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FTSE 100 6,051.03 +53.65 DOW 12,161.63 +69.48 NASDAQ 2,783.99 +14.69 /$ 1.61 unc / 1.19 unc /$ 1.36 unc Certified Distribution29/11/10 till 02/01/11 is 98,444

Hands bidsfor insurerChaucer

GUY Hands, founder of private equityfirm Terra Firma, is in takeover talks with Lloyds insurer ChaucHoldings, sources close to the situa-tion confirmed to City A.M.yesterday.

Hands, who was forced to surrendercontrol of record company EMI to itscreditor Citigroup last week due to itsdebt mountain, has approachedChaucer with a bid to take it private.

In a statement, Chaucer said itnotes the recent share price move-ment and confirms that it has recent-ly received a number of approachesregarding a possible offer for the com-pany but said there was no certaintyan offer would be made.

London-listed Chaucer, which has amarket capitalisation of about 300m,has been effectively up for sale for thepast two years after suffering losses inthe financial crisis.

A combination of subprime-relatedreinsurance losses, exposure toBernard Madoffs Ponzi fraud and a$65m (40m) loss from US hurricanescaused it to lose an estimated 72m inthe year to December 2008.

It resorted to a 75m rescue rightsissue to recapitalise in January 2009and returned to profit that year, but isstill rebuilding under the guidance ofchief executive Bob Stuchbery.

Hands bid is the latest in a string ofinsurance deals, such as Beazleys bid

to acquire Hardy Underwriting last year and Brit Insurance, which isbeing bought by private equity consor-tium Achilles.

BY ALISON LOCK

INSURANCE

Markets are wary of a surprise interest rate hike by Mervyn Kings Bank of England this week Picture: Micha Theiner/ CITY A.M

SPENDING on the UKs high streets bounced back in January afterDecembers sales were hit by heavysnow, it will be revealed today.

The news comes after the FTSE jumped 53.65 points yesterday arise of 0.89 per cent breakingthrough the confidence-boosting6,000 mark to close at 6,051.03.

Retail sales were up 2.3 per cent ona like-for-like basis from January2010, when sales had fallen 0.7 percent, according to the British RetailConsortium (BRC) which released itsfindings today. Total sales were 4.2per cent higher, against a 1.2 per centincrease in January 2010.

Pent up demand after Decemberssnow was a factor behind the boom,the BRC said. In December annu-alised total sales increased by a mod-est 1.5 per cent, while like-for-likesales which ignore shop floorexpansion fell by 0.3 per cent.

The BRC played down Januarysuptick, partly attributing it to a rushat the beginning of the month toavoid the 2.5 per cent hike in VAT.

And it warned the governmentagainst any further squeeze on con-sumers. A range of pressures is bear-

ing down on customers, said BRCdirector general Stephen Robertson.As it considers the budget, the govern-ment must not add any more cuts.

RETAILERS BOOSTRECOVERY HOPES

BY JULIAN HARRISWORLD ECONOMY

www.cityam.comIssue 1,317 Tuesday 8 February 2011 FREE

THE INSIDETRACK

DAVID HELLIERS

NEW COLUMN

P11

AOLS LAST HURRAHARIANNA HUFFINGTON RIDES TO

RESCUE OF AILING WEB GIANT P16

BUSINESS WITH PERSONALITY

A series of positive economicreleases, combined with rising infla-tion, has increased the chance of theBank of England raising interestrates this Thursday, observers said. While an actual hike would stillcome as a shock, there is a near-cer-tainty of an increase by May at the

latest, according to economists.UK gilt yields rose yesterday, with10-year gilt yields reaching a nine-month high of 3.868 per cent, as

investors considered the risk of ahike in rates.

Meanwhile, the global economicrecovery continued apace, with world equities approaching a 29-month high, and copper seen as a bellwether of economic activity reaching $10,121 (6,268) a tonne in

London. European shares rose totheir highest close since September2008. The pan-European FTSEurofirst300 index of top shares closed up one

per cent at 1,176.81 points.Moving on from where it left off

last week, I think the equity marketsare focusing on the growth that isout there and are being supported bystrong earnings, said Mike Lenhoffof Brewin Dolphin. The Dow Jonesand S&P 500 jumped to their highest

levels since June 2008 yesterday, driv-en upwards by a wave of mergernews and solid earnings.ALLISTER HEATH: P2, ECONOMICS: P15

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News2 CITYA.M. 8 FEBRUARY 2011

Bank lendingtarget agreedBRITAINS banks are to pledge over1bn in funding for small businesses,as months of negotiations with thegovernment draw to a close.

The agreement comes as part of theProject Merlin talks between

Westminster and the City over indus-try-wide lending commitments andpay transparency.

UK banks are understood to haveagreed to offer 1.3bn over three yearsto small businesses, particularly inparts of the country worst hit by thespending cuts.

They will now make around 190bnof gross corporate lending availablenext year, an increase from around175bn this year.

State-backed Royal Bank of Scotlandhas set up a 100m fund to support

business franchises ahead of the move.The lender hopes 1,800 franchises

creating 24,000 jobs could be set up asa result.

Chancellor George Osborne is alsosaid to have reached an agreement

with the banks over pay transparency.Under the new regime, Britains

biggest banks will be forced to revealthe remuneration packages of asmany as eight of their highest earningemployees below board level.

Staff below board level will not beidentified by name, according toSky News.

BYRICHARD PARTINGTON

POLITICS

Interest rates will be going up soon

HIGHER interest rates are on the way:that is the lesson from this morningsstrong January retail sales survey, thelatest of a batch of statistics suggestingthe economy bounced back in

January. Even before today, marketswere already pricing in a 100 per centchance of a 0.25 per cent rate hike inMay, with short-dated swaps attribut-ing a 20 per cent chance of a hike on

Thursday. We shall soon find out.I regularly encounter two related

objections to raising the Bank ofEnglands short-term rates from theircurrent, ridiculously low 0.5 per cent.

Many argue that our elevated rates ofinflation come either from higher taxor from higher commodity prices and therefore are either not real orare out of the Banks control. Lets

take these points in turn.CPI-CT and CPIY, which supposedlystrip out the effect of tax, are runningat just 1.9 per cent and two per cent.But these esoteric measures are calcu-lated on the assumption that indirecttax hikes are passed on in full to con-sumers. This is nonsense. Pass-through was only one-third after the2008 VAT cut. Assuming that one-halfof the increase in indirect taxes last

year was reflected in the pricescharged to consumers, Henderson cal-culates that inflation would now be2.8 per cent had tax rates remainedstable still too high.

What about commodities? UK infla-tion is much higher than elsewhere,even though most countries are facingthe same supply shock (dubbed cost-push inflation by some). The reason

why the Bank is tasked with keeping

inflation at around two per cent ayear is that it has much greater pow-ers over average prices than many peo-ple realise. It cant stop individualprices such as wheat from shooting

up or others such as the cost ofcomputers from collapsing. But ithas a huge influence over the averageprice in the economy.

This is because it can vary the totalamount of demand in the economy;in turn, this is because it can largelydetermine the overall amount ofmoney. That is why Milton Friedmansaid that inflation is always a mone-tary phenomenon: he meant that it isalways in the power of the central

bank to create or to stop inflationusing its control of the printing press,short-term interest rates (and in somecountries) its powers to force banks tohold more or less capital.

Higher commodity prices dontautomatically lead to increases in theoverall, average price level: this onlyhappens if the Bank of England does-nt adjust demand to compensate.

Regardless of oil and commodityprices, a disastrous bout of deflationcould be generated in a matter ofmonths were the Bank to suddenlysell tens of billions of pounds worth of

gilts, sucking out pounds from theeconomy and slashing aggregatedemand. Alternatively, the Bank couldtrigger hyperinflation by creditingevery single bank account in the coun-try with an extra 100,000 as con-sumers rush out to buy goods, servicesand assets, prices would jump almostinstantaneously. Manipulatingdemand-pull forces can cancel outcost-push pressures the claim thatthe Bank cant control inflation in thecurrent climate doesnt stand up toscrutiny. Those who dont want higherrates should be arguing for the Bankstarget to be scrapped not claimingthat it has no power over inflation.

Ultimately, all of this is academic.Interest rates are going up, and rightlyso. It is just a matter of when, not if.

[email protected] me on Twitter: @allisterheath

US REGULATORS yesterday endorseda proposal that executives at thelargest financial institutions havehalf of their bonuses deferred for atleast three years.

The proposal, approved by theFederal Deposit Insurance Corp(FDIC), has yet to be approved byother US financial regulators, includ-ing the Federal Reserve and Securitiesand Exchange Commission.

The FDIC warned that it may gofurther to ensure the bonuses proper-ly align executives interests withinvestors, and is considering toughen-ing the proposal to restrict executivesfrom hedging deferred bonuses inthe form of stock. Whether weshould be prohibiting hedging, thatis an issue that is left open, FDICchairman Sheila Bair said.

The US plan is much softer thanEuropean Union guidelines limitingtop bankers to receiving 20 per cent oftheir annual bonuses upfront in cash.

BYKATIE HOPE

US BANKING

US to limit bank bonusesFDIC chairman Sheila Bair warned it may limit bonuses further Picture: Reuters

NEWS | IN BRIEF

Macquarie warns on profitMacquarie Group, Australia's top invest-ment bank, tipped a five per cent fall insecond-half profit yesterday but saidmarket conditions were returning tonormal. Macquarie, which has shed itsmanaged listed funds model to focus ona more traditional investment banking

model, said its balance sheet was strongwith A$3.2bn (2bn) in excess capital at31 December. The bank previously said itexpected its year to March 2011 netprofit to be broadly in line with lastyear's A$1.05bn.

