The Business News Source

Giving his strongest nod to the Bank of England this week, Gordon Brown told the annual meeting of the International Monetary Fund (IMF) that the Bank of England must keep inflation in check as Britain’s economy continues to grow. The IMF’s new forecast for UK growth was 2.7 per cent, he added.

Asked how his comments lined up against his March Budget forecast, where he predicted growth of 2.0 to 2.5 per cent, Brown said: "You’ll just have to look at what the March forecast was and draw your own conclusions"

Last week U.K. bonds slid as reports showed inflation quickened last month and U.K. house prices climbed, stoking speculation the Bank of England will increase interest rates.

Even the Confederation of British Industry, a trade body normally associated with calls for lower rates, suggested that higher rates would be required to curb inflation.

Consensus is now strong that the Bank of England will increase rates at least once this year, with the possibility of further increases later.

The housing market is still over valued according to the IMF and needs to either recede or, at least slow remarkably.

Concerns are that too great an increase in prices may prick the housing market and cause pain and misery to voters. But Gordon Brown and the Bank of England seem to have no choice as householders continue to ignore the ‘writing on the wall’ and borrow in even greater numbers.

At the same time analysts wonder if Gordon Brown wants to be remembered for the house price crash on his ‘watch’. With Prime Minister Tony Blair retiring from his post before May 2007 he won’t be too keen to see it being his ‘Swan song’ either.

If Brown does intend to take over as Prime Minister, which most say he does, then he’ll probably need to time the deflation of the housing market very well or face a negative footnote in history.
 

We have noted that BP seems to be either unlucky or negligently careless over the last few years. While re-branding itself BP instead of British Petroleum, replacing the Viking shield with a Daisy and placing wind generators in its garages may have worked wonders for the ‘green’ image it likes to portray, it seems that in reality oil is a dirty, messy, dangerous game and no amount of marketing can deflect that when things go wrong.

Well certainly things are going badly at the moment, with cracked pipes in Alaska and staff being blasted in Texas it seems that BP is now moving into hyper cautious mode. And this is beginning to affect the price of oil again as fears grow that supply may be less than optimistically predicted a few days ago.

Here’s a report from Investment & Business News

BP’s investors feel thunderbolt

BP is under investigation and that has made it cautious. Last year, a massive fire in a BP oil refinery plant in Texas killed 15 people. This had regulatory authorities examining the company’s approach to safety. Earlier this year, the company found itself even more under the microscope after the oil leaks and subsequent closure of most of the Alaskan Prudhoe Bay field. So now the company is dotting every ‘i’ and crossing every ‘t’.

And all this caution, or is it simply good business practice, has hit the massive Thunder Horse oil platform
When it’s finally ready, the platform is due to process 250,000 barrels of oil a day and 200 million standard cubic feet of gas per day. But the platform, which stands above 6,050 feet of water, 150 miles southeast of New Orleans was damaged by hurricane Dennis last year.

Now it’s emerged that there are further delays, and the $1billion platform which is 75 percent owned by BP and 25 percent owned by Exxon Mobil Corp, won’t start production until 2008, two years later than previously predicted.
Tests over four months "revealed metallurgical failure in components of the subsea system," said a BP statement.
The repair bill is likely to run into the hundreds of millions of dollars...

For the US to rid itself of the volatility in the Oil market and distance itself from Middle East instability it needs to encourge more investment in infrastructure and storage capacity - unfortunately too many lobby groups have paralysed any attempts at improvement.

Crude oil futures prices ended higher Monday on the New York Mercantile Exchange With the near-month contract for the benchmark grade rising 47 cents, to close at $63.80 a barrel.

At the end of August Sony went to great pains to assure the markets that it was working closely with notebook manufacturers and that there would be no further recalls required. The recall of 4.1 million Dell and then 1.8 million Apple notebooks was that end of it we were assured. Despite incurring estimated costs of $258 million to facilitate the swap out and replace the batteries the market eventually took the news in its stride – “No More Recalls” was the mantra from Sony.

So it was a surprise this morning when Toshiba announced that it too, would begin the process of recalling 340,000 laptop computers. Unlike Dell or Apple, Toshiba said there was no risk of the faulty batteries catching fire – probably the last thing any wise PR person would say, given the recent outcrop of self-igniting laptops.

Toshiba said the recall would not hit its bottom line – though how replacing shipping freighting the devices will not affect the bottom line is anyone’s guess.

Once again it looks like Sony will be footing the bill for the call out.

Sony has suffered a severe blow to its brand image, this third major recall follows hot on the footsteps of its announcement that it critically short of vital components for the PlayStation 3 so will delay the launch of the product in certain markets around the globe, and severely restrict the availability in the markets it does ship to.

Sony stock traded down 0.8 percent on the Tokyo Stock Exchange off 10 percent since August.

Hard as it may be, and Japanese companies in particular have this problem, sometimes it’s better to unload all your pain onto the market at the same time, in one go.

Companies like Sony are highly consumer focussed – consumers don’t want to be continually reminded that something from a trusted brand like Sony is likely to catch fire or worse. Similarly, delays in their PlayStation 3 product introduction will further tarnish the brand and infuriate consumers – with the holiday season fast approaching parents will shop around for alternatives for their children this year. Of course we’ll see stories about PS3’s changing hands for $5000 on eBay, but these will be exceptions and most will just buy one of the ‘other’ brands.

Under the leadership of Sir Howard Stringer Sony gained nearly 40 percent in value over a short six-month period. However, since May the company has been caught in a steep decline.

Clearly, Sony still needs to refocus and work hard on re-establishing its edge in the consumer market. Some may say that the battery incidents have been bad luck – perhaps it’s a business unit Sony needs to get rid of  as quickly as possible.

With the quality and production capabilities of the Chinese ‘on par’ with the Japanese, perhaps its time for Sony to go back to it roots and focus on design and marketing, sell off its factories and look over the water to a company that’s managed to do the same – Apple.