PRESS DIGEST - Financial Times - Nov 1

Financial Times

TORIES CRITICAL OF RECESSION POLICY

The Tories accused Prime Minister Gordon Brown of going on a "spending splurge". George Osborne, the shadow chancellor, said a short-term spending increase of one percent of gross domestic product would mean a rise in taxes in the medium term by the equivalent of almost four pence on income tax. "That's not just a tax bombshell, it's a cruise missile aimed at the heart of recovery," Osborne said in a speech to the London School of Economics. Rather than trying to boost demand through the public purse, Osborne argued for allowing monetary policy to "do the heavy lifting in stimulating demand". Brown dismissed Tory fears of a spending splurge and said the government was "making sure we take people fairly through a very difficult time, when national debt is low and we are able to borrow to do it".

BIG CHILL LEAVES CITY PARALYSED BY UNCERTAINTY

As the seesawing equities and foreign exchange markets leave bankers, traders and investors wary to take actions they may regret, much of the City is paralysed with uncertainty. This is evident in the absence of new issues and the fall of companies listed on Aim for the first time since its founding in 1995. Furthermore, as some hedge funds offload stakes to cover redemption requests, share prices are swinging wildly with little reflection of company performance. "Investors are frozen as they learn to cope with an extraordinary amount of uncertainly. Hedge funds are clinging to whatever performance they have and prefer not to risk jumping in front of a moving train," said Karen Olney, chief European equity strategist at Merrill Lynch.

PRICES FALL 5,000 POUNDS A DAY FOR TOP LONDON HOUSES

In October, the Knight Frank Prime Central London Index experienced the fastest one month drop since the index was created in 1976. The index revealed the price of prime London homes -- defined as those selling for more than one million pounds -- declined by 3.9 percent, or nearly 5,000 pounds a day. Liam Bailey, head of residential research at property agents Knight Frank, said the "top end of the market appeared resilient and it was thought that the global rich were immune" from the effects of the recession. "Now it appears that nothing is immune," he said.

BARCLAYS' MIDEAST BACKLASH

Shares in Barclays (BARC.L) lost 13 percent at 178.9 pence on Friday, as the banking group faced an investor backlash over its plans to raise around seven billion pounds in a deal that could result in a third of the bank being in the hands of two Middle Eastern investors. The bank is raising 5.8 billion pounds from investors in Qatar and Abu Dhabi in the form of capital notes and convertible shares, resulting in heavy dilution of the holdings of ordinary shareholders. A number of large shareholders argued that they were being asked to pay a high price to allow the bank to avoid raising capital from the UK government, which has demanded bonuses to be limited in return for its investment. Collins Stewart analyst Alex Potter wrote: "In short, government intervention is being avoided albeit at a very high cost, in our view, with an eye on resuming dividend flow more quickly than the peer group."

POLYGON SUSPENDS REDEMPTIONS ON FOUR BILLION DOLLAR FUND

The Anglo-U.S. hedge fund group Polygon is suspending redemptions in its flagship four billion dollar Global Opportunities multi-strategy fund while it unwinds the fund and gives money back to investors. Returns from the fund have fallen by around five percent in the year to August, and 15 percent in September. One of the founders of the fund, Paddy Dear, described October as an "ugly month for markets and the fund", with performance expected to have fallen 15 percent further. "It has become difficult to balance the interests of investors, some of whom want/need cash and others who think this is the best investing opportunity of their lifetimes," said Dear.

SPANISH ADVENTURE FIZZLES OUT AT BSKYB

BSkyB (BSY.L)> reported earnings before interest, tax, depreciation and amortization, before exceptional costs of three million pounds, 20 percent ahead at 249 million pounds on revenues five percent improved at 1.25 billion pounds. In the first quarter, the broadcaster added 87,000 customers over last year's level, breaking through nine million for the first time. Jeremy Darroch, chief executive, said the company was still on target to achieve its goal of ten million customers by the end of the decade. Separately, BSkyB told investors on Friday that it was not involved in an auction for its Spanish counterpart, Digital Plus.

INM TO SELL APN STAKE IN EFFORT TO CUT DEBT BURDEN

In a move that would cut its debt pile by more than half, Independent News & Media (INME.I) plans to sell its 39.1 percent stake in Australia's APN News & Media (APN.AX), the radio and news group. A disposal would likely bring down INM's debt by 800 million euros to less than 600 million euros. In order to finance its 5.75 percent bond due in May 2009, INM needs 200 million euros. The decision to dispose of the APN stake was criticised by 26 percent INM shareholder Denis O'Brien, who queried the reason the company would sell "one of the group's best performing assets" in a declining market. Despite INM's announcement of significant job cuts and a profit warning, shares closed up 27 percent at 0.63 euros.

ITHACA SELLS ASSETS TO SHV