Spain moves closer to constitutional budget deficit cap

The government's work to reduce the budget deficit has sparked public protests

Spanish politicians have overwhelmingly backed holding a vote on introducing a constitutional cap on budget deficits.

The move all but guarantees that the change will be adopted.

Members of the lower house of Spain's parliament voted 319 in favour and only 17 against holding the debate and vote later this week. The reform would then go to the upper house next week.

To change Spain's constitution requires three-fifths support in both houses.

The proposed reform calls for the broad principles of a balanced long-term budget to be enshrined in Spain's constitution.

It adds that the deficit limit could only be breached in times of natural disaster, recession, or extraordinary emergencies - and then only with approval of the lower house.

Public protests "We have to take a coherent and forceful decision to strengthen our country's solvency," said Jose Antonio Alonso, spokesman for the ruling Socialist Party.

"There is no better way to dispel uncertainties than to elevate the principle of budget stability to the level of constitutional mandate so as to consolidate in the world a clear reality - we are a reliable country in the payment of our debts and there should be no doubt about it."

In 2010 Spain had a budget deficit equivalent to 9.2% of its annual economic output or GDP.

It is now continuing with cost-cutting measures to reduce this to 6% this year, and aims to reach the European Union target of 3% by 2013.

The government's work to lower the budget has come in the face of widespread public protests.

It the reform is based by both houses of the Spanish parliament it would only be the second time that Spain's constitution has been amended since it was first drawn up in 1978.

Germany already has a legal limit on its budget deficit level, and France is exploring the idea.

At the beginning of August, US politicians agreed to increase the country's prescribed debt level in an 11th hour deal.

The International Monetary Fund (IMF) warned last month that the Spanish economy still faced "considerable" risks.

It said the Spanish government had to continue work to reduce public spending and increase efforts to liberalise its jobs market.
Spain currently has an unemployment rate of 21% - the highest in Europe.

There have been concerns that Spain may have to follow Greece, the Republic of Ireland and Portugal in needing a bailout fund from the European Union and IMF.

Greece's Alpha Bank and Eurobank EFG are to merge

Alpha Bank rejected a merger offer from National Bank in February

Greece's second and third biggest banks, Eurobank EFG and Alpha Bank, have announced that they are to merge.

In a statement, the banks said that their merger would, "play a vital role in the economic recovery of Greece".

The Greek government has encouraged banks to pool resources to help them cope with the country's debt crisis.

Qatar Investment Authority (QIA), which is already an Alpha shareholder, is expected to take a bigger stake in the new bank.
Shares in Greek banks have fallen by more than 50% this year, but they rallied in early trading on Monday. 

QIA holds 5% of Alpha and is expected to take 15% of the merged entity.

The new bank will be the biggest bank in southeastern Europe, with assets of 146bn euros ($212bn; £129bn) and 1,300 branches.
Eurobank shareholders will receive five new Alpha Bank shares for every seven Eurobank shares they own. 

The banks estimate that the merger will create about 650m euros of synergy saving per year.

Eurobank has recently sold its Polish subsidiary and promised to raise its capital further after failing EU-wide bank stress tests.

As major debtors of the Greek government, Greek banks have fared particularly badly in the sovereign debt crisis, surviving only with the assistance of the European Central Bank.

The second bailout for Greece will involve its banks having to accept lower interest payments on their holdings of Greek government bonds, albeit over a longer period.

Alpha Bank rejected a merger offer from the country's biggest lender, National Bank, in February.

The planned merger between Eurobank and Alpha Bank comes as rare good news for the Greek government, which has been calling on the country's banks to pool their resources.

The government goes into key talks with the European Union and the International Monetary Fund this week about the second bailout, having just increased its forecast for the contraction of its economy this year from 3.5% to 4.5%.

JP Morgan pays $88.5m to settle sanction violations

 

JP Morgan said it had not intended to violate any US sanctions

JP Morgan Chase has agreed with the US Treasury Department to pay $88.3m (£54.2m) to avoid liability for "apparent violations" of sanctions against Cuba, Sudan, Liberia and Iran.

The Treasury said such violations, which took place between March 2005 and March 2011, were "egregious".

These included processing 1,711 transfers totalling $178.5m to Cubans in contravention of US regulations.

JP Morgan said there had been no intention to violate regulations.
"The firm screens hundreds of millions of transaction and customer records per day, and annual error rates are a tiny fraction of 1%," said Jennifer Zuccarelli, a spokeswoman for the bank.

