• FTSE 100 opens more than 100 points lower • Banks and miners see big falls, RBS down 7.4% • Lagarde calls for recapitalisation of Europe’s banks • Weak US jobs data still worrying traders Fears of a new global recession sent stock markets falling sharply across Europe and Asia on Monday morning, after International Monetary Fund chief Christine Lagarde warned that the world economy is on the brink of a new crisis. In London, the FTSE 100 fell 101.33 points at the start of trading to 5190, down 1.9%. Germany’s Dax fell 2.3%, and France’s CAC index dropped 2.5%. There was also a rush to dump shares in Asia, where Japan’s Nikkei closed 1.86% lower at 8,784.46 points and South Korea’s Seoul Composite index slid by 4.39%. This latest selloff came after Lagarde said the risk of a new financial crisis had grown in recent weeks. “We see that there has been, particularly over the summer, a clear crisis of confidence that has seriously aggravated the situation,” she told Germany’s Spiegel . “Measures need to be taken to ensure that this vicious circle is broken.” Lagarde warned that Europe’s banks needed to be recapitalised, to give them protection from losses on their reserves of sovereign debt. The former French finance minister also argued that Europe needs to implement closer fiscal union and speed up its economic growth – which has almost ground to a halt. “The sovereign debt issue weighs on the confidence that market players have in European banks,” Lagarde said. Financial stocks and miners led the fallers in London. Royal Bank of Scotland slid 7.4% to 22.2p, Barclays fell 5.5% at 155p, and Antofagasta and Kazakhmys both fell by 4%. The UK banks were buffeted by uncertainty over whether they will be forced to ringfence their retail and investment banking operations . The rush from equities into “safe-haven” government bonds pushed the interest rate on German Bunds to just 1.935%. Concerns over the weak US jobs market also dogged investors, following the shock news late last week that no new jobs were created in America last month . Chris Weston, institutional trader at IG Markets, said Friday’s disappointing non-farm payroll numbers continued to cast a shadow. “That US non-farm payroll reading certainly left traders with little to celebrate on Friday, pushing markets on both sides of the Atlantic sharply lower as a result. This has certainly set the pace for Asian markets too and with Wall Street closed today for Labor Day, it seems unlikely that there will be much appetite to start taking on any risk just yet,” said Weston. “Even those who thought a dire jobs report would pave the way for another round of cheap money in the form of QE3 seem to be cooling on the idea – or at least any hope that it’ll provide the same shot-in-the-arm response for equity markets.” Stock markets Financial crisis Global recession Banking Christine Lagarde IMF Global economy European banks Europe Graeme Wearden guardian.co.uk
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• Clinton Cards is among those under strain as rents fall due • Stocks expected to fall include Home Retail, Dixons and HMV Britain’s high street retailers are braced for another wave of closures following one of the worst summer trading periods in years and growing concern about pressures on consumers in the run-up to Christmas. Sales figures for August, blighted by riots, volatile stockmarkets and poor weather, slipped 2.2% among mid-market retailers, according to accountancy firm BDO – the worst drop since the depths of recession two years ago. Widespread disruption, which caused shops to close their doors during trading hours well beyond the riot flash points, has left many retailers facing an uphill struggle in the face of a looming quarterly rent deadline at the end of this month. Among those already under financial strain is Clinton Cards. It emerged the company had approached landlords requesting more time to meet rent bills – as it did this time last year. Earlier this year, the rent deadlines at the end of March and June were followed by a string of retailers crashing into administration. They included Focus DIY, Habitat, TJ Hughes and fashion chain Jane Norman. The second quarter of 2011 saw 375 retailers call in administrators, said accountancy firm PricewaterhouseCoopers, a 9% rise on the same period in 2010. Meanwhile, many surviving mid-sized retailer groups listed on the stock exchange are among those most targeted by short sellers – those investors who effectively bet on the value of shares falling. Recent figures from research firm Data Explorers suggest stocks heavily shorted included Argos’s parent company Home Retail, Dixons, HMV, Ocado, Mothercare, Next and Carpetright. Accountancy firm RSM Tenon has identified almost 9,000 retailers it believes are now financially vulnerable, an increase of more than 10% in the last six months. The Local Data Company and the British Property Federation will this week issue a report expected to show that many towns have seen a sharp rise in the number of boarded-up shops. Previous figures from the British Retail Consortium (BRC) suggest about one in 10 shops are vacant in town-centre shopping districts. The BRC will publish its sales survey for August on Tuesday, which are expected to confirm the gloomy picture painted by BDO. Its figures for July pointed to comparable sales having risen by 0.6% – a number boosted by inflation. The next two weeks will see trading updates from Next, JD Wetherspoon, Costa Coffee parent Whitbread, Carpetright, Home Retail Group, B&Q parent Kingfisher and Primark parent Associated British Foods. All will be closely watched for hints of stress on the high street. However, struggling retailers may well be able to put a case to creditors to ease the pressure before the Christmas trading period, traditionally the busiest time of year. Retail industry Clinton Cards Economics Simon Bowers guardian.co.uk
