Rules to control speculative share trades known as short-selling could be introduced in the UK, Prime Minister Gordon Brown has said.

“When groups of people are exploiting a difficult economic situation, it is right to stop short-selling,” he said.

The Financial Services Authority placed a four-month ban on the short-selling of UK financial shares last week.

Short-sellers “borrow” shares and sell them, hoping to profit by buying the shares back later at a lower price.

Investors who carry out such short-selling have been accused of aggressively targeting banks such as HBOS.

“We’ll be reviewing over the next four months, and I think you’ll find new rules for the future” Gordon Brown

Last week HBOS agreed to be taken over by its rival Lloyds TSB following a dramatic fall in its share price.

List extended

The FSA introduced its temporary ban on 19 September because it was concerned short-selling was exacerbating falls in some share prices.

Initially 32 banks and other key financial institutions were included on the list, and since then this has been extended to include other financial stocks.

Speaking on BBC Radio 4′s Today programme, Mr Brown said it was wrong that “good companies” could be brought down by “speculative activities” in the financial markets.

“We’ll be reviewing over the next four months and I think you’ll find new rules for the future.”

Battered banks

This week, the British hedge fund manager, Man Group, asked for its shares to be included in the FSA’s list.

Its share price fell steeply on Tuesday, partly as a result of the company being left off the list of shares subject to the short-selling ban, said traders.

The FSA has also ordered hedge funds and other institutions to reveal if they are significant short-sellers in the UK’s battered banking sector.

As a result, New York-based hedge fund manager John Paulson has been revealed as one of the biggest short-sellers.

His firm, Paulson & Co, has made bets against almost all of Britain’s biggest banks – Barclays, Royal Bank of Scotland, Lloyds TSB and HBOS.

The firm defended its actions, saying that while it empathised with financial firms that might be in difficulties, its main aim was to make a profit for its investors whether stock markets were rising or falling.

Mr Paulson is said to have made a personal fortune of more than £1.6bn ($3bn) by betting against the American mortgage market last year.

News reported by The BBC

A consortium of investors proposing to rescue airline Alitalia has withdrawn its takeover offer, raising fears the carrier may go into liquidation.

The Italian group, called CAI, dropped its bid after unions failed to back the deal before a 1400GMT deadline.

While four of Alitalia’s unions had supported the deal, five had objected because of plans to cut 3,000 jobs.

Italy’s flag-carrier has already warned that it is running out of funds to buy all the aviation fuel it needs.

Making its announcement, CAI said it expressed “profound disappointment”.

“Further concessions would inevitably have put the realisation of the plan at risk,” it said.

Cancelled flights

Italian Labour Minister Maurizio Sacconi said before the deadline that the future of Alitalia was “hanging by a thread”.

“The company is dead and some of my colleagues want to be its undertakers” Head of the UIL union, Luigi Angeletti

While Italy’s four main union organisations – CGIL, CISL, UIL and UGL – had signed up to the agreement with the CAI, five other unions had rejected the deal as “useless and provocative”.

Those opposed to the package – SDL, ANPAC, UP, ANPAV and Avia – include pilots and cabin crews.

Their protests forced Alitalia, which is losing 2.1m euros ($3m; £1.7m) daily, to cancel 40 flights on Wednesday.

The head of the UIL union, Luigi Angeletti, attacked those unions that rejected the CAI offer.

“The company is dead and some of my colleagues want to be its undertakers,” he said.

Government role

Under the CAI rescue proposal, the Italian consortium had put forward a 1bn-euro offer for the airline.

It wanted Alitalia to merge with Air One, the country’s second-largest airline, while its 1.2bn-euro debt would be absorbed by a second firm, which would then be liquidated.

Prime Minister Silvio Berlusconi has pledged to do all he can to save Alitalia, in which the Italian government holds a 49.9% stake.

In April, plans for the airline to be taken over by France-KLM collapsed when unions refused the accept the terms of the deal.

Alitalia suspended trading in its shares in June and filed for bankruptcy protection last month.

News reported by The BBC

It is becoming an all-too familiar tale.

An airline says that it is in financial trouble. Before long its planes are grounded.

Passengers are stranded and scramble for seats on other flights. Efforts to revive the business fail. Air crew lose their jobs.

