PRESS DIGEST - Financial Times - March 15

Financial Times

LENDERS PULL OUT OF MORTGAGE DEALS AS MARKET VOLATILITY WORSENS

Lenders are rapidly withdrawing many of their mortgage offers as severe funding constraints prevent them from meeting the demand for their most competitive deals. The offers are being withdrawn so quickly that some borrowers who have agreed deals are seeing them disappear from the market only hours before completing their application. Unprecedented volatility in the mortgage markets is at the root of the problem with Friday seeing the three-month Libor rising to 5.93 percent, the highest level this year. According to Moneyfacts.co.uk, there are only 6,186 mortgages left in the market. On Thursday, Scottish Widows removed the bulk of its mortgage range and C&G has withdrawn a number of buy-to-let mortgage loans from brokers.

COUNTRIES WITH SURPLUSES TOLD TO ENCOURAGE DEMAND

Speaking at a conference on sovereign wealth management, John Gieve, the deputy governor of the Bank of England, said the dollar's slide will help the United States to reduce its swollen current account deficit. But to make the unwinding of global economic imbalances less painful, countries with big surpluses also need to do more to stimulate domestic demand, he said. Gieve said the adjustment in the United States was being driven by weaker domestic demand rather than stronger demand from abroad and that imbalances had "helped create vulnerabilities in financial markets and in the wider economy". Gieve said sovereign wealth funds, whose assets could grow to 6,000 billion-10,000 billion dollars within the next five years, could help cushion the adjustment even though their rapid growth had been a symptom of the "savings glut" in surplus countries.

EUROZONE INFLATION REACHES NEW 14-YEAR HIGH

February's eurozone inflation rate was revised upwards to a new high of 3.3 percent on Friday, strengthening the European Central Bank's case for keeping its interest rates on hold. The figure provided the latest evidence that the surge in price pressures, mainly in food and fuel, is proving longer lasting than the ECB had envisaged. Analysts said inflation may even rise this month to 3.4 percent although they estimate an average of three percent for the year. The figures showed food price inflation hit 5.8 percent in February and energy price inflation remained over 10 percent. Inflation was lowest in the Netherlands, with an annual rate of two percent, and highest in smaller member states, including Cyprus and Slovenia.

NORTHERN ROCK TO SHED STAFF AND MORTGAGES TO MEET EU AID RULES

In order to meet tough European Union rules on state aid, Northern Rock (NRKx.L) is to dramatically reduce its workforce and mortgage book. Northern Rock is forecast to repay in one year around 10 billion pounds of its 24 billion loan from the Bank of England. The bank has been doing very little mortgage business since September and is now looking at using its strong links with mortgage brokers to encourage existing mortgage customers to refinance with other banks when they come to the end of their fixed-rate deals. Heavy job losses will come with the reduction of new mortgage business and one option being looked at is for the bank to offer administrative services to other lenders for a fee.

UK LOOKS TO BRITISH ENERGY SALE

The government has approached Britain's leading energy suppliers to sound out interest in its 35.2 percent stake in British Energy BGY.L. Centrica (CNA.L), Eon and RWE (RWEG.DE) of Germany, Electricite de France (EDF.PA) and Iberdrola (IBE.MC) of Spain have all been asked if they would be interested in acquiring part of the stake, worth at least two billion pounds. On Friday, a government insider said the future of the stake was under review and that UBS had been appointed to give commercial and financial advice on investment in new nuclear power stations. It would advise the government on any proposals that emerged, including proposals for other companies to buy stakes in British Energy.

TESCO LOOKS FOR JAPAN EXPANSION

A year after rolling out its Express-type stores in Japan, Tesco (TSCO.L) is sending its business development director, Michael Fleming, to the country in a move which suggests that it is looking to expand there more aggressively. Tesco has rolled out at least 30 Tesco Express outlets in Japan over the past year and now has an estimated 150 stores in the country. After being dogged by setbacks, the move suggests the retailer has finally got the format right after four years of trying. Japan has proved difficult for some of the biggest chains with Wal-Mart (WMT.N) struggling and Carrefour (CARR.PA) withdrawing five years ago.

WELLNESS FOODS TAKES A BITE INTO DORSET CEREALS

Health food group Wellness Foods has bought the upmarket muesli brand Dorset Cereals for 50 million pounds. Wellness Foods is a privately-owned food group which has been snapping up some of Britain's best-known healthy eating brands, including Grove Fresh, Fruit Bowl and Rowse Honey. Sales of Dorset Cereals are estimated to have increased from about four million pounds three years ago to almost 30 million pounds last year.

STANLEY GIBBONS POSTS HEALTHY PROFITS