JP Morgan hires ex-FSA risk chiefThe former Financial ServicesAuthority (FSA) head of risk, SallyDewar, has been hired by JP Morgan tobolster the US banks regulatory meas-ures. She will join the lenders Londonoffice from June as a managing direc-tor, reporting to global head of riskBarry Zubrow. Dewar will help to over-see JP Morgans response to incomingEuropean and US regulation, includingchanges to the EU Market in FinancialInstruments Directive. She left the reg-ulator in January after announcing herresignation last spring.

EDITORS LETTER

ALLISTER HEATH

7th Floor, Centurion House,24 Monument Street, London, EC3R 8AJTel: 020 7015 1200 Fax: 020 7283 5334Email: [email protected] www.cityam.com

EditorialEditor Allister HeathDeputy Editor David HellierNews Editor David CrowNight Editor Katie HopeBusiness Features Editor Marc SidwellLifestyle Editor Zoe StrimpelSports Editor Frank DalleresArt Director Craig GaymerPictures Alex Ridley

CommercialSales Director Jeremy SlatteryCommercial Director Harry Owen

Head of Distribution Nick Owen

Editorial StatementThis newspaper adheres to the system of

self-regulation overseen by the Press ComplaintsCommission. The PCC takes complaints about theeditorial content of publications under the EditorsCode of Practice, a copy of which can be found atwww.pcc.org.uk

Printed by Newsfax International,Beam Reach 5 Business Park,Marsh Way, Rainham, Essex, RM13 8RS

Distribution helplineIf you have any comments about the distributionof City A.M. Please ring 0207 015 1230, or [email protected]

Chancellor GeorgeOsborne has agreedlending targets and paytransparency measureswith UK banks

SEC EYES MORTGAGE DISCLOSURESUS securities regulators investigatingthe role of banks in the mortgage cri-sis are homing in on the question of

whether investors were misled aboutthe home loans used to back securi-ties. The Securities and ExchangeCommission and other regulatorshave been investigating a wide rangeof banking activities in connection

with mortgages that were packagedinto securities and sold to investors.

HELICOPTER SELL OFF GROUNDEDMinisters will today cancel advancedplans for the 6bn privatisation of thesearch-and-rescue helicopter service, cit-ing concerns over misconduct in the

bidding process. The last-minute deci-sion to scrap the competition comesafter military police were called in toinvestigate the alleged mishandling of

commercially sensitive information byformer Ministry of Defence staff.

SWISS SEE INFLOW OF OIL FIRMS

Switzerland has witnessed an inflowof Russian oil traders, bolstering thecountrys claims to be the worldsleading trading centre for physicaloil, industry executives said. State-owned Rosneft, Russias largest oilproducer, and Bashneft, a top refinerand fast-growing oil producer, haveregistered trading operations inGeneva and Zurich, respectively, overthe past few weeks. Both currentlytrade from Moscow.

BRUSSELS STANDS BY EFSF SCOPEEuropean officials have insisted theyare not backing away from proposalsto give the eurozones bail-out fundmore powers to tackle the debt crisisdespite a failure to back the changesat a summit of EU leaders on Friday.Officials from the European Unionsaid the powers were still on the tablealong with other economic and fiscal

measures aimed at shoring up theeuro.

FSA CUTS FINE FOR GUILTY FINANCIERA financier found guilty of marketabuse had his fine of 281,000almost halved yesterday after theFinancial Services Authority decidedthat he had been motivated bywishful thinking rather thandeliberate deceit. David Massey bor-rowed then sold 2.5 million sharesin Eicom at 8p each on November 1,2007.

BRITAIN CLINGS TO CULT OF EQUITYBritish pension funds are bettingmore heavily on shares than any oftheir overseas peers, according to astudy that reveals that Britain is stillthe worlds third-biggest pension-saving country. Yet British fundshave reduced their exposure to equi-ties from 74 per cent to 55 per centover the past decade, according to

research by the actuaries TowersWatson.

PREMIUM BONDS GET CASH AT LASTHundreds of thousands of investorsin Premium Bonds received theirprize money late last month. A print-ing error meant some of the win-ning cheques were written out to the

wrong people. More than 20 millionpeople have the tax-free,Government-backed bonds which donot pay interest, but offers savers apotential share of a monthly prizedraw.

TAXPAYER REPAID AFTER 23 YEARSMore than 20 years after BarlowClowes went bust, taxpayers appear tohave been repaid the 153m which

was distributed as ex-gratia compensa-tion to more than 14,000 investors.Mark Hoban, Financial Secretary tothe Treasury, announced that a totalof 156.5m has now been recovered

from the liquidation of a complex webof offshore companies.

ITALY SUMMONS FIAT CHIEF EXEC The Italian government on Mondaysummoned Sergio Marchionne fortalks with Prime Minister SilvioBerlusconi after Fiat SpA's chief exec-utive suggested that a combined com-pany with Chrysler LLC could be

based in the US, comments that havepoured salt on one of Italy's deepest

wounds: its ailing industrial sector.

NOKIA CEO CONSIDERS BIG SHAKE-UPSeveral senior officials on Nokiasgroup executive board are expectedto leave soon as part of a major shake-up being considered by the Finnishcellphone giant's new chief executive,according to a person familiar withthe situation.Exactly who will leavethe company remained unclear.Stephen Elop, a Microsoft veteran

who was hired in September to help

revive Nokia, is finalizing his plan torevamp the company.

WHAT THE OTHER PAPERS SAY THIS MORNING

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BRITISH Sky Broadcasting has madeexcess profits on its Sky Movies serv-ice, according to the CompetitionCommission.

The company, which is the subjectof a takeover bid from RupertMurdochs News Corporation, has anexclusive deal with the six bigHollywood studios and may now beforced to lower its wholesale price toother broadcasters who want to showits ten film channels.

The commission found Sky Movieshad consistently earned excess profits

that were disproportionate to therisks it took early on in the deals.

LONDON-BASED drilling rig operatorEnsco has agreed to buy US rival PrideInternational in a $7.3bn (4.5bn) deal tocreate the worlds second-largest off-shore driller by number of customers.

The cash and stock transaction is val-ued at $41.60 per share based on Enscosclosing share price on Friday last weekand represents a 21 per cent premiumto Prides closing price.

The Houston-based oil firms share-holders will receive 0.4778 new shares ofEnsco as well as $15.60 in cash for eachshare of Pride common stock they hold.

The deal, which will close as soon asthe second quarter of this year, will cre-ate a huge deepwater drilling firm sec-ond only to Transocean in terms ofnumber of rigs.

The merger comes almost one yearafter the disastrous Gulf of Mexico oilspill and as the offshore drilling indus-try attempts to regroup.

However, major energy companieshave not been deterred by the Macondowell leak.

Oil giants such as Chevron and ExxonMobil are expected to continue spend-ing billions of dollars on new offshore

fields, encouraged by strong US oilprices, which are hovering near $90 perbarrel.

The combined company will operatea fleet of 27 floating rigs, including 21deepwater drilling platforms, as well as47 jackup rigs for shallower drilling.

Ensco was advised by Deutsche Bankand Citibank on the merger, whileGoldman Sachs advised Pride.

Ensco chief executive Dan Rabunsaid: The combination is an ideal strate-gic fit, as our rig types, markets, cus-tomers and expertise complement eachother with minimal overlap.

Ensco is listed in New York but decid-ed to move its headquarters to Londonfrom Dallas, Texas in December 2009.The group will continue to be UK-based.

Ensco buys

US oil drillerin 4.5bn deal

ACTIVIST American hedge fundinvestor Harbinger Capital is to sell itsentire holding in Inmarsat, theBritish satellite operator.

Controlled by Philip Falcone, thefund holds 64.3m shares, or 14 percent of the company.

The sale brings to a close several years of Harbinger investment in

Inmarsat, a company it once consid-ered as a takeover target.By 2008, the US fund had built up a

28 per cent investment in the compa-ny and said it was considering a pur-chase.

Yet Harbinger halved its stake inOctober last year, raising around410m.

Credit Suisse and UBS have beenappointed as joint bookrunners todispose of the Harbinger shares.

Harbinger sells lastshares in Inmarsat

HEAD of Deutsche Bank, JosefAckermann, waded into a gender war yesterday by saying that appointingmore women to its executive board would make it prettier and morecolourful.

Amid a debate on whether Germanyshould set quotas for women on the boards of major groups, Ackermannacknowledged there were none on thebanks executive committee, a subordi-nate body to the board of directors.But I hope it will be prettier and morecolourful one day when more women

are named, he said to newspaperHandelsblatt.

Deutsche headin gender rowWatchdog findsexcess Sky profit

BYRICHARD PARTINGTON

ENERGY

MEDIA

BANKING

London-basedenergy firm Enscoschief executive DanRabun has agreeda merger withTexas-based oildriller PrideInternational.

BYRICHARD PARTINGTONHEDGE FUNDS

News 3CITYA.M. 8 FEBRUARY 2011

56

54

52

50

48

$

8 Nov 29 Nov 17 Dec 7 Jan 28 Jan

ANALYSIS lEnsco Plc.51.81

7 Feb

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EX-CITY minister Lord Myners this week added a second non-executiverole to his portfolio, with his appoint-ment as a partner and chairman ofAutonomous Research, the independ-ent research firm. And he is thoughtto have a third on the way as chairmanof billionaire Nicolas Berggruens newacquisition vehicle which is seeking toraise around 700m from listing inLondon. The German-Americaninvestor, along with business partnerMartin Franklin, is offering shares inthe vehicle at a fixed price of 10pounds each, two sources said..

But unlike many of his ex-ministeri-al peers, Myners move is not his firstexperience of City work his pre-polit-ical career included stints atGartmore, NatWest and the GuardianMedia Group.

