Chancellor of the Exchequer Alistair Darling said fallout from a global credit crunch is proving worse than previously expected, a sign that U.K. policy makers are bracing for slower growth.
“The effect of what has happened is going to be far more profound than people predicted even at the turn of this year,'' Darling said in an interview with Bloomberg Television, which will air excerpts today. “It is quite clear that if you look during the course of this year, conditions have become more difficult across the world.''
The finance minister, whose tenure has coincided with the sharpest decline in house prices and the steepest rise in living costs in a decade, reiterated his belief the British economy will escape recession and pledged to keep up the fight against inflation.
The deteriorating economic outlook, together with a run on deposits at Northern Rock Plc in September and a series of U- turns on tax policy, have eroded Prime Minister Gordon Brown's popularity. Darling won't release new economic forecasts until his pre-budget statement in the fourth quarter.
Britain's economic growth will probably slow to 1.6 percent this year and 1.3 percent in 2009, the weakest since 1992, according to a survey of 40 economists by the Treasury released on July 16. In March, Darling expected growth of up to 2.25 percent this year, compared with 3.1 percent in 2007.
Slower Growth
The Bank of England has already presented a more somber outlook. Governor Mervyn King said then that there may be “an odd quarter or two of negative growth.'' His deputy, John Gieve, said policy makers must grapple with inflation “well over'' 4 percent, double the government's target.
The central bank expects growth to slow to 1 percent in the first quarter of 2009. Consumer prices climbed 3.8 percent in June from a year earlier, the most since records began in 1997.
House prices fell the most in 15 years in June as higher borrowing costs reduced mortgage lending, triggering the worst property slump since Britain's last recession in 1991, according to HBOS Plc, the U.K.'s biggest mortgage lender payday loans online payday loan.
“Times are tough,'' Darling said in the interview, which was recorded July 14. “They are tough for everyone.''
The Conservative opposition had a 22 percentage point lead over Labour in a YouGov Plc survey published on July 13. Forty- six percent of people predicted a recession in the next year, compared with 31 percent in June, YouGov said in its survey of 1,800 people. Brown has until June 201o to call the next election.
Tax Cuts
In May, Darling announced a 2.7 billion-pound ($5.4 billion) emergency tax cut for 22 million people and last week postponed for six months an increase in fuel duty to cushion the effect of record oil costs.
In the interview, Darling said the worst of the credit crisis is far from over, noting action to prop up the mortgage lenders Freddie Mac and Fannie Mae in the U.S. In Britain, Alliance & Leicester Plc agreed to be acquired by Banco Santander SA of Spain for 1.26 billion pounds, less than half of its market value at the end of last year.
Worldwide, banks and securities firms have raised $324 billion in the past year after record writedowns and credit losses of almost $410 billion from the collapse of the subprime mortgage market, according to data compiled by Bloomberg.
“I don't think anyone would be wise to start speculating on how long the present difficulties will last,'' Darling said. “We are dealing with them here and other countries are dealing them as well. If you look at the problems the banks have had, they have moved into a different phase and governments have to take account of that.''
U.K. mortgage rates surged to the highest in eight years and consumer confidence dropped as the worst housing slump in three decades deepened.
“This is doom and gloom,'' said Alan Clarke, an economist at BNP Paribas SA in London. “The housing market is in freefall and unemployment is rising.''
The rate on a home loan fixed for two years rose to 6.63 percent in June, the highest since February 2000, the Bank of England said today in London. The 0.37 percentage point increase from a month earlier is the biggest since October 2003. Nationwide Building Society's index of consumer sentiment dropped to the lowest level since the survey began in May 2004.
The U.K. is skirting a recession as house prices fall, oil costs rise to a record and lenders refuse to pass on the Bank of England's three interest-rate cuts since December. Policy makers, who make a rate decision tomorrow, said last month that they considered increasing borrowing costs after inflation accelerated to 3.3 percent, the fastest pace in at least a decade.
“The Bank of England's credibility is in question with the worst peak in inflation in its history, but there are a lot of reasons not to hike now,'' BNP's Clarke said.
Rate Decision
All but one of 49 economists in a Bloomberg News survey predict the Bank of England will keep the key rate unchanged at 5 percent tomorrow. Nationwide said there is a 20 percent chance that the bank will raise interest rates.
Evidence of the economy's deterioration sent the pound lower against the euro today. The currency fell to 79.59 pence from 79.57 pence yesterday.
House prices fell the most since 1992 in June, Nationwide said July 1. Unemployment may rise 58 percent to 1.3 million by the middle of 2010, the Centre for Economic and Social Inclusion, a government-supported research group, predicted this week.
Homebuilders Redrow Plc and Bovis Homes Group Plc today said they will cut their workforce by 40 percent as sales drop. Persimmon Plc said yesterday it eliminated 1,100 jobs after the housing slump lowered first-half sales by 34 percent payday loans online fast cash advance.
