PRESS DIGEST - Financial Times - May 9

The Financial Times

IMF WARNS OF INFLATION THREAT TO WORLD'S ECONOMY

The International Monetary Fund has issued a stark warning that inflation has re-emerged as a significant threat to the world economy. The managing director of the IMF, John Lipsky, said: "Inflation concerns have resurfaced after years of quiescence (due to soaring energy and food prices)." The warning came as crude oil prices reached a record of almost 124 dollars a barrel, up 99 percent over the past 12 months. Lipsky said policy-makers must respond aggressively to any sign of rising inflation expectations "lest the impressive gains in global stability attained in recent years be sacrificed".

MIXED RESPONSE TO HOLDING INTEREST RATE

Industry groups hoping for a boost to the housing market were disappointed at the decision by the Bank of England to hold interest rates at five percent on Thursday. Other business leaders, however, accepted the need to keep inflation in check. The decision to hold interest rates signals that the Bank does not yet think the UK economy has slowed enough to bring inflation back to target in the medium term. The CBI said the decision was no surprise, since the economy was slowing but "well short of recession", while producers were having to pass on rises in energy and raw material costs.

PACKAGE AIMS TO HELP AVOID LOSS OF HOMES

In a sign of growing government alarm about the fallout from the housing slowdown, the government will announce on Friday a package of measures to bolster beleaguered home owners. Official figures are expected to show a sharp increase in repossessions as rising mortgage costs make it difficult for more people to hold on to their homes. Housing Minister Caroline Flint is to announce the expansion of free legal representation at county courts for those at risk of losing their homes and the Treasury will announce an extra nine million pounds for the Citizens Advice Bureau to provide specific debt advice. Also, Chancellor of the Exchequer Alistair Darling held talks on Thursday with the six big retail banks and urged them to provide better information and support to borrowers.

ROYAL MAIL POSTS LOSS FOR LETTERS SERVICE

A sharp drop last year in the number of items posted and the impact of competition from the private sector have caused the Royal Mail's [GBPO.UL] letters business to post a loss for the first time, with last year's profit of 27 million pounds turning into a loss of 100 million pounds. Royal Mail said the number of letters handled daily had fallen from 83 million to 80 million with increasing use of the Internet and text messages replacing conventional mail. Preliminary results for the year to March 30 were published two days early after an independent review by the government said competition in postal services posed a substantial threat to the stability of Royal Mail and the future of the universal service.

EDF BUYS LAND NEAR NUCLEAR SITES

EDF (EDF.PA) has quietly been buying land around nuclear sites in England and Wales, putting itself in a position to build power stations even if it is unsuccessful in its attempt to buy British Energy BGY.L. The purchases may make it possible for Europe's largest power company to build up to three power stations regardless of the fate of British Energy. Friday is the official deadline for bids for the government's 35 percent stake in British Energy and it is expected that both EDF and RWE (RWEG.DE) will make an offer.

NEXT SALES DROP IN FIRST QUARTER

Clothing retailer Next (NXT.L) on Thursday reported a near nine percent drop in first-quarter sales but also said sales have picked up in the past 11 days with the arrival of warmer weather. Chief executive Simon Wolfson said shoppers were not spending in its stores until "they absolutely had to". The drop in sales was slightly better than expectations as analysts had predicted a like-for-like decline of up to 10 percent. Like-for-like sales at stores unaffected by new openings were down 8.9 percent and down by five percent in total to 518.1 million pounds. Next Directory sales slipped by one percent to 220.8 million pounds. Shares closed at 13.02 pounds, up 74 pence.

VIRGIN MEDIA UNDER BROADBAND PRESSURE

Even though the percentage of Virgin Media (VMED.O) customers cancelling their cable subscriptions fell to a record low in the three months to March 31, price pressure in the broadband market cut average revenues per user. First quarter results showed net losses narrowed from 120 million pounds to 104 million pounds in spite of the cost of servicing a six billion pound debt load having increased to 123 million pounds from 119 million pounds. The group is to increase the price of several telephone, television and broadband "bundles" in June to counter the fall in average revenue per user, and is widely expected to sell wholly owned channels such as Bravo and Living TV to cut its debt.

TRINITY MIRROR REMAINS CAUTIOUS