Tag Archives: London

World Led by U.S. Poised for Fastest Growth Since 2010

According to Bloomberg,

The world economy is primed for its fastest expansion in four years, with the U.S. propelling the improvement in output.

Global growth will accelerate at least 3.4 percent in 2014 from less than 3 percent this year as the euro area recovers from recession and China and other emerging markets stabilize, according to economists at Goldman Sachs Group Inc., Deutsche Bank AG and Morgan Stanley. The U.K. will be a standout, while Japan risks damping the mood by suffering a mid-year slowdown after an April increase in sales taxes.

“So far it’s been a very bumpy, below-par and brittle expansion,” said Joachim Fels, co-chief global economist at Morgan Stanley in London. “Next year could bring a very important transition: a transition to a sounder, safer and more sustainable recovery.”

The upturn should prove bullish for equities and bearish for bonds. If it boosts corporate confidence in the durability of growth, it could further fuel demand, raising the odds that 2014 will break the pattern of recent years and come in better, rather than worse, than projected.

“An improving global-growth picture is widely forecast but, in our view, also still doubted in the investor community,” said Dominic Wilson, chief markets economist at Goldman Sachs in New York. “We therefore see room for markets to price in a better cyclical story.”

Read More…

EU’s Highest-Paid Bankers in U.K. as Bonus Awards Exceed Cap

According to Bloomberg,

Top U.K. investment bankers were paid an average of 1.95 million euros ($2.65 million) in 2012, as bonuses continued to exceed caps set to take effect next year, according to the European Union banking regulator.

The highest-paid bankers in the U.K. had an average bonus-to-salary ratio of 370 percent, according to the European Banking Authority survey of EU finance workers who earn more than 1 million euros a year. In France, the ratio was 495 percent.

The EU brokered a deal in February to outlaw banker bonuses that are more than twice fixed pay, a move lawmakers said would prevent excessive payouts and curb irresponsible risk-taking. The U.K. government challenged the caps at the EU’s highest court in September, saying they were illegal.

“Self-regulation does not work and the report illustrates why the European Parliament took the unprecedented step of inserting a hard bonus cap in the absence of action by the industry,” Arlene McCarthy, a U.K. lawmaker in the European Parliament’s Socialist group, and lead legislator on a previous round of EU bonus rules, said in an e-mail.

Britain was home to 2,188 investment bankers earning more than 1 million euros in 2012, the highest amount in the EU, while Spain had 37, the London-based EBA, set up in 2011 to harmonize banking rules in the EU, said in the survey. France and Germany had 117 and 100.

Capping Bonuses

Workers Pass Clocks in the Canary Wharf Business District (Bloomberg)

Workers Pass Clocks in the Canary Wharf Business District (Bloomberg)

The EBA said in May that any banker paid more than 500,000 euros should be covered by the new rules capping bonuses. The watchdog also targeted the best-paid 0.3 percent of staff in a bank, and some bankers with bonuses higher than 75,000 euros.

The boost to fixed pay means “less alignment between performance and pay,” Syed Kamall, a U.K. Conservative party lawmaker who represents London in the European Parliament, said in an interview.

Senior retail bankers in Spain were better paid than their investment banking colleagues, and were the highest-earning in Europe in 2012, making an average of 2.2 million euros a year, according to the report. That’s compared to 1.7 million euros for investment bankers there.

Read More…

London Gold Fix Calls: Draw Scrutiny Amid Heavy Trading

According to Bloomberg,

Every business day in London, five banks meet to set the price of gold in a ritual that dates back to 1919. Now, dealers and economists say knowledge gleaned on those calls could give some traders an unfair advantage when buying and selling the precious metal.

The U.K. Financial Conduct Authority is scrutinizing how prices are set in the $20 trillion gold market, according to a person with knowledge of the review who asked not to be identified because the matter isn’t public. The London fix, the benchmark rate used by mining companies, jewelers and central banks to buy, sell and value the metal, is published twice daily after a telephone call involving Barclays Plc (BARC), Deutsche Bank AG (DBK), Bank of Nova Scotia, HSBC Holdings Plc (HSBA) and Societe Generale SA. (GLE)

The process, during which gold is bought and sold, can take from a few minutes to more than an hour. The participants also can trade the metal and its derivatives on the spot market and exchanges during the calls. Just after the fixing begins, trading erupts in gold derivatives, according to research published in September. Four traders interviewed by Bloomberg News said that’s because dealers and their clients are using information from the talks to bet on the outcome.

