Sony Ericsson makes profit warning

The Associated Press

The joint venture between Sweden's LM Ericsson and Japan's Sony Corp. said shortages in certain components for mid-priced phones also were expected to affect sales growth in the period.

The company is due to release its earnings for the first quarter on April 23, and said it expects to report around 22 million shipped phones - leading to lower net sales compared with the same quarter a year earlier.

Pretax profit was expected to be between 150 million euros and 200 million euros ($235 million and $315 million), down from 362 million euros in the quarter a year ago because of higher research and development costs.

The company added, however, that it still expects its gross margin for the three-month period to stay relatively stable compared with the same period in 2007.

Sony Ericsson President Dick Komiyama said "the market is proving to be challenging. This has been more pronounced in the mid- to high-end replacement sector of the market in Europe, where Sony Ericsson has stronger than average market share."

He added that for the last year, his company has focused on expanding its portfolio and its presence in new markets in a move to reduce its reliance on the European high-end sector for growth.

"This strategy will continue, and our objective remains to become a top three player globally by 2011," he said.

Komiyama said his company expects to start seeing the positive effects of recent mobile phone and platform launches in the second half of 2008.

Bank of England rescues HBOS from brink of collapse after 'false rumours' shake stock market

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HBOS owns Halifax, the UK's biggest mortgage lender

Shares in HBOS, owner of Britain's biggest mortgage lender Halifax, dropped almost 20 per cent at one stage in a wave of selling.

The Bank of England had to issue an unprecedented denial that HBOS was in crisis - underlining the continuing panic in the financial markets following the collapse of Northern Rock in Britain and Bear Stearns in America.

There are concerns that the rumours had been started by "short-sellers" who make money by betting on shares that fall in value.

An investigation was under way this afternoon into the possibility of suspicious trading. An HBOS spokesman said:

"We very much welcome the FSA's statement today that it will not tolerate market participants committing abuse by spreading false rumours.

"There is not a shred of substance whatsoever in these unfounded and malicious rumours."

Both the FTSE and HBOS shares immediately rallied on news of the FSA's probe but the market eventually closed more than 60 points today.

The drama started to unfold at 8.31 when shares in HBOS began to wobble. What followed was one of the most remarkable morning's trading in recent stock market history.

? 8.33am: HBOS shares plunge as some traders launch a sudden raid on the stock. At the same time rumours about HBOS's solvency and demands for funding from the Bank of England start to sweep through the market.

? 8.51: HBOS's shares plunge to 400 ¼ p and the FTSE100 dives to 5570.

? 9.02: HBOS denies the rumours. A spokesman says it has an " exceptionally sound" balance sheet.

? 10.15: Bank of England press officers phone news organisations including the Evening Standard to kill off rumours of crisis meetings and HBOS cash shortfalls. HBOS shares start to recover.

? 12.30: Financial Services Authority says it is investigating suspicious trading in UK financial shares.

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HBOS shares plunged shortly before 9am today amid rumours the bank was in trouble

Market commentators said it was unprecedented in recent history for the Bank of England to be forced to issue a denial that a major high street bank was in difficulties.

The Bank denied that any bank had asked it for emergency funding or asked for a meeting with it.

It also denied as "fantasy? suggestions that Governor Mervyn King had cancelled a trip to the Far East or that all staff at the Bank had been told to cancel leave over Easter weekend because a bank might be in trouble.

Analysts said that the Bank of England had clearly learned from the dithering by the authorities over the collapse of Northern Rock last year and the much faster rescue over last weekend of Bear Stearns in the United States.

The Financial Services Authority, the City watchdog, aggressively warned stock market traders that it would not tolerate abuse of the stock market by people spreading false rumours and then trying to make a profit.

Sally Dewar, head of the FSA's wholesale markets, said: "There has been a series of completely unfounded rumours about UK financial institutions in the London market over the last few days.

"We will not tolerate market participants taking advantage of the current market conditions to commit abuse by spreading false rumours and dealing on the back of them."

HBOS has more private shareholders than any other company in Britain.

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City traders in London yesterday battle to man the phones

The Dow Jones opened slightly up this afternoon after Morgan Stanley posted better-than-expected results.

Its 2.1 million small shareholders are almost all customers of the bank. In the last six months they received £130 million in dividend. Halifax is Britain's biggest mortgage lender with outstanding loans of £430 billion.

Today an irate HBOS spokesman described the rumours as "completely malicious?, adding: "They are deeply destabilising for the whole UK financial services system. HBOS has an exceptionally strong balance sheet with access to a deep pool of retail deposits.?

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Traders in New York last night watch share prices rebound in the wake of the Fed's decision to cut its rates

He stressed the difference between HBOS, which funds the vast majority of its mortgages from the deposits it takes from savers and Northern Rock - which collapsed because it funded two thirds of its mortgages from the world's money markets which dried up when the credit crisis began last summer.

Stock market veteran David Buik dismissed the rumours that HBOS was in trouble: "I have been familiar with the businesses of Halifax Building Society and Bank of Scotland for 30 years. I doubt you could meet two more conservative outfits and I have no real reason to believe their culture has changed."

Neil Dwane, chief investment officer at fund manager RCM, said: "What is terrifying for financial markets is the power of market rumour."

Next has revealed that the credit crisis has began to impact on its profits

High street giants Debenhams and Next today made gloomy forecasts for sales in the year ahead as the credit crisis continues to hit consumer confidence.

Debenhams today reported like-for-like sales over the first part of the year were down by 0.7 per cent and its chief executive described high street conditions as gloomy.

Fashion chain Next also warned of increasing sales pressure this year as struggling shoppers tighten their belts.

The high street giant is bracing itself for the impact of soaring fuel and household bills and more expensive mortgages on its customers.

Despite the gloomy news from retailers hopes of another interest rate cut next month were dampened today after Bank of England minutes showed inflation fears at the top of the agenda.

Policymakers on the Bank's Monetary Policy Committee (MPC) voted 7-2 in favour of keeping rates on hold at 5.25 per cent in March, records of their meeting two weeks ago revealed.

Despite fears over the UK economy, activity indicators pointed to "less of a slowdown than expected", the minutes said.

The committee - which met before the latest bout of stock market turbulence - also expects inflation will rise strongly in coming months as higher household energy bills hit home.

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