BusinessDay 07 Jan 2019

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www.businessday.ng https://www.facebook.com/businessdayng @Businessdayng Monday 07 January 2019 58 BUSINESS DAY FT US trade negotiators head to China against gloomy backdrop Market volatility and global slowdown concerns raise pressure on both sides to do deal James Politi and Lucy Hornby US and Chinese negotiators are under mounting pressure to compromise in a new round of trade talks this week, as growing financial market volatility and fears of a bruising slowdown hit the global economy. A delegation of American officials will meet Chinese counterparts on Monday in Beijing for two days of discussions — the first face-to-face talks since President Donald Trump and President Xi Jinping agreed a trade truce at the G20 summit in Argentina last month — with a looming March 2 deadline to strike an agreement or see an escalation in tariffs. The mission, led by Jeff Gerrish, the US deputy trade representative, follows a torrid month for global markets, which have been convulsed by concerns of a looming downturn in the world’s two biggest economies. The S&P 500 has fallen 13 per cent since the start of October. Mr Gerrish will be joined by high-ranking officials from the agriculture department, energy department and treasury department in a sign that the talks are becoming more specific than they were when Mr Trump and Mr Xi met in Buenos Aires. For the US, success will hinge on how far China is prepared to go to purchase more American goods in agriculture, manufacturing and energy, as well as curbing intellectual property theft and the forced transfer of technology. “Mutually assured destruction is too strong but the incentives for both China and the US are to work towards some kind of agreement,” said Stephanie Segal, a senior fellow at the Center for Strategic and International Studies, a Washingtonbased think-tank. “They are going to be looking for an outright victory, and if not they will want to declare sufficient progress to kick the can down the road.” “If I were them, I would be looking at the list of US demands that the Chinese said they would be willing to accept, and clarifying those so I can declare victory and it doesn’t look like I capitulated,” said one former US trade official. The Chinese want Washington to commit to not raising tariffs further and removing levies on some items, as it hopes to chip away at the US approach. Senior US officials were comforted by a strong jobs report for December, including a significant jump in manufacturing employment which allayed some concerns about a weakening outlook. They have interpreted last week’s revenue warning from Apple, which the iPhone maker largely blamed on the economic slowdown in China, as a symptom of Beijing’s weakness rather than a worrying sign of spreading economic pain from their trade war. China is grappling with sharply weakening growth, led by lower domestic demand and the trade war, prompting the government to resort to stimulus measures, such as injecting $117bn into the banking system, investing in infrastructure and urging banks to increase lending to small businesses. NATIONAL NEWS A demonstration in Paris on Saturday started peacefully but ended in violence © AFP Macron condemns ‘extreme violence’ as French protests continue Activists smash through ministry door in eighth weekend of demonstrations Victor Mallet The latest round of anti-government protests across France at the weekend degenerated in Paris into violent clashes between protesters and the security forces, prompting the beleaguered President Emmanuel Macron to condemn “extreme violence”. For the eighth Saturday in a row, “gilets jaunes” demonstrators — sporting the yellow reflective jackets that French motorists are obliged to carry in their cars — massed in cities around the country to protest against the cost of living and to call for Mr Macron’s resignation, underlining the challenge to the once-popular president’s authority after more than two months of disruption. The interior ministry said there were some 50,000 demonstrators nationwide, compared with 32,000 the previous Saturday during the Christmas-New Year holiday period. There were also clashes in Bordeaux, Caen and other cities. In recent days Mr Macron and his government, sensing that urban shopkeepers and residents are dismayed by the economic impact of the prolonged unrest, as well as by the burning of cars and smashing of shop windows, have decided to take a tough line against the demonstrators, and have suggested that those who continue to protest are extremists Tension mounts over Congo poll results delay US warns electoral authorities not to distort outcome Tom Wilson and David Pilling The Democratic Republic of Congo was edging towards crisis on Sunday as the electoral commission postponed the announcement of presidential results and the international community stepped up pressure on Joseph Kabila, the incumbent, to cede power. Tension has increased after the respected Catholic Church said there had been a clear winner of the presidential poll a week ago, in what diplomats said