Financial Times Review 2012/12/22

2012 review: It could have been worse

The Scream

According to Mayan prediction, the world should have ended yesterday, so if you are reading this, things have turned out better than expected – and that’s largely the story of investment markets during 2012, too.

The year began with three key risks: that the eurozone would be subject to further severe distress, including the possible ejection of weaker members; that China would suffer an economic “hard landing”, derailing commodity prices and depressing world trade; or that post-election gridlock would push the US over a “fiscal cliff” of tax rises and spending cut.

2012 review: Property is unmoved

Estate Agent

Getting the housing market moving again has been a key focus for the UK government this year as it launched an array of stimulus measures – but most have failed to have any significant impact on prices or transaction levels.

Last autumn, David Cameron unveiled astrategy designed to “unblock” the housing market by providing mortgages for new-build homes to help up to 100,000 people on to the property ladder.

2012 review: Pensions pain and promise

Bank of England
For pension savers, 2012 was a year of both pain and promise. The year began much as 2011 had ended, with hundreds of thousands of men and women facing difficult decisions about how and when to take their pensions.

As the country stumbled in and out of recession, many were forced to delay retiring because they could not afford to stop work.

Iraq boosts gold reserves by 25 tonnes

Iraq has joined the growing list of countries buying gold for their official reserves, purchasing more than 25 tonnes of the precious metal in the market to beef up the gold reserves of its central bank for the first time in years.

The purchases by Baghdad come as Iran is using gold as a currency to settle import-export transactions with neighbouring countries, including Turkey. But Iraq has so far not disclosed any gold transaction with Tehran.

What will happens if cliff talks fail?

If Congress reaches no budget agreement by the end of the year the US economy will suffer the impact of $600bn in automatic spending cuts and tax increases next year. Bush-era income tax rates will reset to higher levels for all households and a cut to the payroll taxes applied to all US workers will lapse. Many government programmes and agencies, including the Pentagon, will suffer a near 10 per cent reduction in their budgets. The impact would set in gradually but the result, according to the Congressional Budget Office, would be a 0.5 per cent contraction in the US economy next year, or a new recession. The unemployment rate, currently at 7.7 per cent, could rise above 9 per cent again. However, a dive over the cliff could be swiftly reversed if Congress subsequently reached a deal.

UK politicians oppose trader’s extradition

A trader charged in connection with the UBS Libor investigation has found himself at the centre of an increasingly fractious transatlantic row between prosecutors, after British politicians of all parties demanded he not be extradited to the US, write Caroline Binham and Jim Pickard in London.

Tom Hayes, a former UBS employee, was charged on Wednesday by the US Department of Justice as part of its probe into Libor manipulation – the same day that the bank agreed to pay $1.5bn to US, UK and Swiss authorities.

Plan B failure exposes Republican divide

When John Boehner called his Republican colleagues to an urgent night-time meeting on Capitol Hill, many expected a last-minute plea from the speaker of the House of Representatives to back his budget proposal.

Instead, Mr Boehner recited the Serenity Prayer – “God grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference” – and abruptly closed the meeting, announcing his budget plan was being withdrawn.

ACS gains on eurozone outlook

Clutch of brokers downgrade KPN following bandwidth overspend, leaving shares 19% lower on week against 0.3% gain for FTSE Eurofirst 300 index.

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