PRESS DIGEST - Financial Times - May 10

The Financial Times

INCOME GAP NARROWS UNDER LABOUR

Figures published on Friday by the Office for National Statistics reveal the income gap between affluent areas of southeast England and other regions has narrowed under Labour. The divide, however, remains wide with gross disposable house income per head 23 percent higher in London than the average for the rest of the UK in 2006. Northern Ireland, Wales and Scotland are the regions that have seen the divide narrow the most, with gross disposable annual income in Northern Ireland having risen by more than 60 percent since 1997. This compares with a 43.7 percent rise for the UK as a whole.

DEMAND FOR FUEL DRIVES PRICES OF OIL AND CORN TO RECORD LEVELS

Crude oil and corn prices reached record highs on Friday as the world's hunger for fuels continued to upset energy and agriculture markets. Oil reached 126.2 dollars a barrel in a week which has seen prices jump by 10 dollars, and some traders are now betting on when it will hit 200 dollars. The increase in energy costs is putting fresh pressure on Opec to increase levels of production but on Thursday, Abdalla El-Badri, Opec's secretary-general, said the market did not need more oil. "There is clearly no shortage of oil," he said. Corn prices rose to a record 6.27 dollars a bushel, up 75 percent in the past year, and some analysts have warned that corn may reach seven dollars a bushel this year.

WAITROSE OFFERS INFLATION HOPE

Mark Price, managing director at Waitrose, has said food price inflation should peak this year, falling to nought percent in the second half of his company's financial year, which begins in August. Price, however, cautioned that food prices were unlikely to fall, saying: "I don't think it will ever go back (to the mid-1990s deflation). We've got issues about feeding the planet." Waitrose has a broad perspective on the market as it is a farmer as will as a grocer. Not all retailers concur, with one agricultural specialist at a leading supermarket saying he believed food price inflation would continue and warning that retailers who did not pass on higher prices would put their businesses at risk.

SLOWDOWN FAILS TO EASE CALL FOR LUXURY HOMES

A report from Halifax reveals demand for luxury homes in the UK has grown with sales of million pound properties having increased by more than a third in 2007. Despite a fall of 9 nine percent in total property sales in the UK last year, sales of million pound homes rose 36 percent to 8,257. Purchases of two million pound properties increased by almost half over the same period compared with the previous year. The freeze on mortgage lending has mainly targeted those without large deposits or high levels of equity in their property, which, say analysts, rarely applies to those purchasing homes worth over one million pounds.

M&S PLANS TO STOCK OTHER LABEL FOOD BRANDS

Marks and Spencer (MKS.L) is to start selling some of Britain's best-loved brands in its stores alongside its own label foods. The move, which may pave the way for M&S to develop an Internet service, marks a break with 85 years of tradition of selling only its own branded goods. Executives at leading suppliers said M&S was in discussions with big consumer goods companies about supplying goods. It is likely M&S will begin by trailing a few brands to gauge customer response before a bigger push.

EDF IN SOLO OFFER FOR BRITISH ENERGY

The government was on Friday still hopeful there will be another offer for its share of British Energy BGY.L after EDF (EDF.PA) turned out to be the only company to make an offer for the nuclear generator by the end of Friday's bid deadline. British Energy said any bids coming in the next few days would still be considered. EDF has internally valued British Energy at 13 billion to 14 billion euros, but its initial bid on Friday may have been lower. RWE (RWEG.DE) is seen as the other group most likely to bid, but a person close to British Energy said that Suez (LYOE.PA) and Iberdrola (IBE.MC) were still looking at making bids.

AGA LOSES SHARES FOR CASH MOTION

Pension Insurance Corporation has stamped its authority on Aga (AGA.L) by voting down a motion that would have allowed the company to issue shares for cash. The defeat, coupled with news of weak sales, overshadowed the company's formal transition into a dedicated consumer goods company. Aga, which has shed its commercial catering business, expects first-half sales of its best-known product in the UK to be flat, and down in Ireland. The Midlands-based oven maker, however, has seen sales of its cheaper Rangemasters range rise five percent so far this year. Shares closed at 292 pence, down 14.5 pence.

MARGINS SQUEEZED AT SMURFIT KAPPA

Shares in Smurfit Kappa fell 10 percent to 7.75 euros on Friday as it predicted that rising costs of raw materials and the weak dollar would hit earnings. Europe's biggest maker of cardboard boxes warned of "greater-than-expected margin pressure" on increasing costs of materials such as wood, while it saw slowing demand for corrugated boxes. Smurfit has also been left with piles of recycled container-board as the industry suffered an inventory build up after Christmas. The company has repeatedly increased prices to reflect the cost of raw materials and plans to reduce capacity at its mills.

FIRST PHASE OF HMV RECOVERY STRATEGY PAYS OFF

Music and books retailer HMV (HMV.L) beat expectations with a sharp rise in sales which show the first phase of its recovery strategy is paying off. HMV said like-for-like sales rose 10.1 percent with market share gains across all categories. Shares in the company of Friday fell 8.5 pence to 140.75 pence after rising at one point by as much as 12 percent, activity that was attributed to its unusually negative shareholder base. The group said it was confident pre-tax profits would be towards the upper end of market expectations, in the range of 46 million pounds to 58 million pounds.

CATTLES CASH CALL WINS SUPPORT

An overwhelming majority of shareholders in Cattles (CTT.L) voted on Friday in support of the subprime loans specialist's 200 million pound rights issue. Last month the company became the latest UK lender to seek cash from shareholders when it announced plans for the nine-for-20 rights issue at 128 pence. Cattles says the money raised will be used to support the company's application for a banking licence as the Financial Services Authority requires the lender to have a higher level of capital adequacy than it currently has.

Prepared for Reuters by Durrants.