UK-Canadian carrier Zoom is just the latest to find itself facing this prospect as it suspends its flights.

Its co-founder admits that he “does not hold much hope” of finding the investors needed to rescue the airline.

And if it does go to the wall, its name can be added to those of Silverjet, Oasis, Eos and Maxjet – carriers which have gone under in the past year.

Dangerous times

Some said that Zoom’s apparent demise was inevitable and indicative of the times.

And the aviation industry is full of speculation that other carriers are in trouble.

Experts are unwilling to name names, doubtless because this could undermine confidence in carriers.

Silverjet was another carrier hit by high fuel bills

But there are rumours of some airlines being told they have to pay in cash, upfront, for things such as air traffic control fees and fuel – such is the lack of faith held in the soundness of the carriers.

And this is a dangerous time of year for the more vulnerable airlines.

As businesses they rely on having a strong cash flow.

In recent months they have been collecting ticket money from people booking their summer holidays.

But as that peak period comes to an end, it is a less busy time with fewer passengers looking to travel – a position exacerbated by the wider economic slowdown with many putting off non-essential travel.

Meanwhile, the carriers still have their overheads: staff to pay, planes to lease, airport costs to cover.

And then there is the biggie: the fuel bill.

Oil prices may have come down a little from their highs of close to $150 a barrel in July, but they are still about twice what they were a year ago.

There is widespread agreement that the big, low-cost airlines in the UK – the likes of Ryanair, Easyjet and BMI – are well-financed and in no danger

And essentially, this translates to a doubling in the price of jet fuel.

So when new airlines have taken off on the back of a business models that price fuel at half the cost you are actually facing, , well, you can see the problem.

Zoom, a relatively small carrier, says its fuel bills have increased by $50m (£27.3m) in the past year.

When you are flogging a single ticket from London to Canada at £99, covering those sort of cost increases is going to be nigh on impossible.

Likewise, Oasis said that a 60% rise in its fuel bill was the reason for its ultimate demise.

Its super-cheap tickets (London Gatwick to Hong Kong for as little as 1,000 Hong Kong dollars ($128; £65) each way) meant that it spluttered badly when costs surged.

Managing overheads

With oil still at about $120 a barrel – and not tipped to fall dramatically anytime soon – what, or who, will be next?

There is widespread agreement that the big, low-cost airlines in the UK – the likes of Ryanair, Easyjet and BMI – are well-financed and in no danger.

Many analysts believe other carriers will follow Zoom’s demise

These carriers – and the likes of British Airways and Virgin Atlantic – have been tinkering with their routes, though.

This has included cutting back on flights over autumn and winter as they try to ensure that their overheads are controlled and their planes are as full as they can manage.

One analyst, Chris Yates, says that newer long-haul budget carriers are most vulnerable because their margins are so small – especially with the economies of many countries beginning to unravel.

Oasis, Silverjet and Zoom all fell into that category.

Other low-cost airlines elsewhere in the world could go to the wall too, he says.

And it seems inevitable that there will be more consolidation between carriers – allowing them to spread some of the overheads.

British Airways and American Airlines are hoping to get permission for a tie-up. BA also hopes to link up with Iberia.

Arguably the latest development with Zoom adds weight to their argument that such deals need to happen if airlines are to continue to operate on some routes.

News reported by The BBC

Russia has seen foreign reserves decline, a sign that the market is more nervous about investing in the region since the recent conflict in Georgia.

Central Bank figures show reserves were sharply down in the week ending 15 August, marking a fall of $16.4bn (£8.8bn) from $597.5bn a week earlier.

Tensions with the west have also been strained by Russia’s objection to the US placing a missile defence in Poland.

Georgia has urged the west to invest in the region as it seeks to rebuild.

According to the Financial Times, the latest drop in capital reserves is the largest “since comparable figures began” in 1998, though similar funds were taken out during the currency crisis.

Reconstruction

Finance ministers from the group of seven richest nations have said they are “ready to support” Georgia’s economic reconstruction in the wake of conflict with Russia.

The US Treasury issued a statement on the G7 countries’ behalf saying they would be ready to help Georgia “to maintain confidence in Georgia’s financial system and support economic reconstruction.”

He also called on Georgian authorities, the World Bank, European Bank for Reconstruction and Development, Asian Development Bank, European Investment Bank, and European Commission to “identify and support reconstruction needs and the restoration of services that will build a base for future economic growth”.

