The Proverbial Hits The Fan

By Heather D'Alton Dec 07, 2005

*** The Baugur CEO’s quandary

*** The surge of the indices

*** The US real estate bubble...China’s growing power...London post-terror...and more

   --------------------- – With Baugur finally out of the bid for Somerfield, expect the supermarket group’s share price to shuffle down today. After facing increasing pressure from its bid consortium mates, Baugur chief executive Jon Asgeir Johannesson – charged with some 40 accounts of fraud – agreed not to pursue his £1.1bn bid for the retailer. Somerfield traded 3% up on Friday.

– Yet that may be the least of the Baugur CEO’s problems: he claims that a former business partner has put a price on his head.

– Meanwhile with Hurricane Dennis on the retreat, the crude price slipped back to below its record highs. Dated Brent traded 73 US cents down at $57.45 per barrel after the hurricane avoided rigs and refineries in the Gulf of Mexico.

– Just before the weekend – after the hurricane had claimed 32 lives – Brent crude had traded above $60 per barrel.  BP fell 1%, while Shell traded 1% in the black.

– The blue chip index managed to make back what it lost following the London bombings on Thursday...and more. The index closed at a new three-year high, up 73 points to trade at 5,232 before the weekend. The FTSE 250 shot up to a new all-time high, to trade nearly 2% up at 7,518. The All Share index also surged some 1.5% on Friday.

– And it doesn’t end there... Today spread betters are calling the blue chip index to open a further 20 points higher.

– BAA, the UK’s biggest airport operator, said that passenger traffic last month rose more than 4% year-on- year, with all its airports reporting higher traffic. According to BAA, it carried 13.4m passengers in June – and some 145m in the 12 months to June. Cargo tonnage however inched up 0.4%, showing a “worldwide slowdown in air cargo growth”. BAA slipped 0.1% down before the weekend.

– And Primark owner Associated British Foods Plc has announced that it's to buy Littlewoods for £410m. That gives ABF ownership of some 120 Littlewood stores – but it intends only to keep 40% of the retail selling space, while selling the rest to other high street retailers.

   -------------------- The City’s Reaction To Thursday’s Bombings– The attacks in London last Thursday were aimed not only to cause as many fatalities as possible, but also as much chaos and disruption as they could. As far as the markets go, that aim was partially – albeit in the short-term – successful, with the FTSE tanking 207 points – or 4% - at one point, before recovering well. But what effect will the attacks have on the rest of the economy...on the consumers...and on the Bank of England when they next consider interest rates?

The Proverbial Hits the Fan– We all know that bubbles can outlast personal solvency...just take a look at the tech bubble of the late 1990s for proof of that, says MoneyWeek’s Tim Price. And now both here in the UK, but particularly in the US, we are once again facing a bubble – this time in real estate. But this bubble is a little different, and is “inexorably linked to the more general bubble in financial asset prices”, as well as the artificially low level of bond yields.

The Bull Hunter– We don’t often write book reviews for Money Morning readers...but when the book is written by MoneyWeek regular Dan Denning...and the book is about China’s growing power...then we think it’s worth a closer look. Dan travelled around the world in search of bull markets, and shares his experiences in China, Hong Kong, France, America and many more in his book The Bull Hunter. His findings are interesting, surprising, and worth checking out, particularly for the serious investor. 
 

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