UK STOCKMARKET[QQ] Lower interest rates and merger announcements from BAT and Vodafone helped to offset the impact of a string of profit warnings. Although Christmas trading was not as bad as had been feared, these included several from high street retailers, most notably Marks and Spencer. OVERSEAS EQUITIES European markets made the strongest start to the new year. Significant institutional demand had been pent up since December as a result of trading bans imposed in preparation for the introduction of the single currency. This strength was quickly reversed on the announcement of the Brazilian devaluation, but Wall Street’s resilience protected against further collapse. INTEREST RATES Although rates were cut again in the UK, they remained on hold elsewhere in Europe and in America. However, investors generally remain confident that central banks will ease policy further if the Brazilian crisis threatens to spread. EXCHANGE RATES The euro made a trouble-free debut as the attention of the currency markets was focused on the continuing strength of the yen. The Japanese government finally intervened when the yen-dollar exchange rate fell below 110, a 35% rise in the yen since August last year. Market data supplied by Britannia Asset Management Ltd. Tel. (0141) 248 2000. Expressions of opinion contained within this document are subject to change. Britannia Asset Management Ltd is the holding company of Britannia Investment Managers Ltd (Regulated by IMRO). Yield curves: Bloomberg; others: Datastream/ICV. SURVEYOR: TOUGH ON GLOOM, TOUGH ON THE CAUSES OF GLOOM Increase in number of UK articles mentioning “meltdown”, 1996 to 1998 – 319% Ditto world articles, 1996 to 1998 – 821% Total number of world press articles mentioning “meltdown”, 1998 – 11,928 PROPERTY’S FIRM FOUNDATIONS Proportion of firms expecting to increase property holdings in next 6 months – 27% Ditto expecting a decrease in property holdings – 15% Average return on commercial property (rents plus capital growth), 1998 – 11.5% Ditto, 1997 – 15.2% Source: CBI/GVA Grimley; Richard Ellis Research Consultancy. THE WORLD IS YOUR SHOPPING BASKET Proportion of European companies which have adopted some level of global purchasing – 77% Proportion of UK companies that consider their corporate culture to be unsuited to global purchasing – 33% Ditto, companies across Europe – 17% Proportion of purchasing managers who will review suppliers in light of price transparency in Euroland – 64% Source: American Express SPINNING (ON) THE WEB Number of FTSE-100 companies without web site – 9 FTSE-100 companies that include financial information on a web site – 63 Ditto, which published a corporate governance report on the web, 1997 – 12 Ditto, 1998 – 25 Source: Deloitte & Touche VALUE’S WHERE THE PROFITS ARE? Proportion of total sales by leading UK companies derived from value-consuming business units – 11% Average number of underperforming units in leading UK firms – 3 Proportion of directors blaming external factors for under-performance – 77% Ditto who would solve underperformance by changing management – 53% Ditto who would solve underperformance by selling the unit(s) – 38% Source: PricewaterhouseCoopers RISKY BUSINESS IN EUROPE Proportion of European (excluding UK) companies which claim to have assessed major risks – 97% Ditto which expressed confidence in their risk control systems – 45% Ditto which have a appointed a designated risk manager – 45% Source: Ernst & Young HER NAME IS RIO AND SHE DANCES ON THE SAND Total exposure of US commercial banks to Brazil – £22.4bn IMF loan to Brazil in 1998 – £25.1bn Total losses on London Stock Exchange on the day Brazil devalued – £51bn Source: The Economist, Evening Standard TIMEWATCH (10am, 28.01.99) Number of days left to issue press releases on imminence of year 2000 – 337 EURO CONVERSION RATES: E1 = DM1.95583 FFr6.55957 L1936.27 I£0.787564 Fl2.20371 BFr40.3399 LFr40.3399 Pta166.386 Es200.482 ASch13.7603 FM5.94573.