Officials from the World Bank are visiting Georgia on Friday to assess the extent of damage to its economy and how the process of reconstruction can begin.

The development body has pledged to help Georgia access funding to rebuild crucial infrastructure, such as roads and railway lines.

It has also promised to assist people displaced by the fighting in South Ossetia and in Georgia itself.

The US and Poland signed a deal earlier this week to locate part of the US missile defence system on Polish soil, but Russia has warned the base could become a target for a nuclear strike.

Such geopolitical concerns have been a factor pushing up oil prices, amid fears that supplies might be hampered.

“Investors are realising that the bear has put its paw on the pipeline, and geopolitical risk is likely to remain a theme for the next month or so,” said Justin Urquhart Stewart, investment director at Seven Investment Management.

News reported by The BBC

African regional banking group Ecobank has announced the continent’s largest ever rights issue – to raise $2.5bn (£1.35bn) to funds for its expansion.

Shares will also be offered to new investors on stock exchanges in Ghana, Nigeria, and the West African regional market based in Ivory Coast.

The bank said it was the first African rights issue to be run in more than one stock market simultaneously.

Ecobank operates in 23 countries, after expanding from its base in West Africa.

The capital raised would “further strengthen Ecobank Group’s accelerated growth plan to expand its network of branches in countries where it currently operates as well as expand to other countries, thereby consolidating its position as the leading pan-African banking group,” the firm said.

Existing shareholders will be offered additional shares at 27 cents each, while new investors must pay 29 cents per share.

News reported by The BBC

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Investors have been warned to beware of fraudsters targeting former customers of a stockbroking firm that was shut by the Financial Services Authority.

The FSA said at least 10 bogus “recovery” firms were cold-calling former clients of Pacific Continental Securities, which was closed last year.

The firms have been trying to trick people into paying a fee in exchange for offering to buy their shares.

The FSA said the firms were not authorised or permitted to do business.

“These firms offer to buy the shares at an attractive price but demand an advance fee,” the FSA explained.

“This is a scam – as soon as the fee is paid, the firm disappears with the money and without purchasing the shares,” it warned.

As well as offering to buy shares directly, the bogus firms also make equally fraudulent offers to put people in contact with other potential buyers.

The regulator said it was investigating the numerous complaints it had received and advised anyone approached in this manner to contact it.

Pacific Continental securities went bust in June 2007 after the FSA withdrew its permission to trade and told it to settle its remaining business.

In March last year the firm was identified by the BBC’s Money Programme as acting like a “boiler room”, a fake stockbroking outfit which uses hard-sell techniques to deceive people into buying worthless shares.

Boiler rooms usually operate from foreign countries outside the direct control of the UK authorities.

News reported by The BBC

Morgan Stanley and JP Morgan Chase have agreed to buy back more than $7bn of securities and pay fines to settle allegations that they misled investors.

The deals were with the New York Attorney General and other regulators.

The Wall Street banks were accused of marketing debt products, called auction-rate securities, as much safer than they were.

Other financial firms are also being investigated for misstating the risk of these investments.

Under the deal with New York Attorney General Andrew Cuomo, Morgan Stanley will buy back about $4.5bn worth of auction-rate securities at face value by 11 December.

JP Morgan Chase has agreed to redeem about $3bn of auction-rate debt it sold to customers, which include retail customers, charities and small-to-medium sized businesses by 12 November.

Its settlement also covers debt sold by Bear Stearns, which it bought earlier this year.

Neither bank admitted or denied wrongdoing.

‘Latest victories’

US authorities are investigating how auction-rate securities were marketed throughout the industry before the $330bn market collapsed in February as trouble in the credit markets due to the US sub-prime crisis spooked investors.

Last week, the New York Attorney and the Securities and Exchange Commission (SEC) reached settlements with Citigroup and Swiss banking giant UBS that required the pair to repurchase in total $26bn of the securities.

“Today’s multi-billion dollar agreements are the latest victories for investors seeking relief from the collapse of the auction rate securities market, which has left a stranglehold on billions of dollars,” said Mr Cuomo.

“The fundamental goal has been to return money into the hands of investors, and that’s what these deals do.”