“Traders involved in this price-determining process have knowledge which, even for a short time, is superior to other people’s knowledge,” said Thorsten Polleit, chief economist at Frankfurt-based precious-metals broker Degussa Goldhandel GmbH and a former economist at Barclays. “That is the great flaw of the London gold-fixing.”

Gold Capital

Barclays and HSBC Holdings Headquarters in London (Bloomberg)

Barclays and HSBC Holdings Headquarters in London (Bloomberg)

The U.K. capital is the biggest center for gold trading in the world, according to the London Bullion Market Association, which said more than $33 billion changed hands there each day in 2012, exceeding the $29 billion of futures traded on Comex, the New York commodities exchange, data compiled by Bloomberg show. Financial instruments including cash-settled swaps and options are priced off the London fix, according to the LBMA website.

In private meetings this year, the U.S. Commodity Futures Trading Commission, which regulates derivatives, discussed reviewing how gold prices are set, according to a person with knowledge of the talks. The FCA review is preliminary and not a formal investigation, another person said. The people wouldn’t say what’s being looked at or if regulators suspect wrongdoing.

Read More…

Bank of America Intern’s 5 A.M. E-Mail Before Death Worried Mom

According to Bloomberg,

Bank of America Corp. intern Moritz Erhardt worked day and night in the weeks before his death, sending e-mails to his parents and colleagues in the early hours of the morning.

The 21-year-old died of an epileptic seizure while taking a shower on Aug. 15, a London coroner said after an inquest yesterday. He never once complained about his workload, Erhardt’s parents and co-workers said, even when staying up until 5 a.m.

“It may be that Moritz had been working so hard that his fatigue was a trigger for the seizure that killed him,” Coroner Mary Hassell said at the inquest. “But that is only a possibility.”

The plight of Erhardt prompted Bank of America to set up a panel of senior managers to “review all aspects of this tragedy,” the bank said following his death. Erhardt was found unconscious at Claredale House, a student residential facility in East London. He was pronounced dead at the scene at 8:34 p.m. after being treated by paramedics.

“Moritz had a natural cause of death, though it’s not so natural that a young man should die like this,” Hassell said.

Erhardt’s parents told the coroner that their son contacted them the day before his death in a 5 a.m. e-mail.

“My wife noticed in his last week that he didn’t get enough sleep,” Hans-Georg Dieterle, his father, said. “We thought this might be a risk in terms of his epilepsy.”

An autopsy found that he was regularly taking medicine to treat epilepsy.

Medical Form

Bank of America's London Offices (Bloomberg)

Bank of America’s London Offices (Bloomberg)

Erhardt didn’t tell the bank about his condition, answering “no” to questions about whether he suffered from seizures on a medical form, according to Hassell, who read the document out in court.

Jonathan Hough, a lawyer for the bank, asked the court to make “no reference” to circumstances other than the primary cause of death “including working practices” in the coroner’s final verdict.

Erhardt’s mother bowed her head, almost touching the wooden table in front of her, during Hough’s arguments.

“We continue to extend our heartfelt condolences and sympathy to Moritz’s family,” the bank said in an e-mailed statement. “Moritz Erhardt’s death was a tragedy that affected and saddened everyone in our company and especially those who had the privilege to spend time with him.”

Hassell questioned Erhardt’s development officer at the bank’s Merrill Lynch unit about whether working late was necessary in investment banking.

Read More…

Gold Analysts Most Bearish Since June on Fed Taper: Commodities

According to Bloomberg,

Gold analysts are the most bearish since June as the Federal Reserve signaled it may ease stimulus “in coming months” as the economy expands, cooling demand for an investment haven.

Nineteen analysts surveyed by Bloomberg News expect prices to drop next week, nine are bullish and three neutral, the largest proportion of bears since June 21. Gold fell to a four-month low and the dollar strengthened after Fed minutes released Nov. 20 showed U.S. policy makers expected enough improvement in labor markets to warrant slower debt purchases.

