PRESS DIGEST - Financial Times - April 11

Financial Times

BANK CUT SHOWS NO SIGN OF AGGRESSION

The Bank of England cut its key interest rate by a quarter point to five percent on Thursday but gave no sign it plans to move aggressively to combat increasing fears of a major economic slowdown. The Bank did express concerns about inflation, noting the CPI inflation rate rose by 2.5 percent in February. The interest rate cut is the third cut since December, when rates stood at 5.75 percent. Money markets barely shrugged at the move. It did not do much to cut the cost of interbank lending, with the three-month Libor little changed at 5.923 per cent.

DEARER IMPORTS DRIVE UP DOMESTIC PRICES

Figures released by the Office for National Statistics reveal import price inflation rose 1.2 percent in February, taking the year-on-year rate of increase to 10.4 percent, a 14-year high. In a quarterly survey by the British Chamber of Commerce, more businesses said they felt under pressure to raise prices than at any time in the survey's 10-year history. The ONS said the UK's deficit in goods narrowed from an upwardly revised 7.9 billion pounds in January to 7.5 billion pounds in February, in line with expectations. The total trade deficit narrowed from a revised five billion pounds to 4.4 billion pounds, helped by a swing to surplus on the trade balance on oil.

RISING WAGE SETTLEMENTS SUGGEST IMPACT OF INFLATION

The are signs inflationary pressures are starting to feed through to pay packets with this month seeing a rise in wage settlements. According to Incomes Data Services, the median level of settlements during the first three months of 2008 is 3.5 percent and continues the trend of modest rises at the end of 2007. However, two-thirds of pay settlements in April have been at or above four percent, and more than half of these were negotiated as part of long-term deals, with rises linked to the retail price index.

EUROZONE WARNED ON IMPACT OF CREDIT CRISIS

The European Central Bank said on Thursday the global financial turmoil may last longer and have a broader impact on the eurozone economy than previously expected. The ECB underlined its stance on inflation and held interest rates at four percent. Analysts said comments by the ECB's president, Jean-Claude Trichet, suggested little chance of an early cut on borrowing rates. The ECB has left its main interest rate at four percent since last June. Despite hefty cuts by the U.S. Federal Reserve, financial markets continue to believe that the ECB will not cut its rate until September.

IMF REJECTS CRITICISM OVER FORESEEING GLOBAL TURMOIL

On Thursday, the International Monetary Fund rejected claims that it should have better anticipated the onset of a global financial crisis. IMF managing director Dominique Strauss-Kahn noted the United States had initially declined to sign up to the Financial Sector Assessment Programme, set up in 1999. About two-thirds of IMF member countries chose to take part, but the United States did not agree until last year and its evaluation is not due to start until 2009. The IMF this week offered a bleak picture for European and U.S. growth prospects for the next two years, but the U.S. Treasury under-secretary David McCormick said the IMF was "unduly pessimistic".

GREEN SEES MORE SIGNS OF PAIN ON HIGH STREET

Fashion entrepreneur Sir Philip Green signalled further signs of retail sector stress on Thursday as he warned of a fall in profits at his BHS chain. DSG International (DSGI.L) also issued its second profit warning this year. When asked about BHS's sharp reverse in 2006, when profits declined to 51.4 million pounds, Green said: "We're going to have another one." This follows a slightly improved operating profit of 52.7 million pounds in the year to March 2007. Green said that while underlying sales were not too bad, underlying costs are "killing me". The BHS owner predicted "slow pain" for the retail sector. The return of clothing price inflation in China is increasing costs, just as consumers are reining back spending.

SILVERJET IN TALKS WITH POSSIBLE SUITORS

Shares in Silverjet SILJ.L rose by more than 30 percent to close at 21 pence on Thursday after it disclosed that it is in talks which may lead to a possible offer. The airline was floated on Aim in May 2006 at 112 pence and saw its share price climb to a peak of 209 pence in March last year, six weeks after flying operations began. ABN Amro analyst Andrew Lobbenberg says the billionaire property developers, the Reuben brothers, could be "the most likely partners" for Silverjet. However, he also said it was not "inconceivable" Virgin [VA.UL], Lufthansa (LHAG.DE) or Air France (AIRF.PA) could be interested parties.

BARRATT EYES SALE OF PROPERTY DIVISION

Housebuilder Barratt (BDEV.L) is considering the sale of its commercial property division so as to reduce the debt incurred in last year's 2.2 billion pound acquisition of Wilson Bowden. Barratt is hoping to secure more that 250 million pounds for Wilson Bowden Developments and has instructed Jones Lang LaSalle Corporate Finance to help with the sale, which is expected to come to market in the next few weeks. Wilson Bowden Developments focuses on the regeneration of town centres and office and industrial development across the UK. The business is not seen as a core concern for Barratt and due to the precarious state of the market, the company is likely to be sold to a trade buyer rather than a private equity investor.

THOMAS COOK REPORTS RESILIENT HOLIDAY SALES

Thomas Cook (TCG.L) has said demand for holiday packages has remained resilient despite waning consumer spending and a strong euro. In the UK, which makes up 40 percent of its sales, the company said summer bookings were down three percent following a 10 percent drop in capacity. However, this was made up by a two percent rise in selling prices. Sales in Northern Europe have also been robust where bookings are up 12 percent, with average selling prices up eight percent. Thomas Cook, which said it is continuing to seek acquisitions, saw its shares close at 299 pence, down 2.6 per cent.

HARDY HIT BY INDIAN FLOODS

Oil explorer Hardy Oil & Gas has reported lower than expected revenue after its PY-3 field in India was hit by flooding. Revenue for 2007 dropped to 11.8 million dollars from 21.3 million dollars as production levels decreased, and Hardy warned that earnings would continue to fall throughout 2008 as the flooded Indian well may not resume production until 2009. Hardy said exploration costs were likely to reach 45 million dollars for the year as drilling rig and floating facilities costs have soared in recent years. Full year profit was 10.6 million dollars. Shares closed at 795 pence, down 25 pence.

Prepared for Reuters by Durrants.