PRESS DIGEST - Financial Times - March 3

Financial Times

COMMODITIES RECORD BIGGEST MONTHLY PRICE GAIN SINCE 1974

In February, commodities prices posted their biggest monthly rises since the oil crisis of the 1970s. The gains have been fuelled by investors seeking refuge from the crisis affecting equity and credit markets, strong demand from emerging markets and widespread supply disruptions. Record energy and agricultural commodity prices are threatening to stoke global inflation, prompting fears of a return to the "stagflation" onditions seen in the 1970s. Fears over rising inflation have led investors to put increasing amounts of money into commodities and some analysts are worried the flows are inflating raw material prices and therefore contributing to the inflationary pressures investors are seeking to hedge against.

FEARS OF 10,000 CITY JOB LOSSES

With the uncertain outlook for global markets and continuing losses in the banking sector from the U.S. sub-prime lending crisis, forecasters believe at least 10,000 jobs will be shed in London's financial sector this year. Matthew Osborne, partner at the executive research firm Armstrong Osborne, said: "Whilst there have been some small cuts before and just after the new year, I believe we will see a much larger-scale set of redundancies in the coming weeks and months if conditions don't improve." A net reduction of 10,000 jobs would mean a 2.9 percent drop in City workers from the record high of 349,100 last year.

PENSION CHANGES COULD LEAD TO RECORD FINAL SALARY DEFICIT

Pensions consultancy Aon has said final salary pensions schemes face their worst deficits if plans go ahead on assumptions on greater life expectancy and new accounting standards. In February, the top 200 schemes recorded their largest ever surplus of 21 billion pounds, but a "double whammy" of proposals from the Accounting Standards Board and pressure on realistic assumptions about longevity from the pensions regulator "throws the future of final salary schemes into doubt", says Aon's Marcus Hurd. The two measures could cost the top 200 schemes 200 billion pounds.

FOCUS SHIFTS FROM PRICING TO QUALITY

A survey by the EEF manufacturers' organisation and BDO Stoy Hayward shows British manufacturers are countering threats from low-cost producer countries by moving into areas where there is less emphasis on price competition. The report says more companies are competing "on the basis of customer service and quality and less on price" and that therefore the pressures on UK manufacturers may be starting to ease. Since 1990 manufacturing has dropped from 21 percent to 14 percent of UK economic output, partly due to competition from lower-cost countries. Examples of companies that have changed their strategy include earthmoving equipment supplier JCB, which has launched a range of specialist products such as military trucks and telescopic handlers that can pick up loads in restricted places.