"We are pleased to have resolved these matters and to move forward with enhancements to our [foreign assets] compliance programme."

JP Morgan reported net profits of $5.4bn for the three months to 30 June, up from $4.8bn a year earlier.

Oil companies ready to jockey for position in new Libya

Scramble begins for Libya's oil

International oil companies are jockeying for advantage in the new Libya, buoyed by news that damage to the energy infrastructure appears to be slight. But they remain anxious about a lack of security and are holding off sending workers back into the country.

National Transitional Council officials report little damage to oil export terminals in eastern Libya (at Ras Lanuf and El Brega) and have appealed to employees to return to work. The two terminals handle the bulk of oil exports pumped from the Sirte basin. But the rebels have also begun to use, with help from Qatar, a terminal at Tobruk.

The NTC official in charge of oil and the economy, Ali Tarhouni, told Reuters news agency Thursday that he expects production can reach 500,000 to 600,000 barrels per day within a few weeks, and return to the prewar level of 1.6 million within a year.

Some industry analysts believe that is optimistic. Sources at Italian oil company Eni (the largest producer in Libya) forecast production at 750,000 barrels by sometime early next year. Energy consultants Wood Mackenzie estimate it will take three years for production to recover to the prewar level. But that would depend on the prompt return of foreign workers.

In a recent report, Wood Mackenzie estimated "six months will be required for NOC (Libya's state-owned oil firm) staff, international companies and foreign workers to return and re-establish supply lines and assess and repair damaged infrastructure."

Libya has always relied on foreign expertise to exploit its oil, but expatriate workers may be reluctant to return before the violence -- and the threat of abduction -- abates. The waters off Tripoli, where heavy gunbattles continued Thursday, contain important fields like the Bahr Essalam. But in the east, too, there are still pockets of fighters loyal to deposed leader Moammar Gadhafi and there are ongoing clashes.

Spanish oil company Repsol said last month that its assets in Libya were intact, but said staff would only return to the country when fighting ceased and it would take at least four weeks to resume production. Marathon Oil, based in Houston, said it has had preliminary talks with the National Transitional Council about restoring production when the situation stabilizes.

The worst scenario for the NTC -- and the oil companies -- is a prolonged campaign of sabotage by opponents of Libya's new rulers.

Wood McKenzie noted that Gadhafi supporters sabotaged the pumping station that moved oil from the Sarir and Messia fields early in the conflict and said: "Libya's oil fields are located in the vast, remote Saharan desert, making them impossible to defend from attack." Other analysts point out that only now, after a prolonged insurgency, is Iraq's oil output recovering to pre-invasion levels.

Rehabilitating the oil industry is one of the NTC's priorities because oil has provided 95% of the state's export revenue. While Libya's new rulers will benefit from the release of the old regime's assets and international aid, they need a predictable revenue stream.

A short journey across the Mediterranean, Libya is the ideal source for southern Europe, with its plentiful reserves of "light sweet" crude, a high-quality oil. Some European refiners are not equipped to process "sour" crude, industry experts said, and that has intensified competition for other sources (mainly Nigerian) of high-quality oil in the absence of Libyan exports.

However unpredictable the current situation, European oil companies are gearing up for battle. The major players from there before the uprising began were Italy's Eni, Total of France and Repsol. British giant BP is also trying to get a larger slice of Libyan exploration projects. It concluded a $900 million deal with the Gadhafi regime three years ago to explore for gas. Other players include OMV of Austria and Marathon. China, through its state-owned CNPC, had begun exploring off the Libyan coast to help feed its insatiable appetite for Africa's mineral wealth but recently terminated several contracts because of the unrest.

Eni has been lobbying hard to retain its dominant role, concerned that Total may get preferential treatment from the new government because of France's leading role in the military campaign to oust Gadhafi. Company officials said Eni has been in regular contact with the rebels since April and CEO Paolo Scaroni predicted a "positive future for Eni in Libya."

Scaroni is to visit Libya next week to sign an agreement to supply gas for vehicles and natural gas to make electricity.

Italy has moved quickly to unblock Libyan assets worth more than $500 million. But there may be concern in Rome that senior NTC member Mahmoud Jibril headed for Paris before Rome.

Some NTC officials have suggested that those states most heavily involved in the conflict against the Gadhafi regime -- which include Britain, France and Qatar -- will have an advantage when it comes to reconstruction projects. Other states -- like Russia, Brazil and China -- that opposed action against the Gadhafi regime may find it an uphill battle with Libya's new rulers.