His experience means that Mynersmight appreciate more than most thelucrative nature of the non-exec roles

available to ex-ministers at a loose end.The going rate for a top-rate ex-Cabinetmember, such as Peter Mandelson, fora semi-formal advisory role is a cool200,000 a year for a couple of days amonth. Those at the bottom can stillbag about 50,000 for one day a week.

Companies are often keen to get ex-ministers on board for a variety of rea-sons but the most salient is usually abulging contacts book.

Ken Brotherston, chief executive ofexecutive search firm Kinsey Allen toldCity A.M.: Theres a fairly well-beatenpath [into the City] for ministers withlots of contacts, helping to oil the wheels and effect introductions. Itsabout the profile, the contacts and theability to help things happen.

In addition, ex-ministers offer com-panies an insight into the practical workings of government, helpingthem predict the next regulatorythreat. Kit Bingham of executivesearch firm Odgers Berndtson says anex-ministers main marketable skill isknowledge of the machine. Its help-ing with forecasting.

Lord Mynerstakes freshjob in the City

BY JULIET SAMUEL

POLITICS

THE US and Brazil will work togetherto pressure China on its undervaluedcurrency, US Treasury secretaryTimothy Geithner indicated yesterdayin comments that reinforced anemerging alliance between the Western Hemispheres two biggesteconomies.

In his one-day visit to Brazil,

Geithner avoided mentioning China by name. Yet Geithner attributedsome of Brazils recent trade prob-lems to countries that understandthe value of having an undervaluedcurrency a clear reference toChinas yuan -- and said that the USwas committed to seeking a solution.

We have a common interest withBrazil and other emerging economiesthat growth is balanced, he said.Brazil and other emerging markets

cannot address these challenges bytheir own policy choices alone, headded. Its now more importantthan ever that we work together.

New Brazilian President DilmaRousseff, who took office on 1January, has identified Chinas under- valued yuan as one of the biggestthreats to Brazils economic boom.

Brazils economy grew seven percent last year, but the pace of growthis expected to slow this year.

US backs Brazil in currencywar with China over yuanBYHARRY BANKS

WORLD ECONOMY


Lord Myners has a number of non-executive roles in his portfolio

POLITICS AND THE SQUARE MILEFOUR EX-MINISTERS CASHING IN WITH CITY ROLES AFTER THEIR GOVERNMENT

POSTS

1Second to his old boss Tony Blair,Lord Peter Mandelsonis about as big a gun as they come in the ex-ministerial world. He recently scooped up an informal advisoryrole at Lazard, likely to be worth six figures a year.

2Baroness Shriti Vadera recently snapped up two non-exec roles at BHPBilliton and AstraZeneca after two years in ministerial roles that includ-ed stints in the business department and cabinet office until 2009.Before joining government, she worked in investment banking.

3After six years in Blairs Cabinet and two years as healthsecretary, Patricia Hewitt cashed in with advisory rolesat Alliance Boots and Bupa. She was then caught out bya Panorama sting in 2010 giving lobbying advice.

4Former education secretaryRuth Kelly spent three years as a juniorminister and two years in the Cabinet until 2008 before quitting as an

MP in May last year. She quickly scooped up a lucrative job leadingHSBCs strategy unit, reportedly for a six figure salary.

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Samsung GALAXY S. Now with afilms & games package worth over 50.

With stunning clarity and superfast access, enjoy films, games and over100,000 apps from Android Market including GoogleMaps.

Screen images are simulated. Terms and conditions apply. See samsung.com/uk/galaxys for details 2011 Samsung Electronics Co. Ltd. Google and Android are trademarks of Google, Inc. Inception 2011 Warner Bros. Entertainment Inc. and Legendary Pictures. All Rights Reserved Inc 2011 Gameloft. All rights reserved. Gameloft, the Gameloft logo and N.O.V.A. Near Orbit Vanguard Alliantrademarks of Gameloft in the U.S. and/or other countries.

ACTIVIST investor Laxey Partnersrenewed its calls for change at

Alliance Trust yesterday, describingthe boards approach as a poisonpill for its share price.

Laxey, which has a 1.3 per centstake in the 2.5bn investment trust,has demanded the board reduce itspersistently large share price dis-count to its net asset value.

Laxey wants it to set up a discountcontrol mechanism (DCM) to trigger a

share buyback to bolster the price ifthe discount rose above ten per cent.

They stand out a mile as having abig discount, said Laxey founder ColinKingsnorth.

Isle of Man-based Laxey also calledfor reform of the voting system that

calculates the voting position ofmembers of Alliance Trust Savings(ATS), which holds 21.3 per cent of

Alliance. The scheme proportionatelyscales up the responses of ATS mem-

bers that vote to represent all poten-tial votes. Laxey argues that thisinflates the share of those that vote,

which include Alliances board mem- bers, giving directors undue influ-ence. We believe the stock market

views both the lack of a DCM and theshare enfranchisement scheme as apoison pill which is depressing theprice of your shares, said Laxey direc-

tor Michael Haxby in the letters.But Alliance chair Lesley Knox has

said the board will narrow the dis-count by improving investment per-formance rather than buying stock.

Laxey has asked for a vote on theproposals at the AGM on 20 May.

Investors callfor changesat Alliance

LONDONS asset management industry body said yesterday it was not con-vinced proposed new EU regulation offinancial trading platforms wouldimprove the markets.

The Investment Management Association (IMA), whose membersmanage 3.37 trillion of assets, saidplans to define venues as organised ormultilateral trading facilities were too

broad.

In its submission to the EU Marketsin Financial Instruments Directive

(MiFID) consultation, IMA wholesaledirector Guy Sears said: Rules for non-equity markets should be specific toeach instrument and should not neces-sarily be modelled on equity markets.

Sears said he understood why the EU wanted a clear definition for the waterfall of market service providerscaught by MiFID, but was not con-

vinced the new category of organisedtrading venuewill result in a bettermarket structure. The OTF concept is

too widely drawn, and the meaning oforganised unclear, Sears said.

Trading in small caps setto be volatile this Friday

TRADING on Londons AlternativeInvestment Market (Aim) may be

volatile on Friday because this iswhen CMC Markets will close out anyAim share bets made by its clients.

CMC delisted trading in the juniorindex with no new positions opened

via its trading platform on Aimshares after 21 January .

Any Aim bets by CMC clients thatremain open will be closed out at theclosing price on 11 February.

CMCs decision follows its move

last year to stop trading in stocksbelow a certain market capitalisation

and reflects the firms switch to anew technology platform and itsfocus on core liquid markets.

It could be a very interesting dayfor the Aimmarket and Aim shares asthe CFDs get closed out, Atif Latif,director of trading at GuardianStockbrokers, said.

The closing of CFD trades will havean influence on the physical Aimmarket as providers of the financialinstruments have to hedge the trades

by holding the actual stocks to pro-tect their positions.

Latif said as much as 50 per cent of

Aim market positions could be heldvia CFDs.

Asset managerswarn on EU rules

BYALISON LOCK

FUND MANAGEMENT

CLEARING platform LCH Clearnet isto clear all trades on freight and com-modity derivatives on trading venueClearTrade Exchange.

Singapore-based Cleartrade is thefirst regulated venue for over-the-counter cleared shipping and softcommodities derivatives. For the firsttime, screen trades will be fed auto-matically in real time from processingto clearing. The process will reduce

risk and speed up the clearing processto allow higher volumes of trades.

LCH Clearnet toclear real-timefreight platform

FUND MANAGEMENTFINANCIAL MARKETS

MARKETS


Alliance Trusts chief executive Katherine Garrett-Cox (pictured, left) and Laxey Partners founder Colin Kingsnorth (right).

ALLIANCE Trusts share price discountto its net asset value (NAV) is now 16.5per cent, far wider than peers such asRIT Capital Partners, trading at a 2.5 percent premium, or F&C Investment Trustwith a 9.7 per cent discount.

It means Laxeys stake, valued at37.05m by share price on 26 January, isworth 7m more in net asset value, at

44.03m. The two letters, to the boardand shareholders, follow Laxeys com-plaint on 10 November last year, whichcalled for an open debate over discountcontrols. It was rejected by Alliancesboard.

The board doesnt think discount con-trols are in the best interests of all share-holders, but more to benefit short terminvestors, sources familiar with Alliancetold City A.M. The board isnt averse toshare buybacks in any way but wants totake different factors into considerationtoo.

Alliance, an industry heavyweight that

was established in 1888, also dismissesthe charge that its directors benefit fromvotes, saying the directors combinedshareholdings made up less than one percent of Alliance Trust Savings 21.3 percent holding. However, Laxey contends

that just 0.5 per cent of ATS investorsvote, giving those that do a significantadvantage.

Numis analyst Charles Cade saidAlliances strategy to improve perform-ance was showing signs of success and itwas important to create demand for itsshares in order to narrow its discount.

Laxeys complaint is not the first time

Alliances investors have queried its dis-count. In 2008, another investor, TroyAsset Management, built up a stake inAlliance and raised support amonginvestors, but despite months of negotia-tions with the board was unsuccessful.

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RENEWED demand for traditionaltwo-storey homes helped house-

builder Bellway post a 7.6 per centrise in its average sale price yester-day.

Bellway said in an update that itsold 2,332 properties in the sixmonths to the end of January, a riseof 3.8 per cent on last year.

The FTSE 250-listed firm has shift-ed its property mix away from flatsin the past year, which has helpedpush its average property sale priceto 168,000 at a time when property

values have dipped.Around 65 per cent of Bellway cus-

tomers currently buy more tradition-al homes, though finance director

Alistair Leitch said this is likely to

stabilise as a swathe of flats in EastLondon start to sell in the run-up tothe Olympics.

