Tuesday lunchtime business bulletin

Jan 29 2008 By Andrew Mernin

Stronger travel firms and expectations of a further cut in US interest rates ensured the London market traded on the front foot today.

Tokyo’s Nikkei 225 stock index set the pace after putting back most of its 4% decline seen on Monday, while the FTSE 100 Index followed suit in London to gain 92.1 points to 5881 by mid-morning.

Wall Street traders had earlier taken a dismal new home sales report as a sign the Fed will lower interest rates on Wednesday.

Travel companies posted the biggest gains of the session, as trading figures from Thomson owner TUI Travel allayed fears that the economic slowdown had altered the travel plans of UK consumers.

TUI also boosted investors by revealing an agreement with Lufthansa regarding a potential merger of Germanwings and its TUIfly arm.

House prices in England and Wales fell by 0.4% during December as the market continued to slow down, official figures showed today.

The drop, which pushed the average cost of a home down to £184,469, was the first decline recorded by the Land Registry since August 2005.

There is now little doubt that the housing market is slowing down, with all the major indexes reporting price falls on a monthly basis.

City firm Dairy Crest said today it had passed on higher overheads to consumers after milk costs rose by a third on last year.

Management said it could not rule out further price hikes, saying they had to balance farmers’ rising fuel and feed costs with weaker commodity markets.

The rising price of milk helped turnover at Dairy Crest’s dairies division rise by 13% in the group’s third quarter, with its food arm posting 17% underlying sales growth before the impact of acquisitions.

Chief executive Mark Allen said predicting what would happen to milk prices going forward was ``very difficult".

The pound at noon was US$1.9875 compared to US$1.9863 at the previous close while the euro at noon was £0.7433 compared to £0.7447 at the previous close.