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Alistair DarlingGEORGES GOBET

Today's top stories from Report on Business :

Merry Christmas, we cut your bonus

Britain's Labour government outraged the country's bankers today by unveiling a one-off, so-called supertax on bank bonuses. The government, lagging in the opinion polls as it heads into an election within six months, said in a pre-budget report that, until April, banks will pay a 50-per-cent tax on bonuses above £25,000. To be sure, there were other measures in Finance Minister Alistair Darling's report, including a higher projection for government borrowing, but it was the bonus tax that got the attention. It's worth noting, though, that the updated debt forecast comes at a time when markets are paying close attention to sovereign credit issues in the wake of troubles in countries such as Greece and Dubai and warnings from ratings agencies about mounting debts.

While the cost is to the banks, it certainly will make them think twice about the size of bonuses. Mr. Darling said some banks still think hefty bonuses are still the priority, despite government bailouts, and "if they insist on paying substantial rewards, I am determined to claw money back for the taxpayer."

The reaction was fierce, with criticism that Labour is playing to the masses, electioneering, discriminating, and taking steps that could hurt London's renowned banking sector.

"Viewed from abroad, those foreign banks which reward their U.K. staff with contractually-agreed bonuses are likely to be the hardest hit," said Angela Knight, Chief Executive of the British Bankers' Association. "London may well look to them now like a significantly less attractive place to build a business."

Almost unnoticed in the fury over bank bonuses was the fact that Mr. Darling cut taxes to bingo operators.

Read:

Britain slaps tax on bank bonuses



Reaction: 'Hit 'em where it hurts'



Streetwise: Canadian banks in London to pay price



Bingo and beer

There must be something in the air today about taxes. Besides the bonus tax, Mr. Darling, the Chancellor of the Exchequer, cut the tax on bingo operators to 20 per cent from 22 per cent, responding to complaints that they'd been hit in the April budget. "Clearly that is a popular measure," Mr. Darling said.

And while it's not bingo, Ireland also offered some new measures to the populace. Trying to stop shoppers from buying alcohol cheaper in Northern Ireland, Dublin said today it would cut alcohol taxes, effectively reducing a pint of beer by 12 cents, a glass of liquor by 14 cents and a bottle of wine by 60 cents, Bloomberg News reports. Shoppers had been going north to take advantage of lower taxes and currency fluctuation, the industry complained.

Elsewhere, Lithuania's parliament approve measures to cut corporate taxes, while Britain, besides the other measures, said it would relax tax-related rules governing development of oil and natural gas fields in the North Sea, and China said it would slap a sales tax on houses flipped within five years of purchase, trying to clamp down on real estate speculators.



Sovereign debt fears continue to weigh

Fears of sovereign credit risk continued to ripple through financial markets today, although stocks climbed back. There have been fears related to Dubai, Greece and, today, Spain, whose outlook was lowered by Standard & Poor's to negative because of its economic growth outlook. On Tuesday, a downgrade by Fitch of Greece's ratings spooked investors, while Moody's warned the United States and Britain to get their fiscal houses in order or "test" their triple-A ratings. Greece's Prime Minister George Papandreou said at a cabinet meeting, which was broadcast on TV, that his government "will do everything necessary to control the giant deficit. That is the only way Greece will not be in danger of losing sovereign rights."

Related : Debt alarm over stimulus spending



Rosenberg on the markets

David Rosenberg, the oft-bearish chief economist at Gluskin Sheff + Associates, says the equity rally is "sputtering." Mr. Rosenberg wrote today: "Volume is already tapering off as we saw yesterday, an indication that institutional investors now recognize a market that is fully priced or perhaps looking at price/earnings, price/book or price/dividend ratios, more than fully priced. Higher volume losses like we saw yesterday and the large number of 'distribution days' accumulated over the past month is very worrisome from a technical perspective. And, any market that can rally more than 60 per cent at the same time the economy sheds 3 million jobs, is a market that was fuelled by technicals, not fundamentals - hence our need to focus at least as much on the former as the latter. And the technical picture right now ain't lookin' so pretty. Here is the big surprise. However the numbers have been cloaked by massive government stimulus that can change the data for some period of time, we will wake up in 2010 and discover that the recession has not ended. This would come as a shock to every Wall Street economist who continues to view the economic backdrop as a cyclical phenomenon as opposed to a secular credit contraction."



