Friday newspaper round-up; BoE, Lloyds, London house prices

Extraordinarily serious and threatening...perilous - these are not the sort of words a central banker normally uses, yet every time the Governor of the Bank of England, Sir Mervyn King, appears in public these days, he ramps up the language of crisis still further. Regrettably, he's only telling it as it is. We stand on the brink, apparently incapable of pulling back. Events on the Continent have come to feel much like the drift into war. There is a feeling of powerless inevitability about it. Crisis summits come and go with no resolution in sight, but there's always the next one to set the world to rights, though we all know that in truth it won't. Markets and politicians cling to the belief that in the end, the single currency won't be allowed to fail, says The Telegraph.Production lines across the world are slowing down as the malign influence of the eurozone crisis hammers confidence in Britain, continental Europe and as far afield as China. Activity in Britain's beleaguered manufacturing sector tumbled to its lowest level in two and a half years last month, fuelling fears that the country is about to tip back into recession. (...) JP Morgan's global manufacturing index dropped to 49.6 in November, from 49.9 the previous month. The eurozone fared the worst, with output in France falling to 47.3, from 48.5 in October, while output in Germany dropped to 47.9, from 49.1. (...) Prospects in America have begun to pick up with job creation improving and anecdotal reports of strong consumer spending after last week's Thanksgiving holiday, The Times reports.Royal Bank of Scotland and Santander fear the official cost of UK banking reforms is too low, Government documents revealed on Thursday. The Independent Commission on Banking (ICB) estimates that the changes it proposed in September will cost the industry between £4bn-£7bn. (...) These "are understated," according to Santander UK chief executive Ana Botin in a letter to the House of Lords' select committee on economic affairs earlier this month. Santander's analysis of the likely costs is in line with a £10bn estimate from analysts at Goldman Sachs, she added, The Telegraph reports.Goldman Sachs has predicted at least two years of sky-high oil prices, in a forecast that would pile even more inflationary pressure on household finances if proven correct. The Wall Street giant predicted Brent crude - the benchmark applied to two-thirds of global oil supplies - could rise as high as $135 in 2013 and $127.50 next year. It said the European debt crisis could force the price back down if it tips the global economy into recession, but predicted industrialisation in developing countries would sustain demand. Any rise in the cost of fuel would damage the Bank of England's efforts to pull the rate of inflation back well below its current 5%. Sceptics pointed to a prediction by Goldman analysts in May 2008 that oil could hit $200 within six months, only to see it fall to $40 by the end of the year. Recent oil price fears have been stoked by rising tensions between Iran and the West, The Daily Mail reports.The seemingly unstoppable rise in the value of London's most expensive homes could finally be losing momentum, with one chain of estate agents reporting a slowdown in the rate of price increases to 1.1 per cent this quarter. Cluttons said today that price increases across Central London had slowed sharply from 3.5 per cent in the second quarter of this year. The slowdown had been expected, Cluttons said, after uninterrupted gains in the past 12 months. But house prices across the capital are still near pre-recession levels, with average values only 2.48 per cent below the peak recorded in the third quarter of 2007. Some "sub-markets" in London, where demand is high, have already breached this pre-recession peak, says The Times. The Government gave the go-ahead yesterday for a controversial proposal to convert Britain's plutonium waste into mixed oxide (Mox) nuclear fuel that could be "burned" in a new generation of nuclear power plants. The decision, which ends decades of uncertainty on how to deal with a growing stockpile of more than 112 tonnes of plutonium waste, was presented as a written Parliamentary statement by the energy minister, Charles Hendry. (...) But although Mr Hendry made it clear that the Government sees the "Mox option" as a priority, it is not certain that a new £3bn plant to convert the plutonium into Mox fuel will ever be built, writes The Independent.Lloyds Banking Group has offered to exchange £4.9bn of its outstanding bonds in order to raise new capital. The part-nationalised lender has asked investors in the Tier 2 securities to swap their holdings for new bonds at a discount to face value of as much as 30%. By exchanging Tier 2 notes, banks dispose of securities that will start to lose their value as capital notes under new European rules from 2013. Lenders also get a boost to their capital against losses by swapping the debt at a discount. The transaction will contribute about 20% of the bank's funding needs for next year, according to Lloyds, according to The Telegraph.AB