Leitch said the overall pick-up insales had potential to continue in2011. The early signs that weve hadin January are encouraging, he said.

Can we keep that momentumgoing through to Easter? ... As longas we dont have anything untowardhappening to the UK economy or tothe world political situation, then

we should be okay, Leitch said.Bellway shares rose 2.8 per cent to

close at 657.5p yesterday.

A move backto houses aidsBellway salesBYMARION DAKERS

PROPERTY

ST MODWEN Properties swung backinto annual profit and net assetgrowth yesterday, and pledged to payshareholders their first final dividendin two years.

Pre-tax profit at the firm, whichspecialises in brownfield sites aroundEngland, was 37.5m for the year,

compared to a 119.4m loss in 2009.St Modwens property values rose

three per cent to 1.1bn in the year to30 November.

Vacancy levels in the firms proper-ties have also dropped from 17 to 12per cent.

Despite some of the gloomier fore-casts to the contrary, we have alsocontinued to benefit from the rela-tive resilience of our occupier mar-kets, underpinned by our own focus

on specific active asset managementinitiatives, the company said.

St Modwen returns to profit onrising rents in regional propertiesPROPERTY


ANALYSIS lBellway home sales in six months to 31 January

Houses account for

65per centof sales

(up 5 per centyear-on-year)

Total home sales:

2,332(up 3.8 per cent

year-on-year)

Flat sales:

816

House sales:

1,516

Average priceper property

168,000(up 7.6 per cent

year-on-year)

Traditional two-storeys boost developerDURING the debt-fuelled property

boom, developers built endless blocks of flats. Many of these werelocated in so-called regenerationareas, downtrodden urban waste-lands on the edge of Britains former

industrial cities like Manchester andSheffield; many now stand empty, atestament to the industrys collec-tive stupidity.

Part of the problem was centralgovernment-imposed housing densi-ty targets, which encouraged devel-opers to build one-and-two bedroomflats rather than family homes.

These targets have since beenscrapped by the coalition govern-ment, and Bellway yesterday

thanked a shift away from apart-ments to traditional two-storeyhouses for encouraging trading in

January.All in all, it was a solid first-half

performance, with completions up

3.8 per cent year-on-year. The averageselling price was up from 156,000to 168,000, and operating marginsare up 100 basis points year on year.RBS estimates that profit wasaround 27 per cent higher, againstguidance in the December state-ment for growth in the region of 20per cent.

The outlook also appears to beimproving. Bellway is the first in thesector for some time to report a

higher order book, with orders upthree per cent year-on-year to402m.

Taken together with better firsthalf sales, this suggests the group is

being slightly too conservative when

it says it expects volumes to be flatthis year, although profit growth will largely come from recoveringprices and higher margins. With theshares trading on around 0.72 times2011 net asset value bang in line

with the sector we would suggestcautious buying going forward.

BOTTOMLINEAnalysis by David Crow

ANALYSIS lBellway700

650

600

550

500

p


657.507 Feb

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9/28

8/7/2019 Cityam 2011-02-08book

10/28

PRICE OFLOVE RUNS

HIGH FOR STVALENTINE

WITH heart-strewn cards and lavish bou-quets lining the shelves of the Citysshops, it seems even the most business-focused of postcodes cant escape theromantic distractions of St ValentinesDay.

So its lucky that bonus season is in fullflow, as the VAT hike and inflation com-

bine to push the expected Valentinespend up from 550 to 595 this year.

But it appears that rising prices cantdissuade romantic Brits from splashingout, with long-haul destinations New Yorkand Las Vegas reappearing on the top five

Valentines 2011 destinations, accordingto travel website Expedia.

For those more focused on purse stringthan heart strings though, the ever-pru-dent Institute of Chartered Accountantsof England and Wales, which has been

busy adding up the cost or the romanticday, has a few suggestions for how to cutthe cost of romance.

UnfortunatelyThe Capitalistcant imag-ine many bankers wives will be overlyimpressed with a frozen ready meal andsecond-hand jewellery both of whichare included in a list of VAT-free tips fromthe industry body.

with singer James Morrison of You Give MeSomething fame (pictured above) perform-ing on Saturday night, and the EnglishChamber Orchestra providing musicalaccompaniment. The orchestra even played a

Wigley-composed tune, which The Capitalistcant help hoping might pop up on iTunes.

A SHOT AT ROMANCEFor singles in the City, how better to spendthe money youve saved on chocolates andflowers over the year than by investing it inthe search for everlasting love? On Saturday,

lonely hearts can enjoy an open bar and achance of romance at Londons first pre-matched singles ball at the HurlinghamClub in Fulham. To avoid the usual awkward

moments, organisers Antipodate are put-ting attendees in touch with a com-

patible date before theevening. At least that way

potential Casanovas aresaved the trouble of

coming up with that perfecchat-up line.

OWN GOAL A record afternoon of scoring in theEnglish premier league usually comes withfew repercussions beyond some particular-

ly painful heads come Sunday morning.But for Sporting Index this Saturdays

tally of 41 goals in eight games meant arather higher price as it notched up a500m payout. The problem wasnt somuch the volume of goals but the earlyscoring by top teams both Arsenal andManchester City had goal-heavy first halvesthat left Sporting Index turning out itspockets after 45 minutes.

We knew the writing was on the wall athalf-time, said a spokesman for the firm. Ifonly Arsene Wenger had such foresight

LIFE BEGINS AT 50There were doubtless a few tired souls inthe City yesterday in the aftermath of the50th birthday celebrations of Bob Wigley

(right), the former Merrill Lynch bankerwho chairs Yell, among other posts.

Wigley took over the luxury LimewoodHotel in Hampshire, owned by Ineosowner Jim Ratcliffe (a client of his from hisMerrill days), and entertained guestsincluding Lastminute.com founder BrentHoberman, dragon Peter Jones andGreg Barker, the minister from theDepartment of Energy and ClimateChange. The Capitalist is reliablyinformed that all ages were cateredfor at the weekend-long festivities,

New York is back on the list of top Valentines destinations for romantic mini-breaks

The Capitalist10 CITYA.M. 8 FEBRUARY 2011

EDITED BY

ELIZABETH FOURNIERGOT A STORY? [email protected]

Singer JamesMorrison per-formed for

guests at BobWigleys50th birth-day celebra-tion lastweekend

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ANALYST VIEWS: HAS RANDGOLD RESOURCESTURNED A CORNER? Interviews by Marion Dakers

DMITRY KALACHEV | CANACCORD GENUITY

We knew this would be a challenging quarter, but the firmthinks the Ivory Coast issues will be resolved this year.

RANDGOLD Resources was one of thebiggest risers in the FTSE 100 yesterdayafter soaring gold prices gave its fourth-quarter results a boost.

Gold sales for the quarter rose 25 percent on last year to $145m (90m),despite turbulent elections in the IvoryCoast hitting production at Randgolds

Tongon mine.The firm said the 23,400 ounces of

gold produced at Tongon would haveadded $21.7m to annual profits.

During 2010, Randgold produced316,539 ounces of gold, or 35 per centless than 2009.

But Randgolds pre-tax profit for thelast three months of 2010 was $50m,up 43 per cent compared to last year,on revenues of $144.8m.

The price of gold rocketed from lessthan $1,100 per ounce to more than$1,400 in 2010, as investors piled into

what is seen as a safe asset.Randgold expects to produce up to

790,000 ounces in 2011, representing a70 per cent increase on last year.

The firm also hopes to press ahead

with expanding its Loulo mine this year, having brought in experiencedengineer Ted de Villiers to oversee newunderground exploration at the site inMali.

Overall, costs during the quarterrose 13 per cent over the year due to dif-ficulties at the flagship Loulo mine,including power cuts and higher trans-portation costs.

Loulo had its share of problems in2010 but its total production of 316,539ounces for the year was in line withmanagements updated forecast, saidchief executive Mark Bristow.

Randgold shares closed up 2.6 percent at 51.10 yesterday.

Gold prices

boost profitat Randgold

Issued by HSBC Bank International, a trading name of HSBC Bank International Limited, HSBC House, Esplanade, St Helier, Jersey JE1 1HS. HSBC BankInternational is regulated by the Jersey Financial Services Commission for Banking, General Insurance Mediation, Investment and Fund ServicesBusinesses. Licensed by the Guernsey Financial Services Commission for Banking, Collective Investment Schemes and Investment Business. Licensed byFinancial Services and Markets Act 2000, including the Financial Services Compensation Scheme. However, HSBC Bank International Limited is a memberof the Depositors Compensation Scheme as set out in the Banking (Depositors Compensation) (Jersey) Regulations 2009. HSBC Bank International Limitedis a participant in the Guernsey Banking Deposit Compensation Scheme. The Scheme offers protection for qualifying deposits up to 50,000, subject toIsle of Man are protected by the Isle of Man Compensation of Depositors Regulations 2008. For further information on these schemes, please visit theImportant Information section on our website www.offshore.hsbc.com/1/2/important-information. Copies of our Terms and Conditions and AuditedAccounts are available on request. Approved for issue in the UK by HSBC Bank plc. To help us to continually improve our service and, in the interest ofsecurity, we may monitor and/or record your communications with us. HSBC Bank International Limited 2011. All Rights Reserved.

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BYMARION DAKERS

MINING


When it makes sense to shun the bigger banks

WHEN BP announced itsrecent share swap with theRussian oil group Rosneftthere was a sharp intake of

breath amongst corporate financiers

working for the likes of Credit Suisse,Goldman Sachs and Bank of AmericaMerrill Lynch. None of the bulge

bracket firms were named as advisersto BP on the deal. Instead the man-

date went to Philip Lambert, a banker who plied his trade at KleinwortBenson before setting up his ownMayfair-based firm.