“The state of the housing market is of grave cause for concern,'' Harriet Harman, deputy leader of the ruling Labour Party, said in Parliament today. She said the government and the Bank of England will fight inflation even as economic conditions threaten to “get tougher.''
Policy Disagreement
Policy makers John Gieve, Timothy Besley, Paul Tucker and Kate Barker, who testified before a U.K. parliament committee on June 26 with Bank of England Governor Mervyn King, all said they considered advocating higher interest rates last month. The nine- member panel voted 8-1 to keep the main rate unchanged. David Blanchflower supported a reduction.
Inflation climbed to 3.3 percent in May, the fastest pace since at least 1997, and King said last month that the rate may exceed 4 percent later this year. In May, he predicted that the economy may see the “odd quarter or two'' of contraction as consumers pare spending.
Inflation has also accelerated because the weakness of the pound is driving up import prices. The pound fell 13 percent in the past year against a basket of the U.K.'s main trading partners. The goods trade gap stayed at 7.5 billion pounds ($15 billion) in May, the statistics office said today.
More than half the respondents in the Nationwide survey expect the economic outlook to worsen over the next six months, and around 70 percent predict their incomes will stay the same in that period, the report showed.
Consumers “are recognizing that the economy is weakening, and that's going to affect them,'' said Fionnuala Earley, chief economist at Nationwide, in an interview on Bloomberg Television. “The next move in rates will be down, but it will be much later this year or next year.''
The Bush administration has put a two-year stop to solar energy projects on federal lands in Arizona and other Western states while it studies their environmental impact.
The U.S. Bureau of Land Management and U.S. Department of Energy will study the impact of solar energy production and other facilities that could be developed on public lands in Arizona, New Mexico, Utah, Nevada, California, Colorado and Nevada.
There are 125 applications by solar energy companies to build facilities on public lands in those states.
The review will take two years worrying a solar energy sector looking to expand in the western U.S. including Arizona.
A number of U.S., German and Japanese solar energy companies want to locate or expand in Arizona and other Western states amid concerns about high energy costs and emissions absolutely free credit report faxless payday loans.
Critics have questioned the Bush administration policies and links oil and gas companies saying the administration is too cozy with those energy sectors.
Kuwait’s oil minister has welcomed Saudi Arabia’s call for a meeting of oil producers and consumers to discuss ways of dealing with soaring energy prices.
Mohammed al-Eleim says consumers and producers have to talk because they are "in the same boat." He did not elaborate.
But he reiterated to reporters Tuesday that record high prices of oil were not caused by market fundamentals.
The government of Saudi Arabia, the world’s largest oil producer, announced Monday it was calling for the meeting in the near future http://paydayintime.com payday loan low fee. The gathering will also include oil companies.
Light, sweet crude for July delivery traded at $134.62 a barrel by noon Tuesday in Europe in electronic trading on the New York Mercantile Exchange.
The top Republican on the Senate Finance Committee said he wants to know whether Treasury Secretary Henry Paulson pressured Federal Reserve Chairman Ben S. Bernanke into brokering the deal that allowed the sale of Bear Stearns Cos. to JPMorgan Chase & Co.
Iowa Senator Charles Grassley, who will be involved in one of two congressional inquiries into the deal, asked in an interview with Bloomberg Television yesterday whether Paulson pushed Bernanke into authorizing the $29 billion loan needed to make the sale or if the agreement was the result of an “independent Fed decision.''
“We want to know the extent to which Paulson was involved in the deal,'' Grassley said. “The extent to which this was a political decision by a political branch of government that was urged on the Fed is very important to me — that that not happen.''
The inquiries — one by the Senate Finance Committee of which Grassley is the ranking Republican and the other by the Senate Banking Committee — may herald a broader congressional backlash against the agreement, which Senate Majority Leader Harry Reid of Nevada has described as a “bailout.''
Grassley said he doubted Congress would attempt to block the deal.
“I'm going to be very reluctant to have Congress step in because you get more politics involved at that point,'' he said.
Demand Details
Still, he said, lawmakers deserve to know the details of the agreement because taxpayer dollars are involved.
“We need to know the upside and the downside for the taxpayer,'' Grassley said. “We also need to know whether or not this is a precedent.''
Jennifer Zuccarelli, a Treasury Department spokeswoman, responded to Grassley's remarks in an e-mail, saying: “We will work with the committee to respond.''
Senate Banking Committee Chairman Christopher Dodd yesterday asked Bernanke, Bear Stearns Chief Executive Officer Alan Schwartz, JPMorgan CEO Jamie Dimon, Securities and Exchange Commission Chairman Christopher Cox and Paulson to testify at an April 3 hearing on the issue.
Separately, the Senate Finance Committee asked the company chief executives, Bernanke, New York Fed President Timothy Geithner and Paulson to provide details on how the buyout was negotiated.
The Fed, in an emergency action this month, authorized a $29 billion loan against illiquid mortgage- and asset-backed securities from Bear Stearns to help the company avert bankruptcy cash advance loans pay day loans. JPMorgan contributed $1 billion.
