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Rolls Royce shares slide on corruption probe; euro tumbles
by Chris Marshall on Dec 06, 2012 at 17:03
16.50: The euro tumbled on currency markets after European Central Bank chief Mario Draghi took the unusual step of suggesting the introduction of negative deposit rates in response to the eurozone's problems.
This would take the central bank into uncharted territory and would mean banks effectively paying the ECB to look after their excess cash.
Draghi declined to comment further but indicated the idea was being considered as a way to stimulate the eurozone economy, for which he painted a gloomy outlook.
His comments came as both the ECB and the Bank of England held their interest rates at record lows.
The euro fell 0.6% to 80.74p against the pound and 0.75% to $1.2972 against the dollar.
Stock markets edged higher with the FTSE 100 closing nine points up at 5,901 and the Euronext 100 two points up at nearly 677.
On Wall Streeet the Dow Jones inudstrial average traded seven points up at 13,041 and the S&P 500 added nearly four point at 1,411.
Rolls Royce shares slide amid corruption probe
Shares in Rolls Royce (RR.L) slumped this morning after the airplane engine maker told investors it was in talks with fraud investigators about concerns relating to bribery and corruption in overseas markets including China.
Shares dropped nearly 5%, the biggest faller on a flat FTSE 100, to 867p after the company admitted the Serious Fraud Office had requested information about ‘allegations of malpractice in Indonesia and China,’ which are among overseas markets where Rolls-Royce has identified ‘matters of concern’.
‘It is too early to predict the outcomes, but these could include the prosecution of individuals and of the company,’ the company stated in an announcement that dented an otherwise fairly consistent march higher for the company’s shares so far this year.
Rolls-Royce reports to the SFO
6 December 2012
Rolls-Royce reports to the SFO
Rolls-Royce, the global power systems company, has passed information to the Serious Fraud Office (SFO) relating to concerns about bribery and corruption involving intermediaries in overseas markets.
This follows a request for information from the SFO about allegations of malpractice in Indonesia and China. Investigations by Rolls-Royce have identified matters of concern in these, and in other overseas markets.
The consequence of these disclosures will be decided by the regulatory authorities. It is too early to predict the outcomes, but these could include the prosecution of individuals and of the company. We will cooperate fully.
Rolls-Royce has significantly strengthened its compliance procedures in recent years, including a new Global Ethics Code and a new Intermediaries Policy. It has also expanded the Compliance function. As a further measure, Rolls-Royce will appoint an independent senior figure who will lead a review of current procedures and report to the Ethics Committee of the Board.
John Rishton, Rolls-Royce Chief Executive, said: "I want to make it crystal clear that neither I nor the Board will tolerate
improper business conduct of any sort and will take all necessary action to ensure compliance. This is a company with exceptional prospects and I will not accept any behaviour that undermines its future success".
Notes to Editors:
1. Rolls-Royce is a world-leading provider of power systems and services for use on land, at sea and in the air, and has established a strong position in global markets - civil aerospace, defence aerospace, marine and energy.
2. As a result of this strategy, Rolls-Royce has a broad customer base comprising more than 500 airlines, 4,000 corporate and utility aircraft and helicopter operators, 160 armed forces, more than 4,000 marine customers, including 70 navies, and energy customers in more than 80 countries.
3. Annual underlying revenues were £11.3 billion in 2011, of which more than half came from the provision of services. The firm and announced order book stood at £62.2 billion at 31 December 2011, providing visibility of future levels of activity.
4. Rolls-Royce employs over 40,000 people in offices, manufacturing and service facilities in over 50 countries. Over 11,000 of these employees are engineers.
5. In 2011, Rolls-Royce invested £908 million on research and development, two thirds of which had the objective of further improving the environmental performance of its products, in particular reducing emissions.
6. Rolls-Royce supports a global network of 28 University Technology Centres, which connect the company's engineers with the forefront of scientific research.
7. The Group has a strong commitment to apprentice and graduate recruitment and to further developing employee skills.
Investors prepare for market movers
Meanwhile European markets made small gains in morning trade, following US markets higher after president Barack Obama said a fiscal cliff deal was possible 'in about a week' if Republicans acknowledged the need to raise taxes on the wealthiest Americans.
There is plenty that could de-rail any gains over the next two days though.
While Brits consider the implications of yesterday’s mini Budget – with Fitch warning over the ‘credibility’ of the UK’s AAA rating – global investors will be watching the European Central Bank’s policy setting decision in Frankfurt today, and then the US monthly US jobs report tomorrow.
Reminding ECB president Mario Draghi what is at stake, Standard & Poor’s has lowered its credit rating on Greece to ‘Selective Default’. The euro was down 0.15% to $1.3047.
The Bank of England also publishes the results of its monthly policy meeting today, with no change expected to its stimulus programme. The pound was slightly lower at $1.6087, so far appearing to be little moved by chancellor George Osborne's statement yesterday on the state of the UK economy, where he was forced to reveal economic growth forecast cuts.
The FTSE 100, which has moved little in recent days, was again struggling to break the 5900 level, trading flat at 5895.
The blue chip index received some support from mining companies including Antofagasta (ANTO.L) and Vedanta (VED.L), as well as emerging markets-focused bank Standard Chartered (STAN.L). In a trading update, the bank said that it expects to deliver double-digit pre-tax profit growth for the current year, but will have to pay about $330 million to US regulators for its failure to comply with sanctions against Iran (taking the total settlement to $670 million).
The FTSE 250 was again beating the large cap list, up 0.4% to 12,147, helped by shares including Dixons (DXNS.L), which was upgraded by Barclays to 'overweight', and DS Smith (SMDS.L), a Citywire Top Stock, which reported a 62.5% rise in first-half profits.
See our FTSE data pages for the day's other risers and fallers
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- Rolls-Royce Holdings PLC (RR.L)
- DS Smith PLC (SMDS.L)
- Dixons Retail PLC (DXNS.L)
- Standard Chartered PLC (STAN.L)
- Vedanta Resources PLC (VED.L)
- Antofagasta PLC (ANTO.L)
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After a record year for inflows and market-leading performance in 2012, emerging market debt has taken a large step towards the mainstream. Our recent debate covers the outlook for the asset class this year and where opportunities can be found.
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