Everyone was expecting an interest rate hike, but that did not stop the panicked murmuring about personal debt piles and mortgage costs hitting front pages.
But the market did not react to the Bank of England’s decision: the FTSE 100 ticked down only a few points after the announcement. Instead, the City was more interested in second guessing what the Bank’s next move would be. The Monetary Policy Committee has the unenviable task of trying to curb a housing market that shows no signs of drying out unaided, while not stamping out the first blooms of economic recovery. The latest Halifax house price survey showed last week that prices rose in January at the fastest pace since October 2002. Should this scenario remain unchanged for the time being, most economists believe the next hike will come early in the summer.
The European Central Bank, meanwhile, did not follow the UK’s lead. While British rates rose for the second time in three months, it opted to keep rates at 2 per cent, despite currency concerns.
The actions of Europeans were also of interest to budget airline Ryanair last week. The European Commission ruled that it had received illegal subsidies, worth around EUR4m (pounds 2.7m), from Charleroi airport in Belgium. It has been ordered to pay back around a quarter of that, but Ryanair, faced with the threat to similar deals around Europe, says it will appeal. It has also warned it may cut routes and raise fares as a result.
Despite this, the Irish group found the time to put out its January figures. Traffic was up 36 per cent against January 2002 – but that was the lowest growth rate since April. The struggle to fill its expanded capacity seems to be the biggest problem facing the carrier.
Rival easyJet also put out its traffic figures and reported a 12 per cent hike following the addition of extra routes. Meanwhile, British Airways and Air France had trouble getting traffic moving at all when security fears disrupted some of their flights.
On the corporate front, US companies were grabbing the headlines. In particular, software giant Oracle refused to give up its unwelcome battle for rival PeopleSoft when it upped its offer by a third to $9.4bn (pounds 5.1bn). PeopleSoft stood firm, however, with chief executive Craig Conway saying he could not imagine any price that would be suitable.
Sticking with tech stocks, Pixar had a lot to thank a small rainbow fish for. The computer-animation firm behind Toy Story and A Bug’s Life thanked its latest blockbuster, Finding Nemo, for a surge in net income to a record $83.9m. It recently ended its merger talks with Disney.
Elsewhere, the British flag was held aloft by Royal Bank of Scotland, which agreed to pay $360m for the credit card business of Connecticut- based People’s Bank. The move marks RBS’s first move into the US credit card market.
In Europe, the biggest deal news was centred on a merger between the UK’s Securicor and Copenhagen-based rival Group 4 Falck, while in Russia, oil groups Yukos and Sibneft finally called time out on their turbulent attempt to join forces after Yukos gave up its demands for compensation. The collapse of the deal now makes both companies targets for Western oil firms, many of which have been looking for an entrance into the country after BP’s deal with TNK last year.
Closer to home and the news was somewhat more muted. Shares in Thornton slumped after the chocolate retailer said takeover talks had melted away. The group said the offers had not met expectations. Similarly gloomy news awaited workers at Aviva. The insurer revealed it was closing its Hill House Hammond insurance brokerage and would be axing 1,600 jobs. The news for investors was better, however, when the group said operating profits for 2003 would beat market forecasts. A “strong” second half, particularly at its life and general units, was the reason.
The strangest “takeover” move of the week, however, was at British Energy. Shares in the stricken nuclear generator, which provides about one fifth of the UK’s electricity, surged after US hedge fund Appaloosa bought a 4.6 per cent stake. That got everyone’s expectations up that Appaloosa would use the holding to challenge a planned sale of the business to bondholders. Yet within a matter of days, Appaloosa, either in a severe case of indecisiveness or for reasons not yet clear, sold the bulk of its stake, making a reported pounds 1m profit in the process.