The metal is heading for its first annual drop in 13 years as some investors lost faith in gold as a store of value, fueled by concern that reductions in $85 billion of monthly Fed bond buying will ease the risk of accelerating inflation. U.S. unemployment-benefit applications fell to the lowest in two months and October retail sales jumped the most since July, the government said this week. Standard Bank Group Ltd. advised selling gold on rallies amid weaker physical demand in Asia.

“For safe-haven assets, there’s no point because the economy is recovering,” said Andrey Kryuchenkov, a commodity strategist in London at VTB Capital, a unit of Russia’s second-largest lender. “The dollar should remain strong, and that’s what should cap any upside in gold anyway. Consumer demand is slowing down. It will recover, but not at the moment.”

Gold’s Decline

Gold Ingot (Bloomberg)

Gold Ingot (Bloomberg)

Bullion slumped 26 percent this year to $1,244.64 an ounce in London, reaching $1,236.88 yesterday, the lowest since July 9. The Standard & Poor’s GSCI gauge of 24 commodities dropped 3.8 percent since the end of December, while the MSCI All-Country World Index of equities gained 17 percent. The Bloomberg U.S. Treasury Bond Index lost 2.6 percent.

Investors sold 768.9 metric tons from gold-backed exchange-traded products this year through Nov. 20, erasing $67.1 billion from the value of the funds and pushing holdings to the lowest since April 2010, data compiled by Bloomberg show. This year’s sales almost match total purchases in the previous three years.

Billionaire hedge-fund manager John Paulson, the largest holder in the SPDR Gold Trust, the world’s biggest ETP, told clients Nov. 20 that he wouldn’t personally invest more money in his gold fund because it isn’t clear when inflation will accelerate, according to a person familiar with the matter.

Paulson has lost 63 percent this year in the PFR Gold Fund, said the person, who was briefed on the returns and asked not to be identified because the information is private. The fund, which has shrunk to $370 million, with most of that John Paulson’s own money, fell 1.2 percent in October, the person said.

Read More…

London Lures Billionaires as Mansions Seen as Safe Haven

According to Bloomberg,

“We’ve had offers of around 25 million pounds, but they aren’t quite high enough,” says Noel de Keyzer, a veteran broker for Savills Plc, a London-based real estate agency. We are standing in a surprisingly sunlit subterranean family room beneath the garden of 29 Brompton Square in Knightsbridge, on the market for 27.5 million pounds ($44.3 million). Damien Hirst butterfly prints hang on the earth-tone walls of the recently renovated, fully furnished 1820s house.

“I would say that eight out of 10 buyers will take a house like this lock, stock and barrel, including the contents, and do very little in terms of altering the design,” de Keyzer says. By “a house like this,” de Keyzer means super-prime — the designation given to properties asking in excess of 10 million pounds, Bloomberg Pursuits magazine will report in its Holiday 2013 issue.

Despite the global financial crisis — or, more accurately, because of it — prices in the London neighborhoods of Belgravia, Chelsea, Kensington, Knightsbridge and Mayfair have risen 23 percent from their previous peak in March 2008, according to real estate brokerage Knight Frank LLP.

Since 2009, more super-prime properties have traded hands in London than in any other city, including Hong Kong, New York and Singapore; last year, the city accounted for about a third of the approximately 300 super-prime sales globally, according to research from Savills.

Super-Prime Market

Noel de Keyzer (Bloomberg)

Fear as much as greed drives the super-prime market. Although a third of London’s super-prime buyers are British, safety-seeking internationals predominate. Oil sheiks want an Arab Spring insurance policy. Wealthy French have fled President Francois Hollande’s new tax regime.

Ultra-high-net-worth individuals from the periphery of the euro zone — Cyprus, Greece, Italy, Portugal — have sought to shift assets out of the besieged currency and into pounds. For Russians, de Keyzer says, “the Putin factor” — the fear of a sudden shift in political winds — cannot be underestimated. Russians and citizens of former Soviet republics indisputably drive the market among international buyers, says Tim Wright, a Knight Frank partner specializing in super-prime housing.

Read More…