Apple's tablet plans move ahead

Oppenheimer analyst Yair Reiner says Apple Inc., which already changed the world with the iPhone, is preparing to jump into digital books. Mr. Reiner said in a research note, according to Reuters, that Apple is poised to launch a tablet personal computer in late March or April, possibly with a launch of as many as 1 million a month. "Our checks into Apple's supply chain indicate that the manufacturing cogs for the tablet are creaking into action and should begin to hit a mass market strike in February," he said, adding the tablet's LCD screen would be similar to the iPhone's, at 10.1 inches. Read the story



U.S. extends bailout program

The U.S. government is extending its financial bailout program through to early October, saying it needs insurance against any further shocks. The program had been scheduled to expire at the end of this year. "The recovery of our financial system remains incomplete," Treasury Secretary Timothy Geithner told Congress. "And, near-term shocks to that system could undermine the economic recovery we have seen to date." Read the story



Nexen to boost production

Nexen Inc . announced a marginal cut to its 2010 capital budget of $2.5-billion but said it planned to boost production by up to about 6 per cent. The Calgary-based energy giant said $1.8-billion would be aimed at conventional exploration and development, $400-million on oil sands development and $200-million on shale gas. Most of the oil sands money is aimed at the Long Lake project, where Nexen is partnering with Opti Canada Inc. Nexen forecasts growth in production, after royalties, of 4 per cent to 6 per cent (assuming the midpoint of its guidance). Production volumes, before royalties, are projected to range from 230,000 barrels of oil equivalent a day, to 280,000.

UBS Securities Canada said that wide range "reflects uncertainty around North Sea turnarounds and Long Lake volumes." UBS pointed out that Nexen is still reviewing non-strategic assets, whose sales could bring in more than $1-billion over the next year or two. UBS held its "buy" rating and $31 target on the stock.

Nexen also said it would put off deciding on an expansion of Long Lake, a delay of a year.



VW buys stake in Suzuki

Germany's Volkswagen AG is eyeing the top spot among global auto makers. Volkswagen announced today it will buy an almost 20-per-cent stake in Suzuki Motor Corp. for $2.5-billion (U.S.). This follows its earlier deal for an almost 50-per-cent interest in Porsche AG. Volkswagen will gain from Suzuki's vast knowledge of India, one of the world's hot markets, while Suzuki gains from Volkswagen's knowledge of hybrid vehicles. "In partnership with Suzuki, the VW Group can take a big step forward in the compact car segment, particularly in the emerging markets in Asia," Volkswagen chief executive officer Martin Winterkorn told reporters, according to the Reuters news agency. "In turn, Suzuki can benefit from our experience with efficient and environmentally friendly drivetrain and vehicle technologies." Read the story



Japan's growth slows

Japan's economy isn't as strong as first believed, troublesome news for a country already battling deflation and a rising currency. Originally, last month, Japan reported its economy expanded 4.8 per cent in the third quarter. Today, however, Japan revised growth in third-quarter gross domestic product down to just 1.3 per cent. What's notable is that the new figure came in below the second-quarter reading of 2.7 per cent, meaning economic growth is slowing, although economists do not expect a double-dip recession.

"When releasing the preliminary figures, I commented with hope that a path for domestic demand-led recovery may have emerged, but now we need to re-examine that," Keisuke Tsumura, parliamentary secretary of the Cabinet Office, told reporters, the Kyodo news agency said.

The new figure knocked down Japan's benchmark stock index and frustrated economists. "It changes our basic understanding of the economy," a JPMorgan Securities Japan economist told The Associated Press. Read the story



Germany on stronger track

There's more evidence this morning that Germany, Europe's biggest economy, is well on its way to recovery. Germany's Federal Statistics Office said today the country's exports in October rose 2.5 per cent, more than expected, and are now at their peak for the year. Imports fell, widening Germany's trade surplus. "This should help support economic growth in [the fourth quarter] especially as government spending is reduced following a huge surge in [the third quarter]" Scotia Capital said.



Bulls betting on RIM

Bloomberg News reports this morning that traders are buying up options on Research In Motion Ltd. , calculating the BlackBerry maker's shares will climb 31 per cent in five weeks as its sales in China pick up. "Investors buying contracts to purchase RIM for $80 through Jan. 15 helped drive bullish contracts on the stock to twice the level of bearish ones, the highest ration since March 2006," the news agency said. "The last time so-called calls outnumbered puts by as much, shares of the Waterloo, Ont.-based BlackBerry maker quadrupled in 19 months."

RIM has unveiled two deals in China this week alone and, Bloomberg noted, its Curve eclipsed the iPhone as the best-selling smart phone last quarter. "People are realizing the haircut the stock has taken since the last quarter was overdone," Research Capital Corp. analyst Nick Agostino told Bloomberg. "People were looking for further deterioration in the business model, and what they're seeing recently from sales channels is signs of what could be a stable quarter."

RIM reports third-quarter results Dec. 17. On Tuesday, UBS Securities Canada said while it agreed with many concerns of investors, it believed RIM "remains well positioned in the enterprise domain where it has continued to grow its subscriber base through the downturn."



From today's Report on Business

Mark Carney counts on consumers



AOL goes it alone with new plan



Mattress sales a litmus test for economy

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