referred to a likely victory for opposition candidate Martin Fayulu. Speaking to the Financial Times, Mr Fayulu warned the electoral commission to publish accurate results, saying “nobody denies that I am leading the polls”. The former ExxonMobil executive, a relative unknown before campaigning began last November, said he backed the call by the Catholic bishops’ conference, known as Cenco. “We completely agree with Cenwho deserve no mercy. A march of an estimated 4,000 people from the Paris town hall to the national assembly began peacefully, but ended in violence and failed to reach its destination when some of the demonstrators — including a man identified by police as a former professional boxer — attacked a group of gendarmes in riot gear blocking a pedestrian bridge across the River Seine. A riverboat restaurant was set on fire. Nearby, a small group stole a forklift truck from a construction site and smashed down the door to a ministry building containing the office of Benjamin Griveaux, the government spokesman, who was forced to flee under escort. “Once again, extreme violence has come to attack the republic — its security forces, its representatives, its symbols,” Mr Macron said on Twitter. “Those who commit these acts forget the core of our civil pact. Justice will be done. Everyone must pull themselves together to prepare for debate and dialogue.” Christophe Castaner, the interior minister, played down the significance of Saturday’s protests and said that 56,500 members of the security forces, more than one per demonstrator according to the official figures, had been mobilised to quell unrest. “You can see that this movement is not representative of France,” he co’s statement because everybody knows the results,” he said. Mr Fayulu also welcomed what he implied was growing international pressure on Mr Kabila to accept that his chosen successor, Emmanuel Shadary, had lost. “It is very encouraging that all over the world they are following closely what is going on in Congo and making some strong statements so that the truth will come out,” he said. Last Thursday, the US state department warned the electoral commission, widely believed to be aligned with the government, not to distort results. “There are moments in every nation’s history when individuals and political leaders step forward and do the right thing. This is one of those moments,” it said. Washington hinted strongly that it accepted Cenco’s verdict that Mr Shadary, known as Mr Kabila’s “dauphin”, had been defeated. Peter Pham, US special envoy for the African Great Lakes region, said: “There is an old dictum that posits told LCI television. Although most of the demonstrations had passed off peacefully, he said, “at the end there were numerous provocations and attacks. Town halls were attacked — those in Rennes and Rouen — and institutions like the high court in Perpignan, and gendarmeries.” Bruno Le Maire, finance minister, said in a television interview on Sunday that he wanted citizens who believed in representative democracy to declare “enough is enough”. He said: “There are forces today that want to bring down democracy.” The “gilets jaunes” protests were triggered by motorists’ anger over fuel prices that have risen as a result of green taxes introduced by the Macron government to reduce emissions, but the movement has since developed into an inchoate series of anti-government and antiestablishment demonstrations. Mr Macron’s U-turn on the taxes and the promise of €10bn of extra government spending to help the poor have not mollified the hardline protesters who continue to take to the streets on Saturdays. Those marching in Paris on Saturday were critical of Mr Macron, a former Rothschild banker, who is seen as a “president of the rich” and has so far failed to convince the majority of the benefits of his economic reforms. But few demonstrators were supportive of any other established French politicians either. that the voice of the people is the voice of God; here rather we have a case where the ‘vox Dei’ points the way to the true ‘vox populi’.” In expectation of possible popular unrest should Mr Shadary be declared the winner regardless of the true count, both the US and the Congolese government have deployed troops in the past few days. Donald Trump, US president, said he had dispatched 80 soldiers to nearby Gabon to protect US citizens and property should violence break out. In a letter to Congress, Mr Trump said he might deploy additional forces to Gabon or to Congo itself. The Congolese government has also been sending thousands of troops around the country, particularly to opposition strongholds, in what observers say could be a preparation to quash anti-government protests. Last week, the government shut down internet services, ostensibly to prevent the dissemination of false results. Egypt tries to block airing of Sisi’s ‘60 Minutes’ interview CBS refuses to stop broadcast, in which president confirms closest ever co-operation with Israel Heba Saleh An interview with US television channel CBS in which Abdel Fattah al-Sisi, Egypt’s president, spoke of his country’s close