Tarhouni told Reuters on Thursday that all current contracts would be honored. He said it was far too early to contemplate new contracts. "It's the last thing on my mind," he told Reuters.

NTC officials have also pledged to reform the notoriously corrupt National Oil Company, often used as a piggy bank by the Gadhafi family.

Apple's Jobs steps down, says can no longer serve

Cook takes over immediately; Jobs, 56, to stay on as chairman 

Steve Jobs is shown in this combination of file photos dating

(top row left to right) 2000, 2003, 2005, (bottom row left to right)

2006, 2008 and 2009.

Silicon Valley legend Steve Jobs, who has been on medical leave for an undisclosed condition since Jan. 17, resigned as chief executive of Apple Wednesday, saying he could "no longer meet" the duties and expectations of the job.



Interim CEO Tim Cook was immediately elevated to CEO, while Jobs, 56, will stay on as chairman of the board.

"I have always said if there ever came a day when I could no longer meet my duties and expectations as Apple's CEO, I would be the first to let you know," Jobs said in a letter to "the Apple community" that was released by the company. "Unfortunately, that day has come."

While the move was stunning, it was not entirely unexpected.

Jobs had been seen only rarely this year, including at a San Francisco event in March where he unveiled Apple's iPad 2, the hugely successful follow-on to its hugely successful tablet computer.

"His health clearly wasn’t improving and there was going to come a time when he was going to have to step aside,” said Rob Enderle, longtime technology analyst with Enderle Group.

Still, Enderle said it will be a blow for the company. The company's stock fell about 5 percent in after-hours trading after the news was announced, shortly after 3:40 p.m. PT (6:40 p.m. ET).

“Apple was designed around Steve Jobs, so there was really never going to be a great time for this,” Enderle said.

The move triggered an outpouring of comments across the Internet from the company's legendary base of intensely loyal customers, many of them expressing concerns for the executive's health.

Story: Cook has the skills to lead Apple, observers say

"I'm sad. He's the greatest entrepreneur ever," said Fred Wilson, a venture capitalist and principal of Union Square Ventures.

Jobs has suffered from health problems for at least seven years. In 2004 he took a leave of absence to get treatment for pancreatic cancer.

In January 2009 he took another leave, and it was later revealed that he received a liver transplant.

Cook, who has been at the company for 13 years, is widely respected as a strong No. 2 leader but hardly the visionary that Jobs is.

“He’s not that kind of a person and invariably that’s going to be a weakness,” Enderle said.

Jobs' story is virtually unparalleled in the annals of American business.

Pushed out of the company he co-founded in the mid-1980s, Jobs went on to found Pixar Animation Studios, the force behind some of Hollywood's most successful animated films. That company alone made Jobs a billionaire and was eventually acquired by the Walt Disney Co.

Jobs returned to Apple as CEO in the mid-1990s and presided over a string of hit products, refashioning the company as a maker of consumer products and integrated services including the iPhone and iPad as well as laptops and desktop computers.

The company's high-flying stock has more than tripled in value since 2009 and now Apple rivals Exxon Mobil as the most valuable American company with a market capitalization of nearly $350 billion. Jobs himself has a net worth of about $8.3 billion, ranking him No. 34 among the richest Americans, according to Forbes.

Jobs' resigning after storied career

Although Jobs has been silent about his the details of his condition, his sudden departure, combined with his medical history, suggests that his condition has worsened to the point where he is “not in functional capability,” suggested Dr. Timothy Donahue, a doctor with the UCLA Center for Pancreatic Disease.

“It could potentially mean pain, lethargy, tiredness,” Donahue said, all of which would preclude running a global enterprise and even raise worries about Jobs’ survival.

Despite treatment for a neuroendocrine pancreatic tumor, first diagnosed in 2004, and a liver transplant, the cancer likely has re-emerged, Donahue said. In other patients who have liver transplants after neuroendocrine pancreatic tumors, the median survival rate is typically about two years.

“He’s pretty much reached the median survival,” Donahue said.

Industry analysts expressed confidence in Cook's leadership.

"The real takeaway is not to underestimate the bench," said Kevin Dede, analyst at Brigantine Adviseors. " "He's got an amazing cast supporting the operation of the company."

Still, analysts acknowledged that Jobs' departure adds a new element of risk and uncertainty to the company.

"It really does create uncertainty even though the execution may not falter given the company's deep product pipeline," said Ashok Kumar, an analyst with Rodman & Renshaw LLC. "But the headline risk is still there."