`Taxpayer Dollars'
“Americans are being asked to back a brand new kind of transaction, to the tune of tens of billions of dollars,'' Senate Finance Committee Chairman Max Baucus, a Montana Democrat, said yesterday in a statement. “With jurisdiction over federal debt, it's the Finance Committee's responsibility to pin down just how the government decided to front $30 billion in taxpayer dollars'' for the deal, Baucus said.
Dodd said he scheduled his hearing to explore the “policy rationale'' behind the Fed's action, the impact of the original and new sale agreements on investors and the markets, and the implications for U.S. taxpayers and regulation of U.S. financial markets.
“It's some pushback from Congress to send a warning shot to the Fed to not use taxpayer resources to bail out Wall Street,'' said Andy Laperriere, managing director at International Strategy & Investment Group in Washington. “If there is a significant negative response from Congress, it would deter the Fed from doing this in the future,'' Laperriere said.
Negotiators and Lawyers
Baucus and Grassley said in their letter that they want to know the names of all negotiators and lawyers involved in the transaction as well as all the steps taken, their specific dates and a list of steps yet to be taken. Grassley said he also wants to know how Bear Stearns's chief will “come out of this'' compared to “rank-and-file'' employees of the firm.
Baucus and Grassley want a description of the assets to be secured by the Federal Reserve, including their value and the types of mortgages underlying the assets. The senators asked for all copies of documents that will be filed with the Securities and Exchange Commission.
The senators asked for a response no later than tomorrow.
Federal Reserve spokeswoman Susan Stawick said the central bank has received the letter and will respond to it.
JPMorgan spokesman Joseph Evangelisti declined to comment on the Finance Committee request. Bear Stearns spokesman Russell Sherman didn't return a call and e-mail seeking a comment.
Biotech Amgen on Thursday reported an increase in earnings and a decrease in sales for the fourth quarter, beating Wall Street’s forecast.
Amgen (AMGN, Fortune 500), based in Thousand Oaks, Calif., said its adjusted net profit rose 3 percent to nearly $1.1 billion, or $1 per share. Quarterly sales slipped 2 percent to $3.7 billion.
Analysts had forecast earnings of 97 cents per share without charges, and an 8 percent decline in sales to $3.5 billion, according to Thomson One Analytics.
Amgen also said that a late-stage study showed that its experimental drug denosumab was 40 percent more effective in treating bone disease than Fosamax, from its potential competitor, Merck (MRK, Fortune 500). Denosumab is the most important product in the biotech’s pipeline, and some analysts believe it could become a blockbuster.
Amgen’s stock rose about 5 percent in after-hours trading.
Amgen sales were squeezed by the extra-tough warning labels the Food and Drug Administration required for Aranesp and Epogen, drugs that are used to ward off anemia, a common side effect of chemotherapy. Aranesp sales plunged 25 percent to $827 million in the fourth quarter, compared with the same period in 2006. Epogen sales slipped 3 percent to $638 million.
"Needless to say, 2007 was a challenging year for Amgen and our shareholders," said chief executive Kevin Sharer, in a teleconference with analysts. "In fact, in my 16 years with the company, it tops out as the toughest one we ever faced. I think in 2007 we proved we’re adaptive, we’re resilient, and we’re able to move the company ahead even under the most difficult circumstances."
Sharer said the study results comparing denosumab to Fosamax gave him "increased confidence."
"We could not have hoped for better results," said Sharer direct payday loan cash advance http://paydayintime.com.
Bret Holley, analyst for Oppenheimer & Co., expects annual denosumab sales to peak at $2 billion by 2012. He said that the successful study, as well as the belief that declining Aranesp sales had bottomed out, pushed up the stock after hours.
Amgen could use some market resurgence, considering that its stock lost more than a third of its value in 2007.
The company reported sales increases for its other lead products. Combined quarterly sales for Neulasta and Neupogen, which are used to prevent infections in chemotherapy patients, jumped 9 percent to $1.1 billion.
Sales for Enbrel, a treatment for inflammatory diseases including psoriasis and rheumatoid arthritis, rose 8 percent in the quarter to more than $800 million. Amgen sells Enbrel in the U.S., and its partner Wyeth (WYE, Fortune 500) sells it overseas.
For the full-year 2007, Amgen reported a 4 percent increase in adjusted net income to $4.8 billion, or earnings of $4.29 per share, without expenses. Sales in 2007 increased 4 percent to $14.7 billion.
Looking ahead to the full-year 2008, the biotech expects earnings per share of $4 to $4.30 and total sales between $14.2 billion and $14.6 billion. Analysts expect $4.37 per share on revenue of $14.49 billion.
Amgen is the world’s largest biotech in terms of annual sales. Rival Genentech (DNA) is the No. 1 biotech in terms of market capitalization.
–Holley does not own Amgen stock and Oppenheimer does not conduct business with them.
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