co-operation with Israel in fighting Isis militants, has stirred controversy after the broadcaster said Cairo tried to stop it from being aired. The interview on the 60 Minutes news programme was due to air on Sunday evening after CBS said it had refused Egyptian government demands to refrain from broadcasting it. In an excerpt provided by CBS, Mr Sisi is quoted as having said: “That is correct . . . we have a wide range of co-operation with the Israelis,” in response to a question asking him if co-operation with Israel was now the closest ever between the two countries. Egypt has had a peace treaty with Israel since 1978 and the two countries have diplomatic relations, but Egyptian public opinion still regards the Jewish state as an enemy and occupier of Arab lands. Mr Sisi’s unprecedented admission could hand his critics further ammunition to attack him. News of co-operation with Israel against Isis militants in the Sinai has been widely circulated in the past year. A New York Times story in February 2018 cited US officials saying Israel had conducted a covert air campaign including some 100 air strikes against Isis militants in the North Sinai with Cairo’s permission. Egypt denied the story at the time. Egypt has fought four wars against Israel since 1948, the last of which in 1973 was aimed at winning back sovereignty over the Sinai. Cairo has not responded to CBS’s claim that it asked the channel to pull the episode in which Mr Sisi is interviewed by Scott Pelley, the program’s anchor and journalist. CBS has promoted the programme as “the interview Egypt’s government doesn’t want on TV”. CBS said it was contacted by the Egyptian ambassador shortly after the interview was recorded in the US and asked to refrain from airing it, but the broadcaster has not specified what the Egyptians found objectionable. The channel has not said why it has held the broadcasting of the interview since September, when it was recorded during a visit by Mr Sisi to New York to attend the UN General Assembly. Other excerpts of the interview made public by CBS include a denial by Mr Sisi of assertions by Human Rights Watch that the country is holding 60,000 political prisoners. Egypt’s official line is that there are no political detainees in the country and that everyone in prison is there for breaking the law. Mr Sisi, a former defence minister, led a popularly backed coup in 2013 against his elected Islamist predecessor. He has presided over one of the harshest crackdowns in Egypt’s modern history, targeting mainly Islamists but extending to secular critics, bloggers and journalists. “I don’t know where they got this figure [of 60,000 prisoners],” Mr Sisi told CBS. “I said there are no political prisoners in Egypt. Whenever there is a minority trying to impose an extremist ideology we have to intervene regardless of their numbers.”
Monday 07 January 2019 www.businessday.ng https://www.facebook.com/businessdayng @Businessdayng @ FINANCIAL TIMES LIMITED Former Barclays executives prepare to face fraud trial John Varley, former chief, and 3 others pursued in SFO prosecution Caroline Binham The UK Serious Fraud Office has made a last-minute personnel change to ensure its flagship case against four former Barclays top brass is properly overseen as one of the biggest tests in its 30-year history comes to trial. Barclays’ former chief executive, John Varley, is one of four defendants whose long-anticipated trial begins this week. They face charges over the bank’s emergency refinancing arrangements with Qatar in 2008, as Barclays struggled to avoid the fate of other high-street rivals bailed out by the UK taxpayer. It is the first jury trial in the world of a major bank’s chief executive over actions taken during the financial crisis more than a decade ago and is scheduled to take at least four months at London’s Southwark Crown Court. The question of who at the SFO is accountable for the case has been in doubt since its general counsel quit for a law firm. The stakes for the SFO, which has spent millions of pounds in ringfenced money from the Treasury investigating the case over more than six years, are high after bloody noses in other trials recently, including the collapse of the retrial of two former Tesco executives late last year. SFO charges against Barclays itself and its operating subsidiary over the Qatari arrangements were also scrubbed in October, sparing the bank from trial. The anti-fraud agency has now named Mark Thompson, its chief operating officer, as the official accountable for the case. The agency’s director, Lisa Osofsky, had to recuse herself from the Barclays case following her arrival at the SFO in late August from private practice, where she was a monitor to banks trying to overhaul their compliance. Alun Milford, the SFO’s former general counsel who had taken the Neil Hume Investors are warming to gold as markets are whipsawed by concerns about slowing global growth. As US equities tumbled in December, the holdings of goldbacked exchange traded funds rose by 2.25m ounces, according to Scotiabank, helping to drive the price of the metal to six-month highs of