He expressed surprise that Jobs would leave so soon before the anticipated release of the iPhone 5.

"The fact that he is stepping down ahead of a much anticipated product release is not a good sign," he said.

Dr. Simon K. Lo, an expert in pancreatic disease at Cedars-Sinai Medical Center in Los Angeles, also speculated that Jobs’ cancer had returned, despite treatment in 2004 and 2009, prompting his decision to resign. He said such a move is typically wrenching for driven, dedicated professionals.

“Most of the high-powered patients are fighters and psychologically they want to work, so they fight to the last minute,” Lo said.

Enderle said he’s already heard of some Apple employees who left once it became apparent Jobs was not going to be able to return. He expects that will become a more significant issue for the company in about two years, when the current cycle of products starts to wind down.

Full text of statement Here is the full text of Jobs' letter, as released by Apple:

To the Apple Board of Directors and the Apple Community:

I have always said if there ever came a day when I could no longer meet my duties and expectations as Apple's CEO, I would be the first to let you know. Unfortunately, that day has come.

I hereby resign as CEO of Apple. I would like to serve, if the Board sees fit, as Chairman of the Board, director and Apple employee.

As far as my successor goes, I strongly recommend that we execute our succession plan and name Tim Cook as CEO of Apple.

I believe Apple's brightest and most innovative days are ahead of it. And I look forward to watching and contributing to its success in a new role.

I have made some of the best friends of my life at Apple, and I thank you all for the many years of being able to work alongside you.

Royal Alliance Mergers & Acquisitions

 

Gordon Macalister

Vice President – Global Equity Analyst

August 23, 2011

Mergers & Acquisitions

India’s Aventis Pharma, a unit of French drug maker Sanofi, is close to buying the over-the-counter business of Universal Medicare for about $109.5 million. A deal which covers about 30 brands sold by unlisted India-based Universal Medicare is expected to be signed in a day or two and would boost the French company’s over-the-counter business in India.

Kinetic Concepts Inc. a maker of medical devices used in wound care, may not favour a higher offer by Avista Capital Partner LLC’s ConvaTec Inc., as the proposal lacks committed financing.

Sberbank, Russia’s largest bank is looking at potential takeover targets in central and eastern Europe, including some in Poland considering Kredyt Bank a subsidiary of Belgium’s KBC Group and Millennium Which is mainly owned by Potugal’s largest private lender, Banco Commercial Portugues.

Indian low-fare airline SpiceJet has stated the compnay is not in discussions with private equity firm TPG Capital for a minority stake sale.

Lockheed Martin will acquire health care company IT company QTC Holdings Inc. Lockheed has stated that QTC provides outsourced medical evaluation services to the U.S. government and Department of Veteran Affairs. Lockheed expects to complete the acquisition before the end of 2011.

Manufacturing conglomerate Honeywell International Inc. has successfully completed the tender offer for EMS Technologies at $33 a share.

Genesis Group Holdings Inc., which operates through its wholly owned subsidiaries, including Digital Comm,  Inc. has announced that it has reached an agreement to acquire Tropical Communications Inc. a Miami Fla. based company.

TransAct Technologies Incorporated a global leader in market specific printers for transactions based industries has completed its previously announced acquisitions of substantially all of the assets of Printrex Inc., a leading manufacturer of high performance specialty printers primarily sold into the oil and gas exploration market.

Printrex has become a worldwide leader in printers for the oil and gas exploration and drilling industry. Printrex also manufacturers and markets printers for other demanding applications that include the medical industry and rugged mobile truck mounted printers.

Micro Focus has ended talks for a takeover of the company offer bids for the UK IT business fell short of expectations. The company will resume a share buy-back programme.

Electrolux will commence a cash tender offer to acquire 100% of the outstanding shares in CTI a Chilean appliance maker at a price of 34.87 Chilean Pesos per share with Sigdo Koppers and certain associated parties committed to tender their 64% stake.

Health insurer Wellpoint Inc. has completed its previously announced acquisition of Medicare Advantage plan provider CareMore Health Group.

South Korean trading firm Samsung C&T is considering taking over independent U.S. oil firm Parallel Petroleum which might be worth as much as $1 billion.

Canada’s Endeavour Mining Corp., has agreed to buy Australia’s Adamus Resources in a deal valued at about C $313.4 million, to create a West Africa focused gold producer.



Royal Alliance Capital Currency Review

Sterling rallies 12% against the franc

 

The pound has rallied more than 12% against the Swiss franc since falling to a historic low of less than CHF1.15 on 9 August 2011.

