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Heads began to roll in the wake of a probe into the manipulation of LIBOR, a benchmark interest rate. Bob Diamond resigned as boss of Barclays, a British bank which had been fined $450m by American and British regulators. Barclays released documents appearing to suggest that the practice was sanctioned by officials at the Bank of England, something strongly denied by the Bank. Barclays’ chairman, Marcus Agius, will also step down later this year, after finding a replacement for Mr Diamond. The bank’s share price plunged by 15% amid the turmoil. At least a dozen other banks are embroiled in investigations around the world into rate-rigging.
At a summit in Brussels, Europe’s leaders exceeded expectations by agreeing, among other things, that the euro zone’s rescue funds could directly recapitalise troubled banks. This could be the first step towards a “banking union”. Yields on long-term sovereign debt dipped on the news, and equities across Europe rallied.
Other markets, too, were impressed by the euro-zone summit. After months of sliding, oil prices jumped, with the benchmark Brent crude rebounding by 14%, to $100 a barrel. Upward pressure was also exerted by the European Union’s embargo on imports from Iran, which came into force on July 1st.
The purchasing-managers index in the euro area, used to measure business activity, languished at 46.4 in June, only a slight improvement on May’s 46.0. It has dipped below 50, which indicates slowing activity, in nine out of the past ten months. Worryingly, Germany posted its worst figure in three years, which suggests that Europe’s most robust big economy may be facing a new downturn.
The IMF cut its forecast for American GDP growth this year and next by 0.1 percentage points, to 2.0% and 2.3% respectively.
Nine big banks with operations in the United States have submitted their “living wills” to the country’s regulators, as required by the Dodd-Frank act. The plans, which stipulate how they should be broken up in the event of failure, contain a general overview for the public and a detailed confidential plan for the authorities. Another 125 firms are expected to draft similar wills.
Volkswagen said it would buy the 50.1% of Porsche it does not yet own for €4.46 billion ($5.6 billion). VW, the world’s biggest carmaker by volume, is snapping up smaller firms. Porsche, a maker of sporty wheels, is controlled by the same Piëch-Porsche family that controls VW.
Airbus announced plans to build a $600m plant in Mobile, Alabama. The new production facility will churn out a modest 50 single-aisle aircraft a year, but will bring the European aeronautics giant closer to its North American customers, who are expected to account for 22% of the world’s new aircraft deliveries from now to 2030. Boeing, Airbus’s American rival, continues to accuse the Europeans of benefiting from illegal subsidies.
Nigeria signed a preliminary deal worth $4.5 billion with Vulcan Petroleum, an American-based company, to build six oil refineries to add to its existing four. Nigeria is Africa’s biggest oil producer, but is able to refine only a fraction of its oil and imports much of its fuel. The deal could increase its refining capacity by 180,000 barrels a day.
America’s Justice Department announced details of a $3 billion fine on GlaxoSmithKline for over-aggressive marketing and selective use of clinical-trials data. The British drugmaker was accused of using cash payments to doctors disguised as consulting fees and “lavish entertainment” to encourage them to prescribe its products. GSK has since replaced a number of its senior managers in America.
A federal judge overseeing the wind-down of Eastman Kodak ruled that the American producer of photographic film and cameras, which filed for bankruptcy protection in January, can auction off its vast patent trove. The intellectual property is expected to fetch around $2 billion.
Dell, a maker of personal computers, said it will pay $2.4 billion for Quest, which provides corporate business-management systems. The deal highlights Dell’s push beyond hardware, which makes up 70% of its revenues, into higher-margin software.
Manchester United announced an initial public offering of $100m of its shares, to be staged in New York. The Glazer family of Florida, which control the English football club, will hang on to most voting rights.
(From The Economist, Jul 7th 2012)
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