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fastFT [/fastft] Market-moving news and views, 24 hours a day Sign in Sign out Account More Back to FT.com HOT TOPICS Search All US Eurozone UK Asia Economy Companies Economy Fed's Dudley says "premature" to start raising rates October 7, 2014 URL Twitter America's jobs market is still too weak and inflation too low to begin raising interest rates, according to a one of the Federal Reserve's senior policymakers. America's jobs market is still too weak and inflation too low to begin raising interest rates, according to a one of the Federal Reserve's senior policymakers. Bill Dudley, the president of the New York Federal Reserve, added that expectations of a first rate rise in the middle of next year are "reasonable," assuming US economic growth sustains its improvement. In a speech in Troy, New York, Mr Dudley said: It still is premature to begin to raise interest rates — the labor market still has too much slack and the inflation rate is too low. The consensus view is that lift-off will take place around the middle of next year. That seems like a reasonable view to me. Although the Fed's latest set of projections, released in September, suggested officials are minded to raise interest rates more quickly over the next two years than they were in June, interest-rate futures show investors remain sceptical the central bank will follow through. Although Mr Dudley, who has a vote on monetary policy at the Fed, expects gross domestic product to expand at a 3 per cent pace in the second half of this year and in 2015, he cautioned that: While I believe that the risks around this consensus forecast are reasonably well balanced, I also believe that the likelihood that growth will be substantially stronger than the point forecast is probably relatively low. Weaker than expected consumer spending and still sluggish housing activity are forces that will temper a much quicker acceleration in growth, Mr Dudley said. The rate of job creation has been a bright spot in 2014 even as broader economic growth has zig-zagged. Mr Dudley said that despite the improvement: What I can say with greater certainty is that there still is a significant underutilization of labor market resources. I come to this conclusion after assessing many labor market indicators, not just the level of the unemployment rate. For example, the fact that the rate of growth of labor compensation costs remains so subdued is consistent with this conclusion. Economy Federal Reserve US US economy Open Markets Treasury yields tumble as US stocks slide October 7, 2014 URL Twitter US equities are sliding, but the far more striking move on Tuesday is the sharp rally in longer-dated US government bonds. US equities are sliding, but the far more striking move on Tuesday is the sharp rally in longer-dated US government bonds. Yields on ten-year and 30-year Treasuries, which have surprised investors with the strength of their rally this year, fell as a combination of weak European economic data and nervousness ahead of third-quarter US earnings soured sentiment. The ten-year yield fell to 2.36 per cent, just above its low for the year of 2.34 per cent. The yield on the 30-year touched a fresh low for the year of 3.07 per cent. Yields move in the opposite direction to a bond's price. A plunge in factory orders in Germany is feeding fears that the Eurozone's tepid recovery is faltering. Meanwhile, the rally in the dollar and the slump in crude prices over the last four months should restrain inflationary pressures in the US and potentially ease pressure on the Fed to raise interest rates. Analysts at TD Securities said: In fact, with wage pressures remaining subdued and a stronger dollar likely to dampen pipeline inflationary pressures even further during the coming. Markets Treasuries US Open Companies Irish property investor to raise €300m for fresh bets October 7, 2014 URL Twitter Hibernia REIT, a fast-growing Irish property investment company, is raising €300m in new capital in a sign that it thinks there is a lot more value to be found in Ireland's recovering property market. Hibernia REIT, a fast-growing Irish property investment company, is raising €300m in new capital in a sign that it thinks there is a lot more value to be found in Ireland's recovering property market. The company, which raised nearly €400m in a stock market listing at the end of 2013, has become one of the most high profile acquirers of Irish commercial and residential property assets in Dublin in recent months, reports Vincent Boland in Dublin. It is now returning to the market to seek more equity capital as the Irish property market continues to emerge from its crash. Hibernia is offering almost 71.5m new shares at €1.05 per share - a discount of 7.5 per cent to its closing price on the Irish stock market on Tuesday. The joint bookrunners are Credit Suisse and Goodbody Stockbrokers. Kevin Nowlan, chief executive of WK Nowlan, which manages the Hibernia REIT, said there were "lots of opportunities" in the Dublin property market as the National Asset Management Agency, the "bad bank" set up to untangle the Irish property crash, accelerated its sale of assets, including office blocks, development sites and loan portfolios. Between 2007, when the Irish property market peaked, and 2012/13, when it hit rock bottom, almost no new development has taken place in Dublin. The result is a shortage of both offices and houses. That is one factor in a sharp rise in prices in the past 18 months. A report last week suggested that house prices in Dublin had risen nearly 25 per cent in the year to the first quarter of 2014. Nama is accelerating its sale of assets partly to try to fill the vacuum in the property market and