One person not surprised in theleast by this is Mervyn Metcalf, whomI met yesterday to discuss the latestgoings on in the market.

Metcalf, now managing director of boutique investment bank GlobalLeisure Partners, argues that it is eas-ier to build client relationships at a

smaller focused bank. The relation-ship tends to be more personal in a

boutique and consequently is oftendeeper and stronger.

Metcalf, who has advised clients

such as the Guardian, Liberty andStonegate Pub Company (backed byTDR) , says that building relationshipsat the bigger banks can sometimes betricky. So many people felt that theyhad to be included in a meeting thatit became difficult to achieve a rap-port with a client.

The former Merrill banker is advis-ing the bookmaker BetFred in its bidfor government bookmaker the Tote.(A whole load of big banks would

have loved to have been on that deal,he says). Its a process that is now inthe final round with six potential

bidders through to the final round where BetFred is thought to be along

with rival bids including one fromMartin Broughton, the former BA andLiverpool football club chairman.

Theres also competition fromfavourites Gala Coral.

Meanwhile, the abandonment ofthe recent London offering for theRussian coking coal firm Koks was a

blow for all advisers, namely UBS(Pavel Ilive), VTB Capital (AlexMetherell) and Citis Steve Kale. Butlets not assume it means curtains for

the London listing of Nord Gold, thegold unit of Russian steel groupSeverstal. The roadshow is ongoingand the pricing is due on Friday, saidone adviser yesterday, still hopeful

the group can raise up to 900m.Advisers point to the fact that NordGold is somewhat gold-plated; its thefirst Russian float to qualify for a pre-mium listing under the UKLAs listingrules and its primary listing is inLondon rather than Moscow. If allgoes to plan, advisers at MorganStanley, Credit Suisse and TroikaDialog should be knocking back the

vodkas by the [email protected]

THE INNER CIRCLE

DAVID HELLIER

CHARLES KERNOT | EVOLUTION SECURITIES

There remains considerable uncertainty over Randgolds

immediate outlook in Ivory Coast.

JOHN MCGLOIN | COLLINS STEWART

Randgold is mid-transition from a medium-sized minerwith open pits to a massive underground miner.

ANALYSIS lRandgold Resources6,500

6,000

5,500

5,000

4,500

p


5,110.007 Feb

8/7/2019 Cityam 2011-02-08book

12/28


GOVERNMENT plans for a crackdownon non-doms could hit Britains eco-nomic recovery and cause an exodusof wealth creators from the City, taxexperts warned yesterday.

Chancellor George Osborne is con-sidering plans to introduce a flat-rate levy for the 120,000 non-doms people residing in the UK, but notdomiciled here to avoid paying UKtax on their foreign earnings in anextension of a punitive tax regime

introduced by former PrimeMinister Gordon Brown.

International mobility partner atPricewaterhouseCoopers Sean Drurysaid: If we reduce the tax benefits forforeign nationals working in the UK,theyre going to think twice aboutcoming here. There is a risk if thereis a large outflow of non-doms thatactually the tax take would reduce.

He added: This is yet another roundof discussions around non-dom taxa-tion. The community is looking for asettled regime in order to make longterm decisions about location.

The crackdown on the super richcomes as the government plansinvestor visas to make it easier formultimillionaire foreigners to live andinvest in Britain.

Drury warned the changes sent

conflicting messages to wealthy businessmen, which could reduceBritains status as an attractive destina-tion for international investors.

Gordon Brown introduced a 30,000annual charge for non-doms who havelived in Britain for seven years or morein 2007.

However, the levy has been seen as afailure after it raised only 162m andresulted in 16,000 rich businessmenleaving the country.

In opposition, George Osborne advo-cated a levy of 25,000 per year for allnon-doms in order to raise as much as

3.5bn for the Treasury. Any attempt to impose a new,

stricter regime would hit high profilenon-doms, including Conservativeparty donor Lord Ashcroft.

Harsher charges could however helpcoalition plans for an increase in the

basic income tax threshold, in a devel-opment that would be seen as a winfor the Liberal Democrats.

Nick Cleggs party campaigned atthe general election to raise the basicincome tax threshold to 10,000 andhas also called for non-dom tax loop-holes to be closed.

The Treasury estimates it willreceive 350m for the last tax yearfrom non-doms under the presentregime. This is on top of the approxi-mately 4bn the Treasury alreadyreceives in UK income tax each year.

Fears of Cityexodus fromNon-dom planBYRICHARD PARTINGTON

POLITICS

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ONLINE gaming firm 888 said yester-day that it remains hopeful of beingtaken over by rival Ladbrokes afterreporting better-than-expected fourth-quarter revenue.

The group said operating profitincreased 18 per cent on the previousquarter to $71m (44m).

The performance was boosted by aturnaround in the performance of thegroups poker business following arelaunch in the middle of last year.

888 was hit hard by a sharp decrease

in demand for online poker, seeing itsshare value fall a staggering 58 per centover 12 months.

Chief executive Gigi Levy said: Ourmarketing activities have driven recordnumbers of players to our sites, andgrowth was achieved across our busi-ness lines. We are very pleased with theresults delivered during the last quar-ter of 2010, especially the record 18 percent quarterly sequential growth.

He added that negotiations withLadbrokes are continuing and there areno major obstacles in the way of a deal,contradicting claims the two sidescould not agree on a price.

888: Ladbrokes deal is on track

AstraZenecacancer drugfails its trials

ASTRAZENECA has dropped its exper-imental prostate cancer drug ziboten-tan from the late stages of trials, itsaid yesterday.

The pill failed efficacy tests follow-ing a review by the Independent DataMonitoring Committee (IDMC).

The withdrawal of the product is ablow to the UKs second largest drug-maker, which has also seen trial fail-ures for separate cancer drugsrecentin and vandetanib.

The company is now pinning hopeson the drug passing an alternativetrial, in which it is combined withchemotherapy.

Prostate cancer is the second mostcommon cancer in men.

While R&D is becoming more sci-entifically challenging, governmentsare adding ever greater layers of regu-lation to clinical trials, driving upcosts and development times, com-mented Philip Stevens of research con-sultancy the Covent Garden WritersGroup.

BY JULIAN HARRIS

PHARMACEUTICALS

M&S POACHES NEW ONLINE BOSS FROM TESCO

MARKS & Spencer has poached Laura Wade-Gery from supermarket group Tesco to headits internet business, underscoring new boss Marc Bollands commitment to growingsales online. Wade-Gery will join as executive director of multi-channel and e-commerceas the retailer aims to double online sales by 2013-14. Picture: Micha Theiner/ CITY A.M

ANALYSIS lAstraZeneca3,200

3,100

3,000

2,950

p


2,957.007 Feb

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Consumer News14 CITYA.M. 8 FEBRUARY 2011

MORE NEWSONLINE

www.cityam.com

MOSS BROS yesterday sold its 15 HugoBoss outlets in a move to concentratemore on its own brands.

The 16.5m deal sees Hugo Boss tak-ing back the stores, two of which are inthe City.

Moss Bros, which also trades asSavoy Taylors Guild and Cecil Gee, hasrun Hugo Boss stores under franchisesince 1995.

But its chief executive Brian Brick isaiming to transform the companythrough changing product ranges andcost cutting.

Meanwhile, like-for-like sales rose byseven per cent in the 26 weeks to 29

January, the retailer said yesterday.Brick said: The company is going in

the right direction.We have the right product ranges

now and we are concentrating on whatwe are good at.

Thats why we have sold the Boss

franchises, so we can concentrate on what we do best and that is formalwear.

However, Moss said it would contin-ue to stock some Boss lines in its ownstores.

The deal means that Moss Bros isnow operating debt free.

Brick said that the money generatedby the sale would be used to revampsome stores and open others across theUK. We are on the lookout for morespace, he added.

Moss Bros inBoss sell-offBY JOHN DUNNE

RETAIL

NEWS | IN BRIEF

Comet job consultation startsElectricals retailer Comet which willshut 14 of its service centres yesterdaybegun consultations with 411 affectedstaff as it seeks to make redundancies.Among those sites affected include theelectrical giants customer service centrein North Lanarkshire with the loss of 40

jobs. The company is centralising its dis-tribution network in a drive to be moreefficient in the tough consumer climate.

Staff to work on Royal Wed dayAbout 400 staff at a floor company havebeen told to work on Royal Wedding day,even though the government hasdeclared it a bank holiday. The GMBunion said that Lancashire-basedInterfloor has told staff that 29 April willbe treated "as a normal working day".Anyone wanting the day off mustrequest to take the day from their holi-day entitlement, the union said.

HAWKPOINT was the lead adviserfor Moss Bros on the Boss deal.

Altium Capital was also involved inthe negotiations which, because ofthe long relationship between thetwo retailers, went smoothly.As a Boss franchisee, the team atMoss knew their counterparts welland the price and details of the salewere agreed by the two partieswithout any posturing or tough talk-ing, said those close to the deal. Thefact that Moss will still stock someBoss items in its stores will see therelationship continue in some form.Hawkpoint advises corporates, finan-cial institutions, private equity hous-es and governments throughoutEurope. The company employs 100staff in London, Paris and Frankfurt.Meanwhile international investmentbank Altium was also in the back-ground, helping the deal through.It specialises in acquisitions and dis-posals. Moss Bros chief executive

Brian Brick described the negotia-tions as like dealing with friends asthe agreement was signed andsealed without any fuss.

HAWKPOINT

ALTIUM CAPITAL

ANALYSIS lMoss Bros

26

25

24

p


27.007 Feb

BRIAN Brick is in the middle of aturnaround plan to restore MossBros to health after the ailing 88-

year-old retailer lost its way.His reputation in the clothing

industry is that of an effective, low-key retailer with an eye for detail.