However, the franc remains the best performing major currency over the past year.

Perceived as a safe-haven, the franc’s rise has largely reflected market concerns the euro zone debt crisis is intensifying and the global economic recovery is running out of steam. However, the Swiss National Bank (SNB) has been keen to curb the franc’s rise, which it fears will act as a headwind to domestic growth and erode exports.

The SNB again repeated its view the franc remains overvalued, whilst increasing the supply of francs in money markets in order to weaken the currency. Speculation the SNB might adopt more aggressive tactics, such as temporarily fixing the franc’s value to the euro, also helped pare the franc’s gains.

The pound enjoyed another positive week against the US dollar, hitting a three-month high above US$1.66. However, economic data remained mixed. The UK's unemployment rate rose and the number of people claiming jobless benefits posted its largest rise in more than 18-months in July, as the labour market increasingly reflects the struggling economy.

The Bank of England minutes revealed a 9-0 vote for unchanged interest rates at the August meeting. Policy members Weale and Dale dropped their preference for higher interest rates, as the meeting noted the first unanimous interest rate vote since May 2010. Sterling gained some support as the majority of members (in an 8-1 vote) did not consider it appropriate to expand quantitative easing in the short-term.

The US dollar suffered at the hands of further global market uncertainty. There was little confidence in the US economy during the week as US jobless claims data were higher-than-expected. The Philadelphia Federal manufacturing survey showed heavy declines in its latest release. The US dollar came under further pressure as existing home sales also declined during July.

The euro endured another mediocre week; slipping just under a cent against the pound, but adding over two and a half cents versus the US dollar. Tensions remained high as discussion between German Chancellor Angela Merkel and French President Nicolas Sarkozy about ways to solve the euro zone debt crisis appeared to achieve little agreement.

Euro zone economic data also disappointed as Germany’s economy slowed sharply between April and June. Core euro zone inflation was also a weaker-than-expected, falling to 1.2% in July. Diminishing inflation and weaker growth will maintain pressure on the European Central Bank (ECB) to reverse recent interest rate rises. 

The Australian dollar fell after the Reserve Bank of Australia’s policy meeting minutes suggested diminishing confidence in the global and domestic economic outlooks. The Canadian dollar was hindered due to poor manufacturing shipments data, along with a drop in foreign investments in Canadian securities.



Gold tops $1,900, looking 'a bit bubbly'

NEW YORK  -- Gold prices have been on a tear lately, topping a fresh record high above $1,900 an ounce late Monday-- just two weeks after rising above $1,800.

While experts aren't too worried about each new milestones, they are starting to freak out about the rapid speed at which prices are hitting them. Gold started the year just above $1,400 an ounce.

Gold prices rose 2.4% during the regular trading session to settle at $1,891.90 an ounce. In after hours electronic trading, prices topped $1,900 an ounce for the first time.

"Gold could keep working its way higher, but it is starting to look a bit bubbly," said Matt Zeman market strategist at Kingsview Financial in Chicago. "The run-up reminds me of what silver did a few months ago. It climbed steadily week after week, sucked everyone in, and then the whole deck of cards came crashing down."

With investors plowing into gold in droves, the SPDR Gold Trust ETF (GLD), one of the most popular funds for investors seeking exposure to gold, is now the world's largest ETF with nearly $77 billion in net assets. Since 1993, the SPDR S&P 500 ETF Trust (SPY) held the top spot. It boasts about $75 billion in assets, accord to State Street Global Advisors.

The Gold Rush Is On

While the "parabolic surge" in the price of gold over the last couple of months is concerning, Lloyd Thomas, professor of economics at Kansas State University, says the rise is also worrisome over a longer period of time.

"Gold is considered a good hedge against inflation," he said, "But the increase in gold price has far outpaced inflation, especially during the last decade."

He noted that inflation has only picked up 2.4% on an annual basis during the last 10 years, but the price of the yellow metal has climbed more than 21% a year during the same time period.

Unless higher inflation -- to the tune of 10% a year -- is forthcoming, Thomas said gold prices are "clearly in a bubble."
But don't expect it to burst right away.

"Bubbles can run a long time -- just look at technology stocks in the late 1990s and housing prices a few years ago," said Thomas, adding that gold prices will likely soon threaten their inflation-adjusted high just above of $2,200 an ounce -- another warning bell of a things getting a little too frothy, he said.

