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As the process of finalising a second bail-out for Greece continued to grind on, official data recorded a contraction in the euro zone’s economy for the first time since mid-2009. Belgium, Greece, Italy, the Netherlands and Portugal are now all in recession, defined as two consecutive quarters of negative growth.
Moody’s cut the credit ratings of Italy, Portugal and Spain, and also put Austria, Britain and France on negative outlook, a warning that their triple-A ratings could be downgraded by the agency. Moody’s said that although Britain was not in the euro zone the crisis was “exerting negative pressure” on its economy, and that the government may thus find it a “challenge” to reduce Britain’s heavy public debt.
In an unexpected move the Bank of Japan increased its bond-buying programme by ¥10 trillion ($130 billion) in an effort to boost Japan’s struggling economy. After years of deflation the central bank also refined its policy on prices, saying it hoped the annual inflation rate would increase to hit a “goal” of 1% “for the time being”. Japan’s GDP shrank by 2.3% in the fourth quarter.
American regulators were bombarded with complaints from banks about forthcoming restrictions on proprietary trading (in which they use their own money to take risky bets), ahead of a deadline for public comment. The banks worry that without revisions the “Volcker rule”, which is included in the Dodd-Frank reforms and is due to come into force in July, will restrict other kinds of trading and hurt the wider financial system. But in a rebuttal to those arguments Paul Volcker, who proposed the rule, said less speculative trading would mean more security for investors.
A six-month ban expired on the short-selling of shares in France’s biggest banks. The ban was put in place last August, when financial markets were plunging in a particularly acute bout of anxiety over the euro-zone crisis. BNP Paribas and Société Générale reported a sharp fall in profits this week, as they took more write-downs on their holdings of Greek sovereign debt.
Barclays also reported a poor set of earnings, as revenue from its investment-banking business plunged. The unit’s annual pre-tax profit was down by 32%; Barclays reduced the bonus pool for bankers by a similar amount.
Robert Zoellick confirmed that he would step down as president of the World Bank when his five-year term ends in June. One question regarding a successor is how much America wants to hang on to the job, given its oft-repeated call for candidates from emerging markets to be considered to run the World Bank and the IMF. The Europeans clung on to the IMF’s top job last year, with the appointment of Christine Lagarde from France as managing director.
The family holding company that owns the Empire State Building outlined its plan to launch an IPO as a real-estate investment trust on the New York Stock Exchange, in which it hopes to raise $1 billion. Malkin Holdings bought control of the iconic skyscraper in 2002 from Donald Trump.
The first arrests were made in relation to an accounting scandal at Olympus that has rocked Japan’s corporate world. The company’s former chairman, his deputy and the corporate auditor, who all left last year after the company admitted to wrongdoing, were among those arrested.
Apple’s stock rose to over $500 a share for the first time. Its share price has jumped by 25% since the start of the year. But Apple, already under attack for the working conditions at factories that assemble the iPad in China, suffered a new setback there when Proview Technology, a local firm that claims it has the Chinese trademark for “iPad”, persuaded some cities to remove the devices from shop shelves. Its lawyers have requested customs officials to halt exports; if they agree, the financial blow to Apple would be severe.
Kellogg’s offered to buy Pringles for $2.7 billion. The popular potato-snack business is owned by Procter & Gamble, which had planned to sell it to Diamond Foods, until the deal was blown off course by an accounting scandal involving payments to Californian walnut farmers. The scandal caused Diamond to restate its earnings for two years.
The improper practices at a British newspaper owned by News Corporation returned to the front pages, after five journalists were arrested at the Sun in connection with an investigation into alleged payments to police and defence officials. The Sun is Rupert Murdoch’s biggest-selling daily. Last year the media mogul shut down its sister paper, the News of the World, amid a furore in Britain over phone hacking.
(From The Economist, Feb 18th 2012)
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