The scale of his task was shownby a pre-tax loss of 3m in the firstsix months of 2009. The perform-ance of the hire shop was in partic-ular hit by the downturn incorporate hospitality.

But Brick is an experienced retail-er who built up a family business.

In 1985 Brick and his brother Alex took over his fathersmenswear business and re-brandedit Suits You.

They built this into a multi-brand menswear business and sold

SRG (Speciality Retail Group) toGresham Private equity in 2005.SRG was the parent company ofSuits You.

Brick became a non-executive

director at Moss Bros inSeptember 2008, and chief execu-tive in January 2009. He took thepost after the former chief execu-tive Philip Mountford had departedand Moss Broshad also facedan aborted 4 0 mtakeover bythe nowd e f u n c tI c e l a n d i cretail investorBaugur.

Brick lives inS t a n m o r e ,Middlesex.

BY JOHN DUNNE

PROFILE

Brian Brick breathesnew life into outfitter

BRIAN BRICK

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THE euro dropped to a two-week lowagainst the dollar yesterday slipping0.2 per cent to $1.3551, after month-on-month German industrial orders fellby 3.4 per cent in December.

The soft data from the Eurozonespowerhouse economy promptedinvestors to book profits after theeuros new year rally. But, German neworders were up by almost 20 per centcompared to December 2009, and themonthly data was an expected correc-tion following Novembers surge,according to INGs Carsten Brzeski.

German industrys positive trend isunlikely to reverse, he said.

THE UKs housing market slump hascontinued into this year, withdemand, supply and prices all drop-ping in January, it was revealed today.

However, London looks set to buckthe trend. Prices in the capital areexpected to increase over the nextthree months, according to the latestRoyal Institution of CharteredSurveyors (RICS) survey.

There is a very clear regional pat-tern emerging with London seeing agreater level of price resilience, saidRICSs Ian Perry, while in much ofthe north and midlands, the marketremains under greater pressure.

Surveyors expect the number ofsales in the capital to grow over thecoming months.

Overall, the markets downwardtrend is beginning to slow, suggestingit will soon bottom out. The propor-tion of surveyors reporting a drop inprices fell to 37 per cent in January,from 50 per cent in December and 53per cent in November.

A majority 56 per cent reported

no change in house prices. There remain far more surveyors

reporting a fall in prices, 37 per cent,than those reporting a rise, six percent, creating a headline balance of-31 per cent. However, this was themost positive the balance has beensince July last year, RICS said.

And the fall in both demand andsupply also looks set to level out, pos-sibly stoking a rise in activity for 2011.The fall in new vendor instructions, which indicate supply, slowed to abalance of -3 per cent, up from -14 inDecember. Demand is still falling, at -7, yet this is an improvement onDecembers balance of -12.

London set to

escape houseprice slump

DEFICIT cuts and deregulation arerequired to boost economic growth inJapan, the Bank of Japans governorMasaaki Shirakawa said yesterday.

Japans fiscal situation is of coursein very bad shape, he said. As historyshows, no country can continue to runfiscal deficits forever.

The Bank could increase its bondpurchases if the economic situationdeteriorates further, he said, yetwarned that this could give marketsthe impression that it was directlyfinancing government debt.

Shirakawa was cautiously optimisticover Japans economic outlook.

Bank of Japanurges debt cutsEuro falls on backof German data

BY JULIAN HARRISHOUSING

EUROZONE ECONOMY

ASIA ECONOMY

Economics 15CITYA.M. 8 FEBRUARY 2011

HAVE YOU CUT YOUR SPENDING BECAUSE OF THE VAT RISE?Interviews by Marion Dakers

IN ASSOCIATION WITH

www.RateSetter.com Customer Phoneline: 08442490115

Save or Borrow peer to peer at RateSetter.com

Ive got a quite a big family, and wehave noticed an extra 15 or so onthe shopping every week, althoughthis is not entirely downto the VAT rise. The riseis one of many thingsthats costingme.

ALLISTER AUGUSTIN |

NOMURAI have spent a bit less because of it.I dont buy as many DVDs or treats.I think the government should lowerthe VAT and focus onhelping companies togrow more and getmore people intowork.

JOHN LAUDRUM |RFIB GROUP

I have definitely noticed pricesgoing up, but its a combination ofthings that make it moreexpensive. We are prob-ably spending less,because of thewider context ofthe recession.

STEWART GABRIEL |ROCELA

NEWS | IN BRIEF

All time high for pension assetsPension fund assets in the worlds 13major markets hit a record high of $26trillion (16 trillion) last year, it wasrevealed yesterday. Assets grew by 12per cent in 2010, after a 17 per cent risein 2009. The uptick comes after thedownturn in 2008 when assets dropped

by 21 per cent, according to the consul-tancy Towers Watson. Global pensionassets now amount to 76 per cent ofglobal GDP, substantially higher than the2008 level of 61 per cent.

Trichet praises Eurozone watchdogEuropes new economic super-watchdogwas talked up by European central bankpresident, Jean-Claude Trichet, yester-day. The European Systemic Risk Board(ESRB), of which Trichet is also presi-dent, will single out problems bubbling in

individual countries if they pose a risk tothe wider system, he said. The ESRB willflag emerging problems, he said,although the body is toothless to enforceits verdicts on individual states. AndTrichet warned against the policy offorcing private sector investors to takeon some losses from debt restructuring,a procedure known as haircuts.Policymakers should simply apply theprogramme of rescue packages, he said.In the case of haircuts, the short-term

investor makes money, the other loses.

Consumer credit spikes in USAmerican consumers boosted their cred-it card debt in December for the firsttime since August 2008, official datashowed yesterday. Revolving credit carddebt climbed by $3.5bn (2.16bn), whiletotal credit outstanding climbed $6.1bn,well above the expectations of mosteconomists. We expect the headlineseries to increase further in the comingmonths, said Barclays Theresa Chen.

ANALYSIS lProperty sales

40

30

20

10

Average salesper surveyorover 3 months

1997 1999 2001 2003 2005 2007 2009

Source: Royal Institution of Chartered Surveyors

8/7/2019 Cityam 2011-02-08book

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AOL yesterday announced it hasbought fast-growing news source theHuffington Post in a deal worth$315m (196m).

As part of the deal AriannaHuffington, co-founder and editor inchief of the US-based media outlet,will take charge of all of AOLs edito-rial content.

AOL chief executive Tim Armstrong said the deal gives hisfirm an ability to accelerate ourcore strategy, accelerate the advertis-ing strategy, and put a different brand ability in content mediaspace.

AOL hopes to drive the sites rev-enues from $31m last year to around$60m in 2011. Ian Maude, onlineanalyst for Enders Analysis told CityA.M. the deal fits AOLs strategy ofmoving towards a low-cost, editorial-ly driven content base but warnedthe price seems high.

He said: AOL is obviously assum-ing it can grow its audience and

advertising revenue but even thenthis deal seems pricey.

Arianna is clearly a very impor-tant factor in the deal. Putting her incharge of editorial is placing a hugeamount of faith in her.

In short, its a successful, growing business that has attracted a lot ofattention. It isnt cheap but neitheris it Armstrongs Bebo moment.

AOL suffered sharp declines inadvertising sales and dial-up sub-scriptions in the fourth quarter of2010, driving overall revenue down26 per cent. to just $2.4bn.

The deal, which places a 10 times pre-mium on the Huffington Posts 2010revenues, comes after a string of disas-trous acquisitions by AOL.

Topping the list is its failed$350bn merger with Time Warner,which saw astronomical writedownsbefore AOL was spun off in 2009.

The firm was also badly stung when it bought Bebo for $850m in2008, before offloading it just two years later to Criterion CapitalPartners for a rumoured $10m.

AOL splashes$315m to buythe HuffPoBY STEVE DINNEEN

MEDIA

THE Greek-born co-founder and edi-tor in chief of the HuffPo as it isaffectionately known is in line fora huge paper windfall after AOLannounced it will buy the firm.

While it is unclear exactly howmuch Arianna Huffington willreceive at least three venture cap-ital firms have interests in theHuffPo, with Oak InvestmentPartners thought to own around aquarter of the business it is cer-tain to considerably add to herexisting $115m fortune.

She vowed to remain with theorganisation yesterday, saying Iwant to stay forever. I want this tobe my last act.

The self-styled media maverickhas built the organisation from aniche content provider to one of themost heavily visited news sites inthe US.

However, the AOL deal, whichwill see her take control of all ofthe firms editorial content, willtransform her from a respectedcommentator reaching 25m users amonth, to the Svengali behind asprawling network of news sourceswith an audience of around 270m.

The 60-year-old moved to the UKwhen she was 16 and was educatedat Cambridge. She was involved in a

10-year relationship with the late Times columnist Bernard Levinbefore moving to the US.

She was married to oil billionaireMichael Huffington, who ran forthe senate for the Republicans, andshe later ran as an independent can-didate for governor of California.

She was seen as a conservativecommentator until switching to amore liberal outlook in the late

1990s.She foundedthe HuffPoin 2005,along withKennethLerer, and

JonahPeretti.

BY STEVE DINNEEN

PROFILE

Arianna Huffingtonset for huge windfall

ARIANNA HUFFINGTON

$315mThe amount AOL paidfor the Huffington Post

THE HUFFINGTON POSTDEAL BY NUMBERS

26% Fall in AOLs advertisingrevenue in the last quarter

$31mThe HuffPos estimatedrevenues for last year

$60mThe revenue forecast forthe HuffPo in 2011

$20mAmount AOL will spendon the site in restruc-turing costs

25mUnique users to theHuffPo every month

270mEstimated number ofunique global users forAOLs total stock ofmedia content

Technology and Media News16 CITYA.M. 8 FEBRUARY 2011

THE Google-branded Nexus S smart-phone will end its exclusive run withthe Carphone Warehouse, withVodafone revealing it will start stock-ing the handset.