However, some experts like Adam Klopfenstein, senior market strategist at MF Global, argue that they won't worry about a gold bubble until prices surpass their inflation-adjusted high.

As fiscal problems linger, Kingsview Financial's Zeman said gold prices will continue to gain luster, even reaching $5,000 or $7,000 an ounce over the next few years.

"Debt issues in the United States and Europe are playing a huge role in why investors are buying up gold, and those are not going away anytime soon," noted Zeman. "I don't see how the United States can get out of debt without further debasing the dollar, so that will continue to support gold prices."

That said, he's far from in a rush to buy gold at these lofty prices. Zeman is looking for prices to shave between $100 and $200 an ounce in a correction, and said they could drop as low as $1,650 an ounce, the level gold was trading at before its recent run.

But when that might be is anyone's guess. 

UK retail sales see weak growth in July

Retail sales grew only slightly last month, as cash-strapped consumers remained under pressure, figures show.

More consumers are cutting back on their spending

Sales volumes excluding petrol rose just 0.2% in July, a slowdown on the 0.8% increase in June, said the Office for National Statistics (ONS).

Sales of household goods, clothing and footwear all declined.

Consumer spending continues be affected by a number of factors, including higher inflation, job losses and limited wage rises.

Inflation in July, as measured by the government's preferred Consumer Prices Index, increased to 4.4% from 4.2% in June. This is more than double the 2% target rate.

Meanwhile, the number of people unemployed in the UK rose by 38,000 to 2.49 million in the three months to June.

'Disappointing' data
Compared with July 2010, sales volumes excluding fuel were also 0.2% lower. When fuel sales are included sales were unchanged from a year ago.

The sales volumes data is adjusted by the ONS to remove the effect of inflation.

When the impact of inflation is included, sales in July rose in value terms by 0.8% from June, and by 4.3% from a year earlier.

“The outlook for retail does not look particularly rosy, concerns about the growth outlook and the decline in real wages are weighing on the consumer”

The 0.2% rise in volume retail sales in July was less than the 0.3% increase expected by analysts, and was also lower than the 0.6% increase estimated by the British Retail Consortium earlier this month.

The ONS said volume sales of clothing and footwear fell 0.3% in July compared with June, with household goods declining by the same amount. Food sales were up 0.7%.

Since the start of the year a number of well-known retailers have gone into administration, including fashion chain Jane Norman, interior designer Habitat, and wine seller Oddbins.

Others such as Mothercare, entertainment group HMV and confectioner Thorntons have announced store closures.

David Kern, chief economist at the British Chambers of Commerce, said the latest official figures were "broadly as expected".

He added: "While disappointing, it is not surprising given the huge squeeze on disposable incomes as a result of higher food and energy costs and the government's austerity measures.

"These figures and other economic indicators suggest growth in the third quarter of this year is likely to remain sluggish, although fears of a new recession seem exaggerated."

George MacDonald from Retail Week says people are still buying

goods such as iPads

'Limping along'

Nida Ali, economic adviser to the Ernst & Young Item Club, said the latest data was "more encouraging than expected".

She added: "Monthly sales growth was much weaker than June but, given that retailers had started their sales earlier than usual this year, any growth at all in July is very welcome, particularly in the current climate."

Investec analyst Victoria Cadman said UK consumers were "limping along at best".

"What leaps out is that consumers are unwilling to spend on big ticket items - household goods are down 4.1% on the year," she added.

"The outlook for retail does not look particularly rosy, concerns about the growth outlook and the decline in real wages are weighing on the consumer."

The UK economy grew by only 0.2% in the second quarter of the year, down from the 0.5% growth rate recorded between January and March.

Gold hits record high above $1,816 an ounce

The price of gold hit a record high above $1,816 an ounce Thursday, as demand for the safe haven investment rose on resurgent worries about a possible new recession for the global economy, analysts said.

Gold hits record high above $1816 an ounce

Gold struck $1,816.25 on the London Bullion Market shortly before 1200 GMT, beating the previous record of $1,814.95 that was forged on August 11.

It later pulled back slightly to stand at $1,809.65 an ounce.

The new high came as Europe's main stock markets were plunging ahead of US inflation data, with Frankfurt's DAX 30 index down more than 4.0 percent.

"There is another air of panic out there in the market today, what with the DAX... US crude oil falling two dollars and European banks getting crushed again," said Ian O'Sullivan, an analyst at Spread Co. trading group.

"The beneficiary once again of this nervousness has been gold, which has shot up another 30 dollars today."