The economic and regulatory might of the US is still keenly felt in Britain two significant news stories of the moment show, according to Chief Investment Officer Haig Bathgate.
Its legal power is demonstrated in the wrangle between the world's largest economy and Royal Bank of Scotland. Reports suggest that while Britain's biggest state-owned bank may face a fine of as much as £500 million due to its alleged involvement in the Libor scandal, US prosecutors are also trying to get RBS to plead guilty to charges related to the manipulation of the key lending rate. RBS would obviously rather pay a fine without accepting guilt as that would allow it to draw a line under the issue. An admission of guilt could set the company up for a raft of legal action, the financial consequences of which would be hard to quantify.
The power of the US consumer to lift the global economy, and with it that of the UK, is shown by how closely commentators and analysts monitor its behaviour. Two sets of numbers published this week point in opposing directions. US consumer confidence dived in January to its lowest since 2011 while S&P/Case-Shiller Home Price Indices showed a significant improvement in the US housing market. We are more likely to go with the positive housing data as the most accurate reflection of US economic health. Consumer confidence is notoriously fickle, and the drop could be the result of the"end is nigh" predictions that accompanied the fiscal cliff discussions at the start of the year, or even due to tax increases that are coming into effect. The strong showing in the housing data would tend to confirm our long-held belief that the US recovery is gaining more traction, and as it strengthens it will help lift economies such as Britain's with it.
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