Vodafone did not confirm whenthe handset will be available but it isunderstood it could be in UK stores assoon as March. City A.M. revealed last year the handset, manufactured bySamsung, would go on sale in an

exclusive deal with CarphoneWarehouse and its partner Best Buy,

despite outgoing Google chief execu-tive Eric Schmidt claiming therewould be no follow-up phone to theoriginal Nexus One. The partnershipwith Carphone Warehouse was seenby analysts as an experiment with itsdistribution model. The originalNexus was tied to an exclusive deal with Vodafone in the UK. Despitebuilding a cult following the handset,built by HTC, failed to make a splashwhen it was released last year.

Vodafone to sell the Nexus S Googlephone after deal with Carphone ends

ALMOST half of FTSE 100 companiesnow have a Twitter account, accord-ing to research by communicationsagency The Group.

Of the UKs elite companies, 45 percent have a Twitter feed, up almost 50per cent year-on-year.

A further 25 per cent have aFacebook page, a rise of 20 per cent, and39 per cent have a YouTube channel.

Only 12 per cent have a corporate

blog, although that represents a 200

per cent rise since last year.The firm says the research showsfirms are warming to the benefits ofTwitter but remain wary about otherforms of social media.

Sony Ericsson demonstrated thepower of Facebook as a marketingtool when it used the site to promoteits new Xperia Play handset dubbedthe PlayStation Phone. The newdevice will debut at the Mobile WorldCongress event next week.

Almost half of FTSE 100firms now use Twitter

BY STEVE DINNEEN

TELECOMS

YOU cant blame AOL boss Tim Armstrong for pursuing so-calledtransformational deals: he has littleoption. Once the undeniable king ofthe web, the firm is now heavilyreliant on subscription revenuesfrom its internet service, which arefast disappearing.

The surprise is that almost 4mAmericans are still willing to pay anaverage of $18 (11) a month on topof the fee they pay their broadband

provider to access the internet with AOL. In 2010, those customers were

worth around $1bn in sales, a stagger-ing 42 per cent of overall revenues.

But AOLs US customers are fast wak-ing up. Between 2009 and 2010, thefirm lost around 1m subscribers,worth around $400m in revenues. Atthis rate, the subscription businesswill be gone in just a few years.

Thats why Armstrong is desperateto build a content hub, and there are worse places to start than withHuffington Post, one of the more suc-

cessful online-only publications.AOL has been here before, however.

Who can forget the ill-fated acquisi-tion of Bebo in 2008, which saw thefirm spend $850m on the numberthree social network before selling itfor a reported $10m last year. The mul-tiples for that deal 42.5 times 2007sales and 160 times ebitda were sim-ply ridiculous, based on massivelyover-optimistic assumptions aboutcompound growth, which provedincorrect. The price paid forHuffington Post, which is expected topost revenues of $60m this year, is lessabsurd, at around 6.3 times sales.

But it is still pretty hefty for a firmthat it is said to be turning just a smallprofit on such chunky revenues.

Investors will be hoping AOL learnt itslesson last time round.

Dont forget the ghost of Bebo pastANALYSIS | AOL has a poor record when it comesto transformational deals. By David Crow

IN FOCUS: WHAT THE DEAL TO BUY THE HUFFINGTON POST MEANS

1983AOL is founded as Control VideoCorporation by William von Meister,offering a games downloading serv-ice. Renamed Quantum ComputerServices in 1985 and finally becameAmerica Online in 1991.1998AOL buys web browser Netscape for$4.2bn (2.6bn). But Netscape over-taken by Microsofts Internet Explorer.2000AOL and Time Warner announce theworlds biggest ever merger astaggering $350bn deal which madethe new entity one of the biggestfirms in the world.2000-2002The firm is beset by problems, culmi-

nating in a quarterly loss of $54.2bn

TIMELINE | THE RISE AND FALL OF AOL

in 2002 following massive write-downs at Time Warner.2008AOL acquires social networking siteBebo, which is popular withteenagers, for a cool $850m.However, rival Facebook is steadilygaining users and soon eclipsesBebo, which looks set to become yetanother poor acquisition.2009Time Warner and AOL part compa-ny as Warner is forced to makewritedowns totalling 100bn as therecession bites.2010A wounded AOL sells Bebo toCriterion Capital Partners just twoyears after buying it for a reported

sum of just $10m.

GoogleandCarphonein

mobiledeal

TH

BYSTEVE DINNEEN

EXCLUSIVE

BY STEVE DINNEEN

TELECOMS

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brought to you by

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ANALYSIS lRexam

360

340

320

300

p


365.807 Feb

SHARES in Rexam soared yesterdayafter the British can maker con-firmed plans to sell its beverage andspecialties arm in a deal that could beworth 200m.

The shares rose nearly five per centin early trading, before closing theday up 3.4 per cent from Fridaysclose at 368.9p.

Rexam is believed to have appoint-ed Barclays Capital as advisers on thedeal, and final bids for the businessunit which makes lids for drink andfood containers are expected thisweek. Bankers have long said Rexamis an attractive target for takeover.

A Rexam spokesman said that thecompany was considering options forthe unit.

Rexam was the top FTSE 100climber just ten days ago when itsstock rose following news that it hadcompleted contract negotiations inNorth America, and signed a long-term contract with its largestBrazilian customer.

Following the completion of thesenegotiations the company forecastthat overall operating profit in itsBeverage Can North America division

in 2011 is expected to remain compa-rable to that in 2010, as improvedpricing, new customers, continuedgrowth in specialty cans and furthercost control initiatives will offset theimpact of lower net 12 ounce vol-umes.

As a result of the negotiations,Rexam has diversified the customerbase for all can sizes and has signedmedium-term contracts to recovermost of the 2011 volume loss by2013.

The company is scheduled torelease its preliminary results for2010 on 23 February.

In a trading update fromNovember, chief executive GrahamChipchase said the company expectedits results in the second half of 2010to be similar to those of the f irst.

SUZUKI Motors, Japans No4automaker, posted a 31 per cent risein quarterly profit yesterday on brisksales in Asia, and stuck to its conser-vative forecasts as competition inten-sifies in the key Indian market.

Suzuki has enjoyed robust earningsgrowth compared with most domes-tic rivals thanks to its limited expo-

sure to the stronger yen and heavyweighting in India, where majority-

held unit Maruti Suzuki India sellsevery other car.

But falling margins in India due torising raw materials prices and slow-ing growth in the countrys car mar-ket have weighed on Suzukis shares,which have been the worst performeramong Japanese auto stocks in thepast three months.

The trend of rising sales and prof-its remains, but the pace of growthhas slowed compared with the first

and second quarters, senior operat-ing officer Takao Hirosawa said, cit-

ing margin pressure from higher rawmaterials prices in India.

In the October-December thirdquarter, operating profit at the makerof the SX-4, Swift and other compactcars came to 23.64bn yen (178.6m),up 31 per cent from a year earlier androughly in line with estimates.

That brought its nine-month profitto 92.46bn yen, just shy of its full-yearforecast of 100bn yen. A survey of 21analysts put the profit at a much bet-

ter 115.8bn yen for the year to March31, up 46 per cent from last year.

Asia gives profit boost to Suzuki butcompetition in India freezes forecasts

IRISH airline Aer Lingus carried abouta fifth fewer passengers in Januarythan a year ago on the back of routecuts and a dispute with cabin crewover longer working hours.

Aer Lingus said yesterday 552,000passengers were booked to f ly with itin January, a 17 per cent decrease onlast year, and flight cancellationsmeant the numbers who actuallyflew that month were four per centbelow the booking levels.

A three-week stand-off with 215cabin crew over longer working hours

ended on Friday with crew agreeingto work the new rosters in exchangefor clarity over meal breaks, time offand the length of tours of duty.

Aer Lingus had raised the numberof annual flight hours to 850 from830 as part of cost-cutting measuresto return it to profitability.

The companys booked load factor a measure of how well an airline fillsits planes fell by 3.6 points inJanuary to just under 64 per cent.

Industrial unrest leavesAer Lingus paying costAVIATION

DEFENCE technology group QinetiQsaid yesterday it has completed theearly refinancing of its 275m creditfacility to help the firm advance amidlooming cuts to government defencebudgets and an ongoing restructur-ing.

FTSE 250-listed QinetiQ hasrenewed the revolving facility, which

was due to mature in August 2012,with a syndicate of banks made up ofBarclays, HSBC, RBS, Bank of America, JP Morgan Cazenove andUBS.

QinetiQ chief executive Leo Quinsaid in a statement: The early re-financing of QinetiQs credit facilitydemonstrates the improved strengthof the Groups balance sheet andmarks another important milestone

in our self-help programme.QinetiQ said in its interim man-

agement statement last week that itsprincipal markets on both sides ofthe Atlantic have remained underpressure thanks to governmentefforts to reduce deficits.

The firm is also mid-way through atwo-year self-help programmedesigned to streamline the businessfollowing an annual loss in 2009 / 10.

Qinetiq secures early refinancing to aidgrowth during defence spending cutsDEFENCE

NORILSK NICKEL, the worlds largestnickel and palladium producer, said

yesterday that it had suspended a buyback offer for more than sevenper cent of its shares following acourt order.

A St Christopher & Nevis courtissued the order following a legalcomplaint by Rusal.

Norilsk Nickels Corbiere unit,which made the $252 (156) per shareoffer, said it will contest the decision.

Corbiere does not believe thatthere is a basis for granting the

injunction and intends to contest theorder and the injunction reliefgranted, it said in a state-ment.

