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Business - Need to Know

Morning Edition

Diageo will be in focus this morning following the revelation late last night that US financial regulators had quizzed the British distiller of Johnnie Walker whisky and Smirnoff vodka.

The Securities and Exchange Commission is said to be investigating the shipping of excess inventory to distributors, which would enable a company to report increased sales and shipments, The Wall Street Journal claimed.

US-traded shares in Diageo fell up to five per cent last night on the back of the news and are forecast to fall when trading begins shortly in London. For the latest on the market reaction log on to our Business Now blog.

Back on track? Maybe not. Hopes that the Chinese economy was returning to its growth path have been dashed this morning with the release of the latest flash Caixin/Markit manufacturing purchasing managers’ index. Manufacturing in the world’s second largest economy slumped to a 15-month low in July, according to the survey with the index falling to 48.2, its lowest level since April last year. We’ll have a full story shortly on www.thetimes.co.uk/business.

Ladbrokes has outlined the details of an agreed deal to buy rival Coral this morning, weeks after announcing it was in talks. The merger, which creates Britain’s biggest bookmaker, includes a placing of 90 million shares to finance the deal.

Troubled Aggreko has warned that full year results will “fall short of current market expectations”.

Lonmin has announced it is planning to close or mothball several mine shafts, putting 6,000 South African jobs at risk, because of depressed metal prices.

Elsewhere on the corporate front this morning we have interim results from Hammerson and Pearson and trading updates from Vodafone and AG Barr.

Finally, European regulators have approved the world's first malaria vaccine after almost 30 years of development by GlaxoSmithKline (and heavy investment from the Bill and Melinda Gates Foundation).

Don’t forget you can follow me throughout the day on twitter for the latest updates - @fletcherr.

Have a great weekend.

Richard Fletcher
Business Editor
The Times
richard.fletcher@the-times.co.uk

Amazon surprised investors with an unexpected quarterly profit that sent shares in the online retailer up around 17 per cent in after-hours trading. The company said profits in the second quarter jumped to $92 million, up from a loss of $126 million this time last year. Analysts had expected a loss of $52 million and the spike in Amazon shares made the company worth more than Wal-Mart.

Pearson has struck a deal to sell the Financial Times to Japan’s Nikkei Group for £844 million after nearly 60 years of ownership. After days of speculation, Pearson confirmed yesterday that the owner of Japan’s best-known daily newspaper, the Nikkei, had won the battle for the “Pink’un”.

Michael Woodford, the whistleblower who exposed a $1.7 billion fraud inside Olympus, said that he was “cynical and deeply troubled” about Pearson’s sale of the Financial Times to Nikkei. The former president of the Japanese technology group said: “The Nikkei is known as the corporate voice-piece of Japan and has a notorious reputation for being leaked [price-sensitive] company information. In contrast to the FT, which broke the news [of the Olympus scandal], the Nikkei was like the public relations office for Olympus.”

Brussels has picked a fight with Hollywood over its business model of selling film licences country by country and opened an investigation into Sky UK for blocking access to films for viewers outside Britain. The European Commission is going after America’s biggest studios — Disney, NBCUniversal, Paramount Pictures, Sony, Twentieth Century Fox and Warner Bros — in a highly political antitrust battle that could revolutionise pay-to-view television in Europe.

The Nikkei 225 has closed up 0.67 per cent this morning at 20,544.53. The FTSE 100 is expected to open 29 points lower when trading begins shortly.

The FTSE 100 had further to fall yesterday after the 100-odd point drop in the previous session, off another 12.33 points, or 0.18 per cent, to 6,655.01, as it was unable to sustain a small rally earlier in the day, buoyed by Greece edging closer to negotiations with creditors over a third bailout. The FTSE 250 fell 26.55 points to 17,619.1. Read here for Alex Ralph’s full market report.

Wall Street shares fell for a third day after weak corporate results left the Dow Jones Industrial Average down 119.12 points, or 0.6 per cent, at 17,731.92. The S&P 500 dropped 12 points, or 0.6 per cent, to 2,114.15. The technology-heavy Nasdaq lost 25.3 points, or 0.49 per cent, to 5,146.41 points. However, it could rise today after surprise quarterly profits from Amazon sent shares in the online retailer up 17 per cent in after-hours trading. The rise means that for the moment Amazon is worth more than Wal-Mart.

Sterling weakened against the dollar which strengthened after new US claims for jobless benefits fell to a forty-year low, a bullish signal for the economy. The pound slipped 0.01 per cent to $1.5513. It also eased against the euro, down 0.04 per cent to €1.4117.

The price of oil dipped further. In New York, Brent crude for September settlement fell $0.72 to $55.27 a barrel.