partly under government pressure to wind up its operations as quickly as possible. Danny Kitchen, Hibernia's chairman, said management was "continuing to see significant investment opportunities"; the new capital was intended to capitalise on those opportunities and "deliver attractive returns for shareholders." Hibernia's shares have risen 13 per cent since the company's IPO. Europe Ireland Companies Eurozone Nama Open Companies UK broker Daniel Stewart warns of shortfall October 7, 2014 URL Twitter Daniel Stewart, the UK small-cap broker whose shares were suspended last week after it missed the deadline for submitting annual accounts, said on Tuesday it had identified a shortfall in its regulatory capital. Daniel Stewart, the UK small-cap broker whose shares were suspended last week after it missed the deadline for submitting annual accounts, said on Tuesday it had identified a shortfall in its regulatory capital. The company said it was in discussions with unidentified parties to strengthen its balance sheet and supply the capital that it needs to continue as a regulated financial services business, reports Kate Burgess. The shortfall was discovered in the final stages of preparing the group's annual accounts, Daniel Stewart said. In June, PwC was appointed to audit the company's results. According to figures from the London Stock Exchange, which oversees the Alternative Investment Market (AIM), Daniel Stewart currently acts as nomad to 27 Aim-quoted companies. In July, Daniel Stewart said that its losses had narrowed in the year to March. The broker has until March to file accounts before the share suspension becomes permanent The company said it's confident the shortfall can "be resolved shortly." Daniel Stewart UK Companies AIM Open Comment Anglo American: copper deal sets tongues wagging October 7, 2014 URL Twitter Red metal red herring, or a real deal? Red metal red herring, or a real deal? Reports that Anglo American is readying the sale of three Chilean copper mines plus a smelter valued at a punchy $1bn isn't such a big deal in the scheme of Anglo, but it's a sure sign that M&A bankers' tongues are wagging. Rounding off a day dominated by Glencore's passing interest in Rio Tinto, Bloomberg reports that Anglo's Mantos Blancos and Mantoverde mines, plus its 50.1 per cent stake in El Soldado and the Chagres smelter are under the hammer. These are small beer in the context of Anglo's Collahuasi and Los Bronces copper assets - whose performance so far this year has prompted the London-listed diversifed miner to upgrade its full-year production guidance. Even so, the possibility that the lesser Chilean assets may be sold fits Anglo CEO Mark Cutifani's broader preparedness to sell lower quality mines the better to focus on less capital- and labour-intensive mines that offer higher returns – a process already in train with the planned disposal of its Rustenberg platinum mines in South Africa. Mr Cutifani is on a mission to lift Anglo's return on capital to more than 15 per cent by 2016 and is likely to jettison a good number of unwanted assets in the miner's portfolio to get himself above that run rate. The copper sale had prompted plenty of chatter in the Chilean press in recent months, but it would seem that bankers are finally being lined up. Keep up the end-of-summer sales momentum, Mr Cutifani, your share price needs you. Copper Chile Rio Tinto Anglo American Glencore Anglo American Platinum Open Economy Bank of Israel attacks Netanyahu's budget plan October 7, 2014 URL Twitter It's rare that a central bank chooses to publicly attack a government's fiscal policy, but the Bank of Israel has. It's rare that a central bank chooses to publicly attack a government's fiscal policy, but the Bank of Israel has. The budget plan proposed by prime minister Benjamin Netanyahu's government overestimates tax revenues, while the effectiveness of measures to temper the deficit are "uncertain," the Bank of Israel said on Tuesday. Mr Netanyahu and his finance minister, Yair Lapid, agreed late last month on a 2015 budget that will push the annual deficit to 3.4 per cent of gross domestic product, as the country expands defence spending. The central bank said, that by its estimates, the deficit will reach 3.6 per cent of GDP, comfortably above the target of 2.5 per cent. In a statement, the central bank, which is run by governor Karnit Flug, said: In view of the frequent changes to the deficit path to which the government committed—including the increase in the ceiling in the proposed budget, an overestimation of expected revenues, the character of the proposed measures, the risk in not realizing some of the measures and the risks reflected in the domestic and global economic uncertainty that may lead to a further deviation from the deficit target—there is concern that exceeding the target may negatively impact the credibility of the government's commitment to its fiscal targets. Earlier on Tuesday, the Israeli shekel, already out of favour among investors, fell 1 per cent to 3.71 against the US dollar. Economy Benjamin Netanyahu Middle East Israel Open Companies Container Store punished as small-cap rout worsens October 7, 2014 URL Twitter America's small cap-companies can't catch a break. America's small cap-companies can't catch a break. The latest case in point is The Container Store , the US retailer of storage items, which on Tuesday slumped below its initial public offering price for the first time. Once a high-flying member of the Russell 2000 - the index of small caps in the US - the company is getting punished after cutting guidance for the second time this year as same-store sales slipped. Executives now expect full-year sales to be between $800-$810m, below earlier