more than $1,290 a troy ounce. That forced funds that had placed speculative wagers against gold in the US futures market to cover their positions, sending the market from a net short to a net long position — where bullish wagers outnumber bearish bets — for the first time since June last year. Analysts believe there has been a further increase in bullish bets as well as short covering, although this has yet to be reflected in official data. Weekly reports compiled by the US Commodity Futures Trading Commission are not being published because of the partial government shutdown. COMPANIES & MARKETS lead role in the case, has recently left for Kingsley Napley, the law firm. While the firm’s instruction precedes his arrival by many months and he will not be involved, Kingsley Napley has a role acting for some of the witnesses in the case. Mr Thompson is viewed as a safe pair of hands at the agency and also stood in as acting director after the previous director, Sir David Green, left in April and before Ms Osofsky took up the role. But while Mr Thompson is an experienced investigator, he is an accountant by background and not a lawyer. The SFO has shrugged off concerns that there is no senior lawyer acting as a “second pair of eyes” as the landmark case proceeds to trial. Mr Thompson is expected to make any decisions in conjunction with Hannah von Dadelszen, a senior lawyer who jointly heads its fraud team, while the case controller, Rakesh Somaia, has been in place throughout the probe. The agency declined to comment. After six years and interviews with at least 40 individuals, the case is finally heading to trial. As well as Mr Varley, in the dock at Southwark Crown Court will be Roger Jenkins, the rainmaker who negotiated the two 2008 capital raisings; Tom Kalaris, who was a trusted lieutenant in Barclays’ investment banking unit, and Richard Boath, the former European head of the investment bank’s financial institutions group. The case involves issues over what the bankers told the market when Barclays twice turned to Middle Eastern investors in 2008 as part of emergency cash calls worth £11.8bn at the height of the financial crisis. Qatari investors ploughed a total of £6.1bn into Barclays over the two capital raisings. The SFO alleges that the bankers induced the Qataris to invest through side deals worth more than £300m not fully disclosed to the market nor to other investors. Gold lures investors as gyrating markets take shine off stocks An eruption of volatility has seen the metal re-establish its haven status “A combination of rising open interest on Comex and the gold price going up tells me that new longs are coming into the market,” said John Reade, chief market strategist at the World Gold Council. For much of 2018 gold was out of favour, hit by the strength of the dollar and interest rate rises in the US, which dented the appeal of assets such as the precious metal that offer no yield. That saw gold trade as low as $1,174 in August in spite of rising geopolitical tensions and the fallout from US-China trade war. Sentiment towards gold began to improve towards the end of the year as US stock markets fell and volatility increased. That has continued into 2019 amid speculation a slowing US economy will ultimately force the Federal Reserve to stop raising interest rates. Analysts say gold can continue to shine as long as markets remain volatile — a fact underlined late last week after a better than expected US jobs report saw equity markets bounce. FINANCIAL TIMES John Varley, Barclays’ former chief executive, is one of four defendants facing charges over the bank’s emergency refinancing arrangements with Qatar in 2008 © Getty RBS admits misleading court to repossess customer’s home Case highlights concerns that banks are struggling to change scandal-hit culture Nicholas Megaw Lawyers representing Royal Bank of Scotland falsely denied the existence of a customer complaint in a court hearing to repossess a borrower’s home. The case will fuel concerns that banks continue to mistreat customers despite claiming to have transformed their culture after a series of scandals. Richard, a longtime RBS customer who did not wish to give his full name, initially fell into arrears on a NatWest-branded mortgage when the bank paid some property management fees levied by a third party that he thought were unfair. He complained about his treatment to the Financial Ombudsman Service in May. However the bank initiated court proceedings to repossess the property in June, and its lawyers said on August 15 that it had “no knowledge” of any FOS complaint, according to a witness statement prepared for the hearing. “Consequently, the claimant [RBS] asks that the court will refuse the defendant’s request to dismiss [or] adjourn the hearing”, added the lawyers. Airbus faces a test of its credibility this week when it reveals whether it met its target to deliver around 800 aircraft last year, as the plane maker races to narrow an orders gap with archrival Boeing. The European group’s factories worked overtime during the Christmas holidays to make up for delays because of supplier