Tempus looks at RELX, which is what we must now call the Reed Elsevier media group. It has a reputation for stodgy reliability, and the half-way figures are no exception. This might be seen as no bad thing in these markets. It is too early to expect much from the new chief executive of Kingfisher, but the latest trading statement did show some uplift from the eventual arrival of the British summer. Breedon Aggregates is growing by small acquisitions into an important player in the building materials industry, and the shares have responded accordingly.

The Times
Pearson has struck a deal to sell the Financial Times to Japan’s Nikkei Group for £844 million after nearly 60 years of ownership. After days of speculation, Pearson confirmed yesterday that the owner of Japan’s best-known daily newspaper, the Nikkei, had won the battle for the “Pink’un”. The sale was dubbed a “sad day” for global journalism by Michael Woodford, the businessman who worked with the British paper to expose the worst corporate fraud scandal in Japan’s history.
read full update
Daily Telegraph
The Financial Times has been sold by Pearson to the Japanese media giant Nikkei for £844m in a deal that the two companies claim will protect the 127- year-old title in the shift to digital and mobile news. The surprise buyer was announced yesterday afternoon after hours of fevered speculation that included a suggestion by the FT itself that it was most likely to fall into the hands of the German group Axel Springer
read full update
Financial Times
Nikkei, Japan’s largest media company, is to buy the FT Group fromPearson for £844m, after stunning its rival bidder, Germany’s Axel Springer, with an 11th hour offer for the London-based global news organisation. The deal marks the end of an era, bringing the curtain down on Pearson’s 58-year ownership of the Financial Times at a timeof upheavalin themedia industry
read full update
Economics

Greece: Britain may have to pay almost £1 billion towards the bill for the latest bailout of Greece, it emerged after Athens agreed to implement unpopular measures in an attempt to begin talks over a third bailout deal worth as much as €86 billion. Greece needs €12 billion in emergency funding to prevent it defaulting on €6.7 billion in repayments to the European Central Bank over the the next two months and to pay back International Monetary Fund loans. Global equities rose amid hopes of a resolution to the crisis.

Pay: Companies will be forced to publish average salaries for the men and women they employ, under plans to shame bosses into closing Britain’s gender pay gap. David Cameron says that making all companies with more than 250 employees reveal detailed pay data will “cast sunlight on discrepancies”.

China: Two-way trade over the six months to the end of June fell by 6.9 per cent to 11.53 trillion yuan (£1.2 trillion), although the figures for last month offered some hope for the world’s second-largest economy as it struggles to adapt to slower growth. While imports in June fell for an eight consecutive month, with a 6.1 per cent drop, the fall was less than expected. Exports in June rose by 2.8 per cent compared with a year earlier.

Banking & Finance

+1.58%

Bank levy: A new surcharge on banks’ profits will cut lending to small businesses by £10 billion and should be changed, according to a letter to the chancellor from 15 challenger bank bosses. The group has called for a meeting with George Osborne to express anger about the tax, announced in the budget, on all banks making more than £25 million a year, drawing in smaller lenders and building societies.

Barclays: John McFarlane, chairman of the lender, will have to tell regulators this week that the search for a new chief executive will be under way soon as part of his formal application to become temporary executive chairman. The Prudential Regulation Authority is likely to approve John McFarlane’s move into the executive role on Friday.

International Personal Finance: Shares in one of eastern Europe’s biggest sub-prime lenders lost a quarter of their value after it warned that a change in Polish credit rules would mean that the charges it imposes on customers could be severely restricted. The group said that the amendment to Poland’s draft consumer finance law could have a “adverse financial impact” on business in a country where it generates more than half its profits. Under the proposals, interest charges on loans will be subject to a flat rate of 25 per cent, eroding IPF’s previous margins.

Brevan Howard: Five years after quitting London for Geneva in an apparent attempt to cut the tax bills of its star traders, one of Britain’s largest hedge funds is preparing to move staff back to the capital because they became bored with life in the Swiss city. The fund has begun briefing investors in its $27 billion fund about plans to transfer senior employees back to Britain. It has highlighted the allure of London since the explosive rise of the Swiss franc and the UK election of a Conservative government.

Bank of England: Michael Cross, the head of foreign exchange, has left the Bank eight months after the publication of a report that led to the dismissal of one of his senior managers over his failure to report evidence of potential rigging in the currency markets. His resignation is understood not to be related to the investigation.

Lehman Brothers: The trustee of the former investment bank’s broking unit asked a federal bankruptcy judge in the United States for permission to distribute another $1.89 billion to unsecured creditors, boosting their total recovery to $7.78 billion. Roughly 111,000 former customers of the brokerage have already been paid more than $106 billion, and senior creditors have been paid in full.

Templeton: Mark Mobius will step down from his role as lead portfolio manager of the fund manager’s £1.9 billion emerging markets investment trust, although he will continue to lead the broader emerging markets group, the company said.