The court case in the

Caribbean Federation ofSt Christopher andNevis is part of a largerbattle between NorilskNickel shareholdersOleg Deripaska andVladimir Potanin.

Deripaska (pictured), who controls a 25 per centstake through aluminium giantRusal, has clashed frequently withPotanin over the companys strategy

and the composition of its board.Sources have said the cash-rich

miner might scrap its 2010dividend to fund the sharebuyback, which will cost

close to $3.5bn.This is seen as a blowto Deripaska, as he willnot receive any funds topay down debt at Rusal.

Norilsk, whose boardand management are

seen as closely aligned withPotanins interests, sought in

December to end the dispute byoffering Deripaska $13bn for hisstake.

Norilsk told to shelve buybackBYHARRY BANKS

MINING

Rexam stock

jumps on talkof 200m saleBYHARRY BANKS

MANUFACTURING

BYHARRY BANKS

AUTOMOTIVE

AL GORE LAUNCHES FUND FOR ASIA STOCKS

AL GORESGenerationInvestmentManagement isstarting a $500m

(310m) fund toinvest in Asianstocks.Generation is look-ing to invest incountries includingChina and India tocorrespond withAsias demands fornatural resourcesand its impact onthe global economy

Picture: REUTERS.

NEWS | IN BRIEF

SolarWorld expects sales riseSolarWorld, Germanys second-biggestsolar company by market value, expectssales to rise this year as it looks outsideits shrinking home market, particularly tothe US. In the current environment, giv-ing a sales outlook is tough, SolarWorldchief executive Frank Asbeck said yester-day, pointing to an expected drop inprices for modules and cells, the solarindustrys main products. The companyposted a 2010 operating profit aboveexpectations and proposed a higher divi-dend, boosting its shares.

Europe boost for lock makerSwedish Assa Abloy, the worlds biggestlock maker, expects some growth in its

main European market this year as con-struction expands in Germany and other

strong economies. Posting 15 per centgrowth in fourth-quarter core earnings,in line with expectations, the companysaid growth in some areas would offsetthe impact of government austeritymeasures in other markets. We haveGermany where we see a good economicsituation, we have Sweden, we haveFinland so we think we ought to beable to see some growth in Europe, saidchief executive Johan Mohlin.

Uralkali-Slivnit merger approvedRussian potash miner Uralkali said yes-terday that Silvinit shareholders hadvoted to approve their merger, which willcreate the worlds second largest produc-er of the soil nutrient. Uralkali said 90.9

per cent of the votes cast at a meetingon Friday supported the merger.

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PricewaterhouseCoopersMark Stephen has been promoted to

head of the firms UK insurance busi-ness, succeeding Andrew Kail. He willnow lead PwCs insurance work, help-

ing businesses adapt to changing regu-lations. Stephen has been with the firmfor 20 years and has specialised in theinsurance industry.

RBC Capital MarketsThe corporate banking arm of Royal

Bank of Canada has added three direc-tors to its global equities platform inEurope.

Matthew Penton has joined as adirector covering the industrial sector.He was previously at Nomura. DanieleCalabrese has also joined as a directorand sales trader covering Italianaccounts, having worked in the past at

RBS/ABN Amro and Bear Stearns.And Hugh Kingsmill Moore has

joined the firm as a director coveringrenewables and utilities. He was mostrecently at Nomura Code and hasworked at ING Barings, GreigMiddleton and Nomura International.

Merrill LynchBank of America/Merrill Lynch WealthManagement has appointed MilanDuschka as a financial adviser.

He joins the firm from ABN AMROsprivate bank Mees Pierson and will bereporting to Geoffrey Bruyn in his newrole, based in Amsterdam.

LaSalleLaSalle Investment Management hasopened a new Dubai office to be led byNick Brook, who has been based inLaSalles London office and focused onthe Middle East since 2002.

Reed SmithThe law firm has appointed a new sen-ior partner: Scott Cameron, to theEurope and Middle East corporategroup in its London office. He is US-qualified and specialises in capital mar-kets, acting for firms on all aspects ofSEC regulation and on many cross-bor-der transactions.

CITY MOVES | WHOS SWITCHING JOBS Edited by Juliet Samuel

JP Morgan Private BankAastha Gurbax (pictured) has joined the pri-vate banking arm of JP Morgan, based inLondon. She will be a vice president on the pri-vate banking team, reporting to Olivier deGivenchy. Gurbax has previously worked atMorgan Stanley as an adviser for high net

worth families and charities. Formerly, she wasa tax consultant at PricewaterhouseCoopersand Deloitte and Touche, before which sheworked in forex and specialised derivatives.

+44 (0)20 7557 7245morganmckinley.com

To appear in CITYMOVESplease email your careerupdates and pictures to [email protected] SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT

in association with

Mergers drive USdespite light volume

MERGER activity drove the Dowand S&P to two-and-a-half- year highs yesterday in thelatest in a series of mileposts

that point to more gains ahead.Buying accelerated after the S&P

500 broke through the 1,313 mark,

taking the index further into levelsthat prevailed before the financial cri-sis. More than two stocks rose forevery one that fell on both the NewYork Stock Exchange and Nasdaq, butthe day's rise came on lighter-than-average volume.

Diversified industrial companyDanaher agreed to buy medical diag-nostics company Beckman Coulterfor about $6.8bn. Oil driller Enscosaid it would buyPride Internationalfor about $7.3bn.

The size of these deals is an indica-tion that the buyers feel comfortableputting that cash to work while thecompanies being bought are under- valued, said James Dunigan, chiefinvestment officer at PNC WealthManagement in Philadelphia, whichoversees $105bn.

The level of the broader market isreasonable, but there are these indi-

vidual situations that deserve a high-er premium than the market is

getting over all.Danaher rose 2.2 per cent to $49.03

while Beckman Coulter gained 10 percent to $82.65. Ensco fell 4.2 per centto $52.13 while Pride Internationalrose 15.7 per cent to $39.80.

With the 1,313 level breached,stocks face little by way of technicalresistance until the 1,400 level on theS&P.

The Dow Jones industrial averagewas up 69.48 points, or 0.57 per cent,at 12,161.63. The Standard & Poors500 Index was up 8.18 points, or 0.62per cent, at 1,319.05. The Nasdaq

Composite Index was up 14.69 points,or 0.53 per cent, at 2,783.99.The S&P is up 4.9 per cent so far in

2011, adding to the gains it notchedmostly in the latter half of 2010. Thesize and swiftness of the advance hasprompted many analysts to call for acorrection, though none has materi-alized.

UBS raised its 2011 target for theS&P 500 index by 7.5 per cent to 1,425from 1,325, citing an improving out-look for the economy and earnings.AOL has agreed to buy TheHuffington Post for $315m. The stockfell 3.4 per cent to $21.19.Loews reported a better-than-expected 16 per cent jump in profit,sending shares of the conglomerateup 4.5 per cent to $43.27.

Volume was light, with about 6.89billion shares traded on the New YorkStock Exchange, the American Stock

Exchange and Nasdaq, well below lastyears daily average of 8.47bn.

MINERS lifted Britains topshare index higher yesterday,driven by record metal pricesand results from Randgold.

The FTSE 100 closed 53.65 points,or 0.9 per cent, firmer at 6,051.03, itshighest finish since 18 January andmarking the fourth gain in the past

five trading days.A fresh year high is being eyed with worries over the impact eurozone debt problems and the politicaltroubles in the Middle East fading,CMC Markets head of equities JimmyYates said. It will be interesting to seeif traders have the mettle to see itthrough that level (6,090.49) and holdonto gains.

Nicole Elliott, a technical analyst atMizuho Corporate Bank, said theindex was not far short of substantialresistance levels, with Januarys highat around 6,090 and the 2006 high of6,137 both being watched.

All this is despite weaker-than-expected payrolls figures last Friday,and is a confirmation of the appetiteinvestors still have for shares and howthey are willing to shrug off the oddpiece of disappointing-economicnews. The next big target for the FTSE

100 is the 6,300 area, last seen in May2008. Although shares in the UK have

had a choppy start to the year, at themoment there is no reason to doubtthat the buyers are still happy to pickup shares on weakness it would notbe surprising to see further gains asthe week goes on, said David Jones,chief market strategist at IG Index.

Miners added most points to theindex, spurred by record copperprices and boosted by upbeat corpo-rate results.Randgold Resources, up 2.6 percent, posted a 43 per cent jump inprofit and raised its dividend 18 percent.

Xstrata, set to report today, gained3.6 per cent, helped by bullish com-ment from Citigroup and Nomura.Rio Tinto, which reports later in theweek, was up 2.9 per cent.

Energy stocks climbed as appetitefor riskier assets strengthened amonginvestors, with BG Group 0.8 per centhigher ahead of results due today.

Can maker Rexam firmed 3.4 percent. The company has appointedBarclays Capital to sell its beverageand specialties arm in a deal thatcould be worth 200m.ARM Holdings was the top blue-chip gainer, 3.9 per cent higher, asNumis raised the chip designersprice target to 660 pence on promis-ing long-term revenue drivers.

On the downside, BT Group shed1.5 per cent as investors locked inprofit following results on 3 February.

Meanwhile, insurers Old Mutualand Resolution dipped 0.9 per centand 1.6 per cent respectively on the

back of recent strength. The sectorhas been supported by bullish brokercomment and persistent M&A specu-lation.

Small-cap Lloyds of London insurerChaucer said it had received takeoverapproaches from an unspecifiednumber of suitors, lifting its shares 17per cent.

There was little key economic dataearly this week for investors lookingto the Bank of Englands monthlyinterest rate decision, due onThursday. No changes were expectedto the 0.5 per cent offici

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