projections of as much as $837m (which the company tempered in July) and analysts' forecasts for $822m. The figures are the latest disappointing results from the small-cap universe: gun maker Smith & Wesson has been under pressure after it said there was an over-supply of unsold guns at retailers. The Russell Index soared 37 per cent in 2013, outperforming the S&P 500, but is down 6 per cent this year. Although valuations for the Russell 2000 have fallen over the past year, small-cap companies remain more expensive than large-cap companies. The forward P/E ratio on the Russell 2000 is roughly 20, while the forward 12-month PE ratio for the S&P 500 is 15.2 times, according to data from FactSet. But analysts on Wall Street remain optimistic that The Container Store will gain traction in 2015 should the US economy continue its steady, if unspectacular, improvement. Small-cap companies tend to be more closely tied to US economic activity than larger rivals, which have operations abroad. Analysts at Barclays said: We continue to admire the prospects for The Container Store, including: attractive growth prospects, its robust unit economics, its unique culture, its highly experienced management team, its leverage to the growing home category and its rapidly growing e-commerce business. Shares of The Container Store fell 20 per cent to $17.64, taking the company's decline this year to more than 62 per cent. Earnings Companies US Container Store Open Markets Travel shares slide on Ebola virus fears October 7, 2014 URL Twitter Shares in airlines, hotel and travel companies are leading European markets lower on Tuesday as fears over the spread of the Ebola virus hit the continent. Shares in airlines, hotel and travel companies are leading European markets lower on Tuesday as fears over the spread of the Ebola virus hit the continent. In London, IAG - the British and Spanish airline combo - is at the foot of the FTSE 100, with its shares down 6.4 per cent at 348p. A Spanish nurse in Madrid has become the first person to be infected outside West Africa with the deadly virus, which is estimated to have killed more than 3,000 people to date in Africa. Spanish media report that a second nurse is undergoing tests. Carnival , the cruise company, is down 5.5 per cent at £23.55, budget airline easyJet is off 4.4 per cent at £14.02, travel agent Tui Travel is down 2.7 per cent at 387p and Intercontinental , the hotels group, has fallen 2.7 per cent to £22.68. Thomas Cook is down 4.7 per cent at 113p on the FTSE 250 and, in Frankfurt, Lufthansa has fallen 5 per cent to €11.47. Markets Airlines UK Europe Lufthansa IAG Open Companies Glencore not "actively considering" Rio Tinto deal October 7, 2014 URL Twitter So don't expect GlenTinto to emerge anytime soon. So don't expect GlenTinto to emerge anytime soon. Glencore said that is no longer "actively considering" a merger with rival miner Rio Tinto after the latter rebuffed an initial approach in July. Shares in Rio Tinto, the world's largest iron-ore producer, rose almost 5 per cent on Tuesday after disclosing overnight that Glencore had made an approach. Glencore, which is run by Ivan Glasenberg, said in a statement late on Monday afternoon that it is bound by City takeover rules over the next six months, but: Reserves its rights to make an offer in the future with the consent of the Takeover Panel, either with the recommendation of the Board of Rio Tinto, in the event of a third party offer for Rio Tinto, or in the event of a material change in circumstances. Here fastFT examines why Glencore will be happy to take its time. Mining Rio Tinto Glencore Companies US Open Economy UK economy grew 0.7% in third quarter - NIESR October 7, 2014 URL Twitter An influential UK think-tank estimates that the country's economy expanded 0.7 per cent in the third quarter, even as the eurozone flirts with another recession. An influential UK think-tank estimates that the country's economy expanded 0.7 per cent in the third quarter, even as the eurozone flirts with another recession. The National Institute of Economic and Social Research produces widely-watched gross domestic product estimates for the UK, and its latest report estimates that the economy is now 3.1 per cent bigger that it was in the same period last year. However, the last quarter's pace of expansion is somewhat slower than the 0.8 per cent second quarter GDP growth, and the NIESR predicted that the Bank of England will not hike rates this year. There does however remain a reasonable amount of spare capacity in the UK economy. Given this, we continue to expect the first increase in interest rates to come in February 2015. Below is a NIESR chart of various UK recessions and recoveries, which underscores just how disappointing the current recovery has been in a historical context. Economy UK economic growth UK Open Load more Fast FT on twitter More FT Twitter accounts Meet the team Fast FT is a global team working across timezones to give you market-moving news and views twenty-four hours a day, five days a week London Robin Wigglesworth robin.wigglesworth@ft.com @RobinWigg Chris Nuttall chris.nuttall@ft.com @ChrisNuttall Richard Stovin-Bradford richard.stovin-bradford@ft.com @StovinBradford New York Richard Blackden richard.blackden@ft.com @RichardBlackden Eric Platt eric.platt@ft.com @EricGPlatt Pan Kwan Yuk pan.yuk@ft.com @pyuk Hong Kong Naomi Rovnick naomi.rovnick@ft.com @naomi_rovnick Patrick McGee patrick.mcgee@ft.com @PatrickMcGee_ Jennifer Thompson jennifer.thompson@ft.com About us Contact T & Cs Help Feedback Advertise with the FT Privacy policy Cookie policy Copyright © THE FINANCIAL TIMES LTD 2014. FT and 'Financial Times' are trademarks of The Financial Times Ltd. Always Learning Pearson