The Business News Source

Stocks across Europe fell as weak corporate growth and profitability were forecast in the USA by a survey at the Philadelphia Federal Reserve. Wall Street extended losses overnight, affecting confidence of global markets as the worlds largest consumer country stuttered.

The FTSE 100 fell near 1 percent mid morning on worries about that a global slowdown would precipitate. FTSE companies earn about 70 percent of their income from overseas – any fall in the USA would directly affect these companies.

Mike Lenhoff, chief strategist at Brewin Dolphin was quoted in Reuters as saying "The good news is if the U.S. economy is that weak, the Fed will cut interest rates. If so, it will carry through to the UK, and the MPC could say it had better not proceed with a rate hike in November. But we’re not there yet because the market has overreacted," referring to the survey.

On the positive side, the slow down may be more due to the malaise in the construction and automotive industry more than other sectors. So the fears may indeed be an over reaction.

More recently the UK seems to have broken its link with US interest rates as focus on the housing sector and retail sector start to pre-occupy the minds of central bankers and polititions alike.

In Australia there are fears that with commodities prices continuing fall, that perhaps the good times are behind them, and that as in the UK the focus should shift to internal growth inflation rather than short term worries about rate exchange parities.

For the short term it looks like the USA will move through a period of uncertainty about which direction it’s going. Other OECD countries need to make sure that these potential ‘blips’ do not distract them from the real growing issues at home.
 

Comparisons between the recent activity at Hewlett Packard and the Watergate affair are almost too tempting to resist. Late yesterday it became apparent that investigation into the bugging of fellow board members, staff and journalists was leading straight to the top.

The Washington Post reported that Mark Hurd, CEO of Hewlett Packard was implicated in approving an operation to ‘sting’ journalists in order to find out the boardroom source of leaks. Mark Hurd has been one of the main forces behind the resurgence of HP over the last year since Carly Fiorina was ousted.

Worries that he may be implicated sent shares of HP plunging down 5.2 percent after the news broke.

The investigation into the various activities and spying are a worrying precedence in any company or sector of the business, but HP’s founders would be turning in their graves at the latest escapades. The company has moved from morale high ground to an all time low.

Many would argue that the rot set in after Carly Fiorina took over the post of CEO and relentlessly pursued the takeover of Compaq. It could be argued that the moral fibre and DNA of the company disappeared during this timeframe with many HP engineers still craving for the days when the company was led by William Hewlett one of the eponymous co-founders.

HP announced a press conference this morning to discuss the affair, trying to head off further damage.

Unfortunately this is too good a story to allow it to die. Journalists are convinced that with more poking around they can uncover more dirt. For HP to nip this in the bud it must show that it has the constitution for truth and integrity, something it has shown that it has scant regard for so far.

BAE Systems PLC has had its outlook raised to stable from negative by ratings agency Moody’s.

The change in outlook reflects a combination of reduced debt, positive prospects for increased cash flow in light of recent contract awards, and reduced uncertainty regarding the impact of BAE’s recommendation to its shareholders to approve the sale of its 20 interest in Airbus SAS, according to Moody’s.

The negative outlook had been in place since April 2005 when BAE announced its intention to acquire United Defense Industries (UDI). The increased debt burden and high multiple paid for UDI were expected to place stress on the company’s cash flow to debt profile, which were already considered weak for the rating category.

Also, many questions around the sale of its 20 pct ownership interest in Airbus had added uncertainty.

Whilst many may have questioned the sanity of BAE earlier in the year, it seems that with further delay of the A380 announced yesterday and BAE’s thrust into the US market should strengthen its hand further down the line.