.uk

Banking stocks have helped the FTSE 100 begin the last month of the year – traditionally a positive one – in the green, up 34.59 points to 6,390.68.

Barclays is leading the index higher, 3.8 per cent to 231¾p, after the UK’s seven biggest financial institutions came through the Bank of England’s annual stress tests.

Ahead of the quarterly reshuffle of constituents of the FTSE 100 and the mid-cap FTSE 250, which will be confirmed by the stock exchange tomorrow, based on tonight’s closing prices, Wm Morrison, a contender to be demoted from the blue-chip index, is down about 1 per cent to 151p.

Babcock International is the biggest faller, though, 2 per cent lower to £10.50, on a downgrade from Citi which told clients to sell the defence company and cut its target price to £10, warning there were “too many risks”.

In the FTSE 250, Home Retail has bounced 5.2 per cent to 108¼p after Nicholas Marshall, a former boss of the Garden Centre Group, previously known as Wyevale, said he was talking to private equity groups about a possible offer for Homebase.

Alex Ralph
Markets Reporter
The Times
@alexralph

Manchester City owner Sheikh Mansour waves to Manchester City fans. Chinese investors are paying more than £265 million for a 13 per cent stake in the football club's parent group

We enter December on a mini high of sorts. Following a mid-month decline, US equities rallied to end November in the black, as both the Dow Jones Industrial Average and the S&P 500 ended up less than one per cent on a total return basis. Financials were the strongest sectoral performer, gaining two per cent and entering positive territory in the year to date. The utilities sector was the laggard, declining two per cent.

In the last few weeks, several economic reports have provided evidence of the erratic growth pattern resulting from the two opposing forces pulling on the US economy and unsettling investors: solid domestic momentum versus a low oil price and a slowdown in global demand. US manufacturing activity has been hurt by the second of these forces, weighed down by a strong dollar and deep spending cuts in the energy sector. Could it finally be turning the corner? Maybe. Today the Institute for Supply Management will publish its national factory index and economists expect to see a rise to 50.5 last month from a reading of 50.1 in October.

Last month's car and truck sales will be reported today after what has been a stand out year for the industry. Edmunds.com predicts that 1,331,415 new cars and trucks sold in the US; very close to the biggest November in the industry’s history, with twice the sales usually recorded during Black Friday weekend.

Alexandra Frean
US Business Editor
The Times
@freanie

"The stress-test results suggest that the banking system is capitalised to support the real economy in a severe global stress scenario."
The Financial Policy Committee of the Bank of England concludes the UK's banking system is strong enough to survive another global economic crisis.
Today's FTSE 100 risers and fallers
Up (%)
Barclays 3.81
Royal Bank of Scotland 3.27
Tui 2.81
Lloyds Banking Group 2.66
Berkeley Group Holdings 2.09
* As at noon
Down (%)
Babcock International -1.96
Aberdeen Asset Management -1.82
Glencore -1.73
Sage Group -1.62
BT Group -1.52
* As at noon
The Markets Today
FTSE 100 6,390.68 0.54
FTSE 250 17,505.78 0.49
Cac 4,954.55 -0.06
Dax 11,382.18 0.00
Brent Crude 44.75 0.31
Gold 1,068.27 0.23
GBP/US 1.51 0.14
GBP/euro 1.42 -0.13
10Y Gilts 101.26 -0.28
* As at noon
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