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FTSE 100 chiefs enjoy record windfalls from complex and opaque bonus deals thanks to stock market bounce Bosses at the helm of Britain’s top 100 companies saw their pay packages jump by an average of £1.3m to almost £4.5m last year, the biggest leap in nine years, according to a study commissioned by the High Pay Commission. The average pay deal for a FTSE 100 chief executive soared from £3.09m to £4.45m last year as business leaders were able to enjoy record windfalls from share-based incentive schemes, thanks to a sharp bounce in the stock market. The commission, which was set up last November to run for a year, has singled out these highly complex and often opaque share-based reward programmes as the most controversial element of boardroom pay. They are of “staggering complexity” and there is “no clear evidence” they work, it claims. Many economists have suggested the recovery in the value of shares in late 2009 and 2010 which boosted executive rewards had little to do with the underlying performance of businesses. Rather, it was in large part an indirect consequence of drastic policy measures taken by central banks around the world to drive down long-term interest rates in order to avert a global depression. Recent months have seen these share gains go into reverse. The benefits reaped from the stock market bubble by top FTSE 100 executives have not been mirrored on the shop floor. Instead wage inflation stood at 2.2% for the final three months of 2010. Factoring in the rising cost of living – the retail price index stood at 4.8% last December – that means most workers in Britain saw a significant decline in their real incomes. “The evidence exposes the myth that big bonuses and high salaries result in better company performances,” said Deborah Hargreaves, chair of the commission. “There has been massive growth in what has been termed performance-related pay, yet no such corresponding leap forward in company performance.” She suggested the real acceleration in top executive pay had been hidden behind an array of bewilderingly complex schemes purportedly designed to peg share-based rewards to company performance. “All we’ve seen is things getting much more complicated – in many ways masking the real value of what executives get paid,” she said. “Corporate governance reforms attempting to link pay with performance appear to have done little more than add to the huge complexity of executive packages, reward schemes and bonuses that make up the pay of FTSE 100 directors.” The study of executive pay deals, carried out for the commission by Incomes Data Services, showed the average annual director’s bonus rose by 187% in 10 years. The commission said the disparity between pay and performance was sharpest at Britain’s leading banks, several of which have relied on taxpayer support in recent years either through Bank of England liquidity assistance or in bailout recapitalisations in the case of Lloyds Banking Group and Royal Bank of Scotland. Executive pay and bonuses Stock markets Corporate governance Simon Bowers guardian.co.uk
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New prime minister Yoshihiko Noda promises urgent assistance as winds and rain leave thousands stranded in central areas Rescuers and search parties were scouring central Japan on Monday as the death toll from the worst typhoon to hit the country in seven years climbed to 26. Typhoon Talas, which was later downgraded to a tropical storm, lashed coastal areas with destructive winds and rain at the weekend before moving offshore into the Sea of Japan. Fifty two people were missing and thousands were stranded as the typhoon washed outbridges, railways and roads. The scenes of destruction were an unwelcome reminder of Japan’s vulnerability to natural disasters as the country attempts to recover from the 11 March earthquake and tsunami. Prime Minister Yoshihiko Noda, who was sworn in a day before the storm, said the government would provide assistance as quickly as it could. His predecessor, Naoto Kan, was forced out of office chiefly because of public anger over the government’s response to the tsunami, which left nearly 21,000 people dead or missing and sparked the world’s worst nuclear disaster since Chernobyl in 1986. “We will do everything we can to rescue people and search for the missing,” Noda said. The typhoon was believed to be the worst to hit Japan since 2004, when 98 people were killed or reported missing. It caused most damage on the Kii peninsula in central Japan, south-west of Tokyo and hundreds of miles from the north-eastern coast, which bore the brunt of the effects of the earthquake and tsunami. The extent of damage from the typhoon continued to emerge on Monday. Rescuers and reconnaissance teams spread out over the worst-hit areas to look for survivors or people stranded in flood zones. Television footage showed washed-out train bridges, neighbourhoods inundated by swollen rivers and police using rope to pull frightened survivors out of homes. The government’s emergency headquarters put the death toll at 26 on Monday morning. About 100,000 people were being advised to evacuate their homes. Most of the dead were in Wakayama prefecture, said local official Seiji Yamamoto. He said 17 were killed there and another 28 people were missing. “There are so many roads out that it is hard to count them all,” he said. “Hundreds of homes have been flooded.” Rains and wind were recorded across wide swaths of Japan’s main island, but no significant damage was reported in the north-east. At least 3,600 people were stranded by flooded rivers, landslides and collapsed bridges that were hampering rescue efforts, Japanese news agency Kyodo reported. The centre of the typhoon crossed the southern island of Shikoku and the central part of the main island of Honshu overnight on Saturday. It moved slowly north across the Sea of Japan off the country’s west coast, the Japan meteorological agency said. Japan Natural disasters and extreme weather Yoshihiko Noda guardian.co.uk
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