Construction & Property

+0.95%

Home loans: Demand for mortgages at banks and building societies has bounced back to its strongest level since the end of 2013. It increased “significantly” in the second three months of the year, after falling in the previous three quarters, the Bank of England reported in its latest quarterly check of lenders.

Industrials

+1.00%

Alent: The maker of specialist chemicals has accepted a £1.35 billion takeover bid from Platform Specialty Products, an American rival. Alent shares ended the day up 44 per cent.

Media

+1.34%

Instagram: The photo-sharing website claims to have won 14 million active monthly users in Britain. It is the first time that it has published a figure for any country outside America. It is trying to woo advertisers in the battle with Twitter, Snapchat and other social media rivals. The company’s global user base hit 300 million in December.

Natural Resources

-0.13%

Oil: A fleet of tankers is ready to unleash 40 million barrels of oil to a saturated global market as talks over the Iran’s nuclear programme and the end of sanctions edge towards conclusion. The overhang of Iranian crude ready to be sold would add to a glut that led to a collapse in prices last year. That would be a boost for consumers in the developed world but a blow for oil-dependent poorer countries. The short-term impact of a deal would be significant: Iranian oil tankers are holding the rough equivalent of a month of Saudi Arabian exports to the United States or two weeks’ production from BP.

Genel Energy: Tony Hayward, the former BP boss, will become chairman of Genel Energy, replacing Rodney Chase, who has resigned. The new chief executive will be Murat Ozgul, its president in Turkey and the semi-autonomous Kurdish region in Iraq. The move comes as the company retrenches in its core Turkish and Iraqi operations and steps away from exploration. The oil and gas company added that production in the first half of the year from its Kurdish assets had risen by 41 per cent and the company was more confident of being paid shortly for oil that had already been shipped from there.

Marathon Petroleum: The refiner will expand into natural gas processing with the $15.6 billion acquisition of MarkWest Energy Partners. Maarathon is buying MarkWest through its pipeline unit, MPLX. The cash-and-shares deal will create the fourth-largest master limited partnership — a tax-efficient structure — valued at $21 billion. Shares of Marathon, which will control the combined company through MPLX’s general partner, rose as much as 11 per cent to a four-year high of $60.30. MarkWest, the second-largest American natural gas processor, has plants across the country, including Pennsylvania and Ohio. It also has more than 4,000 miles of pipelines, mostly natural gas and natural gas liquids and one crude oil pipeline.

Support Services

+1.12%

Post Office: A businessman known for cutting jobs and for a brief appointment as Boris Johnson’s mayoral No 2 in City Hall, London, has been appointed to lead the Post Office. Tim Parker, 60, who is also remembered for restructuring the privately owned Clarks shoes, said that he had been attracted by the “strong social purpose” of the loss-making state-subsidised group.

SThree: Gross profit, or fee income, at the recruitment services specialist rose by 10 per cent on a reported basis, to £110.5 million in the half- year to the end of May with a strong performance in the Americas.

Retailing

+1.34%

J Sainsbury: The chairman of Bristol Rovers has accused the supermarket chain of delivering a “kick in the teeth” to the city after a High Court judge ruled that it had the right to withdraw from a deal to redevelop the football club’s stadium. A legal showdown ended in defeat for the recently promoted League Two club as Mrs Justice Proudman rejected a £30 million claim lodged against Sainsbury’s for breach of contract. At issue was a 2011 agreement under which Sainsbury’s was to to buy Rovers’ Memorial Stadium and use the site for a supermarket, plus homes and community facilities, providing funds for the club to move to a 21,700-seat stadium on Bristol’s northern fringe.

Kays: The last vestiges of the mail order fashion business dating to 1890 are to be swept away in a reorganisation at Shop Direct. The online retail group owned by the Barclay brothers is to shut down K&Co, the successor to Kays, next month in order to concentrate its resources on two bigger brands, Littlewoods and Very.

Living wage: The national living wage will hit retailers, restaurants and leisure groups, one of the three big credit ratings agencies has warned. The chancellor announced last week that the national minimum wage for those aged 25 and over would be replaced by the living wage and payments would rise from £6.50 and hour to £9 by 2020. Moody’s said that companies in labour-intensive sectors, such as supermarkets, hotels and restaurants, were likely to be most affected. It believes that the four largest supermarkets — Tesco, Wm Morrison, J Sainsbury and Asda — are set to suffer as all employ thousands of staff on relatively low wages.

Technology

+0.11%

Nintendo: Satoru Iwata, who drove the video games group to new heights despite going against the trend of violent and complex video games, has died after 13 years at the helm of the Japanese company. He began with the handheld DS console that sold more than 150 million units, then was credited with expanding the market with Nintendo’s Wii, launched in 2006.

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