Repercussions

JP Morgan Chase and Morgan Stanley will also reimburse customers who have sold their auction-rate debt at a loss.

JP Morgan Chase will pay a $25m penalty to New York State and the investor protection group the North American Securities Administrators Association, while Morgan Stanley will pay a fine of $35m.

Separately, New Hampshire securities regulators have sued UBS for misleading the state’s student-loan agency about auction-rate debt and so resulting in less money available to offer students loans.

Student-loan agencies and municipalities were frequent users of auction-rate securities because they were seen as highly liquid investments, almost equivalent to cash but offering a higher return because their rates were reset at weekly or monthly auctions.

News reported by The BBC

PHILADELPHIA/NEW YORK (Reuters) – With Wall Street still hesitant to make big bets on merger financing, corporate buyers are looking to wealthy investors such as Warren Buffett and international funds to bankroll their shopping sprees.

Dow Chemical Co (DOW.N: Quote, Profile, Research), which is buying rival Rohm and Haas Co (ROH.N: Quote, Profile, Research) for $15.3 billion (7.8 billion pounds), followed the lead of candy maker Mars Inc in tapping outside investors for funding.

The deal, the third-largest of 2008, includes an equity investment by billionaire Warren Buffett’s Berkshire Hathaway (BRKa.N: Quote, Profile, Research) and the Kuwait Investment Authority in the form of convertible preferred securities for $3 billion and $1 billion, respectively.

Dow has also secured $13 billion of debt financing from Citigroup (C.N: Quote, Profile, Research), Merrill Lynch (MER.N: Quote, Profile, Research) and Morgan Stanley (MS.N: Quote, Profile, Research). Dow aims to pay some of this debt immediately after receiving the proceeds from its planned joint venture with Kuwait Petroleum Corp.

The presence of outside help from Buffett echoed the agreement by M&M’s maker Mars in April to buy the No. 1 chewing gum manufacturer, Wm Wrigley Jr Co (WWY.N: Quote, Profile, Research), for $23 billion.

“I think that in a tough credit market you really have to be creative in finding sources to get your transactions done,” said Bob Filek, a partner with PwC Transaction Services.

“It shows some of the creativity in financing. People looking at minority investors, at specialized institutions, at groups overseas, are more likely to be able to get deals closed,” he said.

The motivation to get creative with financing comes after a year of tight credit markets, several collapsed mergers, and massive writedowns by banks. Private equity firms have abandoned the $10 billion-plus transactions seen during the buyout boom, and blue chip corporations have brought in outside investors to spread the risk, even on smaller deals.

News reported by Reuters

Inflation worries, near-record oil prices and fears of further bank losses have led to a sell-off of shares across global stock markets.

Key share indexes in India and China both fell 3% while Japan’s main index fell for its ninth consecutive day for the first time in four years.

In Europe, the FTSE 100 fell 2.6% while the Cac40 fell 2.1% and the Dax 1.6%.

But in New York the Dow Jones Industrial Average bucked the trend, ending the day up 0.28%.

Bank rumours

Swiss bank UBS, which has been one of the biggest victims of the widespread financial crisis caused by the US housing slump, reshuffled its management on Tuesday.

This sparked speculation that the firm, which has announced plans to cut more than 5,000 jobs, could be set to announce further losses from failed mortgage-backed investments.

It has already incurred losses of more than $37bn.

“We haven’t hit the bottom yet… investors are still pessimistic at this point” Zhang Xiuqi, Guotai Junan Securities

“There is more concern coming back in on the banking sector again,” said Andrea Williams, head of European equities at Royal London Asset Management.

“There are a lot of rumours about writedowns.”

Earlier, Asian stock markets were hit by concerns that rising inflation, stoked by higher prices for oil and raw materials, would eat into company profits and slow economic growth.

In India, where inflation is at a 13-year high, the main Sensex index in Bombay slid 3.7% to 12,961.68. Shanghai’s main index. meanwhile, fell 3.1% to 2,651.6, a 16-month low.

“We haven’t hit the bottom yet,” warned Zhang Xiuqi, from Guotai Junan Securities.

“That is because investors are still pessimistic at this point.”

Losses in Japan were limited despite the closely-watched Tankan survey of corporate prospects showing that business confidence had fallen to a five-year low.

News reported by BBC