Shares soar as bulls battle

THE markets seem to have reached the point of scandal fatigue. Another telecoms company fiddling its sales? No great surprise. Another $1bn of accounting errors? So what!

So London's Footsie shrugged off the worries with an 186 point gain, and Wall Street surged an astounding 447 points, although the Qwest Communications scandal had all the usual ingredients of over-aggressive counting of revenue, booking of 'swaps' of telecom capacity with rivals as 'sales', and the presence as auditors (until recently) of good old Arthur Andersen.

Is the bear market really over? Since the Footsie hit 3626 last Wednesday, it has bounced a remarkable 16%.

Sadly, this is too good to be true. The danger of more shocks remains high. But the economic background, though volatile, is far from gloomy. UK consumer credit growth slowed from £1.44bn in May to £1.28bn in June, well below expectations. Don't forget, though that June was World Cup, gluedtothe-telly month. In any case, a modest sales slowdown would be welcome. It is not clear yet that we face anything worse.

US economic news later this week should be reassuring. The dollar, after a precipitous plunge, has regained ground. That is helpful; it needed to fall, but an unstoppable collapse would be calamitous. There is still plenty to worry about; the unsettling swings in share markets, the slump in Japanese industry. But at least the battle of the bears and bulls is better balanced.

Learning curve

AGAINST the background of Mercer's latest survey showing that top company boards are still 92% male, Marjorie Scardino was tempting fate by becoming the first female chief executive in the Footsie.

Appointing another woman, Rona Fairhead, as finance director of publisher Pearson ensured that if it slipped up, there would be enough pointing fingers and Itoldyou-sos to add a new chapter to the City's Encyclopedia of Misogyny.

Pearson has slipped up all right, making a mess of Dame Marjorie's bold target of doubling the shares in five years. In fact they more than trebled at the height of internet fever, but all the gains have since unwound.

Her response is typically feisty; don't blame me for the advertising downturn (fair enough); look at the streamlined Pearson portfolio today, in contrast to the sprawling list of investment banks, vineyards, waxworks and china teacups that it used to be.

Some hear a faint but worrying echo of Marconi here; getting rid of old businesses to pursue an exciting new strategy that somehow never quite comes up with the goods.

When I put this to Scardino, she said: 'That is the single biggest insult anyone has ever given me.'

In fairness, Pearson had cash flow of £490m last year, and has kept and invested in its core publishing assets. Solid cash earners like the Financial Times should bounce back when advertising recovers.

Scardino sees huge opportunities in 'integrated learning' which can create individual learning programmes for each child in line with its needs.

She says: 'Education has growth potential in every country in the world. But it comes at a cost and it's going to take time.'

Sean Eddie at Bank of America says: 'The strategy was right; get out of low return businesses and reinvest in higher growth. The error was to pay too much.'

Pearson says earnings are set to rebound this year. That should banish the worry that it has been a 'serial over-promiser'.

The streamlined group has some of the best media and publishing assets in the world.

Now it needs to get back to earning good returns on them. After the promises, it is delivery time.

Aberdeen anguish

THE market rally has come too late for the walking wounded of the split capital sector.

The collapse of Aberdeen High Income, which was once worth £200m, will leave even its bank and debenture holders with a shortfall, wiping out the shareholders.

Meantime, calls for compensation are growing. Solicitors Class Law say a private bank paid out £10,000 to a client who lost £15,000 after being advised to buy splits a year ago.

Aberdeen, alone of fund managers, has promised compensation - on just one of its funds, a unit trust marketed as a safe investment.

That is all, so far. Class Law has 1,700 'split' investors on its books. The Financial Services Authority is still investigating. This one will run and run.