issues. Guillaume Faury, head of Airbus’s commercial arm, had made sorting out the company’s supply chain a key focus. Mr Faury, who takes the helm from chief executive Tom Enders in April, is understood to have launched a review looking at Airbus’s ways of working, industry executives with knowledge of the move confirmed. The group said in October that it would deliver about 20 fewer aircraft but still hoped to meet its target by including 18 A220 jets, the model acquired through its purchase of the Bombardier C series. Deliveries are watched by investors as a key indicator for cash flow. Airbus had delivered 673 aircraft to the end of November, leaving it 127 jets short of its target. Analysts at Vertical Research Partners are forecasting 797 deliveries for 2018. Industry sources pointed out that Airbus was in a similar position in 2017 but still managed to close that year with a record 718 deliveries. A spokesman declined to comment on the final tally, which will be announced on Friday, but said “the Airbus team worked flat out until the very last hours of December 31”. Boeing, which will unveil its numbers on Tuesday, had been targeting between 810 and 815 deliveries in 2018, up from 763 in 2017. It had delivered 704 planes by the end of November. In terms of the annual orders race, Boeing was far ahead of its European rival by the end of November with 690 net firm orders, fuelling speculation that it would break Airbus’s five-year winning streak. Airbus had reported 380 net firm orders in the same period but last week said it had firmed up two more deals for another 120 aircraft. In 2017, Airbus secured 1,109 net orders while Boeing netted 912. The court agreed and ordered Richard to hand back his property to NatWest. However, the FOS had told Nat- West about the complaint by at least early July, according to correspondence seen by the Financial Times. The bank’s claim to have no knowledge of the issue was also directly contradicted by the office of chief executive Ross McEwan one week after the court hearing. A representative from his office told the customer’s local MP that RBS could not discuss his case because of an “ongoing complaint” with the FOS. After being contacted by the FT, RBS acknowledged that there had been an error in its witness statement. “We are aware of [Richard’s] situation, and understand that the Financial Ombudsman Service have reopened their investigation. We will not take any further action against [Richard] at this time and await the outcome of their independent investigation,” said a spokesperson. The case comes as the taxpayerowned bank is battling to improve customers’ perceptions after largely completing its decade-long restructuring. RBS was ranked the country’s least popular bank brand in an official ranking published by competition regulators this year, while NatWest was tenth of 16. Executives have made customer satisfaction a priority after admitting the bank had been “distracted” with internal problems in recent years. It came under particular fire for the behaviour of its Global Restructuring Group, which was accused of “widespread and systematic” mistreatment of struggling small businesses after the financial crisis. RBS has pledged changes to ensure “past mistakes cannot be repeated”, but has nonetheless faced accusations of being overly aggressive towards individual customers. This month, for example, the BBC reported that RBS refused to compensate a customer who was defrauded of £20,000 after a violent mugging until it was contacted by reporters. In addition to the witness statement, Richard said RBS had repeatedly refused to engage with his efforts to arrange a way to repay his arrears, and pushed him into further debt by reneging on agreements to renew the fixed rate on the rest of his mortgage. Airbus under spotlight with race to hit delivery target European aircraft maker struggling to close orders gap with US rival Boeing Sylvia Pfeifer and Patti Waldmeir BUSINESS DAY 59 “Boeing will end up ahead in 2018 in terms of deliveries and orders, on the back of their wide-body strength, and that’s confirming a trend we saw in 2017,” forecasts Chris Higgins, aerospace analyst at Morningstar Securities. He estimates that Boeing secured around 200 wide-body orders in 2018, nearly four times as many as Airbus. “It’s a structural issue, it’s not a one-year issue, and that has potential implications for Airbus, they may have to refresh their wide-body line-up much sooner than they expected.” Richard Aboulafia, analyst at the Teal Group, said what mattered most was the “book-to-bill ratio”. Based on the end of November figures, Boeing could achieve a ratio of 1.0 — meaning new orders would match the number of aircraft deliveries. Mr Higgins forecasts that the current year could be challenging for both aircraft manufacturers. “Given the economic backdrop, which is to say cautiously pessimistic, there are going to be a lot of airlines sitting on their hands in terms of orders this year. I’d not be surprised if 2019 comes in flat or maybe even down a bit in terms of orders”.
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