A Life Less Affordable

UK debt: A life less affordable - at Moneyweek.co.uk - the best of the week's international financial media.

- Banker Egg surged 8% yesterday - joining the growinglist of mid-cap companies to rocket on bid rumours.

- Egg, which is 79% owned by Prudential, shot up to116p on speculation that an unnamed group had boughtthe Pru's stake. Both Egg and the Pru kept quiet - butthe blue chip insurer also traded 1% in the black onWednesday.

- More M&A gossip...more FTSE gains. The mid-cap 250traded 0.5% up, to close at new all-time records at7,257. The blue chip index also reached a new 32-monthhigh, trading 10 points up at 4,916. The All Shareindex added 0.3%, closing at 2,473.

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- Xstrata rocketed 5% - to close as the blue chip'swinner on Wednesday. Investors were impressed as theminer proved it's serious about buying Australia's WMCResources, by raising its takeover offer by A$1bn, or£410m. The bid now stands at A$8.4bn. So what's sospecial about the Aussie WMC?

- Well, WMC is the owner of the Olympic Dam mine insouthern Australia - a mine which just happens to bethe world's largest source of uranium. No wonder theAussies reckon that the extra A$1bn offered by Xstratastill only values WMC at the lower end of the group'srange.

- What's more, even if WMC accepts the offer, Xstratamust still hurdle a number of obstacles first. There'sa board to win over...the shareholders...and Xstratamust hope that no rivals will bid for the firm. Butthen the miner still needs to convince the Australiangovernment of its good intentions.

- 'Price is a matter for shareholders,' Australiantreasurer Peter Costello said yesterday. 'Thegovernment looks at the national interest. If a bid isagainst the national interest at whatever the price,it wouldn't be allowed.' Xstrata closed at £10.12.Anglo American also added 2%, while Antofagasta traded1% up.

- Potential Allders buyers have to make their plansknown by tomorrow, administrators said yesterday. Yetif no one is willing to buy the chain store by Friday,Allders may have to be broken up. As it is, more than60 firms have claimed to show an interest in the store- with Debenhams or Primark looking the most likelybidders.

- And it's been a busy week at Allders. On Tuesday,130 staff - including CEO Terry Green - were given themarching order by administrators Kroll.

- Meanwhile, Tuesday's big gainer Exel closed as yesterday'sheaviest faller. The logistics group fell 5% asinvestors locked in profits from bid speculation. ------------------ - The British consumer is getting even thirstier fordebt, according to a survey by HSBC. The bankyesterday said its borrowing enquiries in Januaryincreased by 4.4% in comparison to a year ago. Andthat's nearly 2.3% higher than December's borrowingqueries.

- So just what does this mean in figures? Well, inBritain we started the New Year with £1,060bn debthanging over us. Or, in other words, well over £1tnof unpaid bills. This is also nearly £120bn more debtthan we woke up to on 1 January 2004.

- So from 2004 to 2005 we had a 12% increase in debt.Yet did we see a 12% rise in wages, Cliff D'Arcy ofMotleyFool.com asks? No, instead wages for 2004 roseby around 4%. So, 'yet again, life becomes a littleless affordable from one year to the next,' D'Arcynotes.

- Some more perspective into the spending habits of usBrits? Well, as a nation, for every £100 we earn, weend up spending £110.

- This is of course bad news for Mervyn King, governorof the Bank of England. His Monetary Policy Committeejust two weeks ago voted to keep interest rates steadyat 4.75%.

- Then the meeting's minutes released last weekconcluded that MPC members had no inclination toeither raise...or lower...their rates. The latest newscould persuade him that the interest rate hike of1.25% seen since November 2003 may not be over justyet...

- Meanwhile, across the pond Alan Greenspan'sFederal Reserve pushed interest rates up 25 basispoints yesterday. No surprises there, then, as the Fecontinues what it calls its 'measured pace' to controlbudding inflation. This is the sixth straight rate hike, andtakes the benchmark lending rate to 2.50%.

- Yet will the move somehow pinch America's easingeconomy to life? Remember, US GDP dropped to 3.1% in2004's last quarter. This was well down from 4% inquarter three. So no, MoneyWeek friend John Mauldinsays, the US growth rate will not speed up. Insteadthe economy will be seen as weaker in the winter of2005.

- And the result of that? Well, the American marketwill certainly be lower by the end of 2005. Until tomorrow, Heather D'AltoMoney Mornin