The Interest Rate Puzzle

The Interest Rate Puzzle – at - the best of the week's international financial media.

*** Blue chips back in fad

*** Are things all that good at Unilever?

*** Barclays closes in on Absa...investing in China...what's it like in Omaha?...and mor -------------------

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

- So much for small caps. This summer it looks like blue chips are back in fashion. On Friday the FTSE 100 closed in the black for the sixth consecutive day on Friday. That's the most sustained positive performance for eight months and meant that the blue chip index added 2.5% last week to close at 4,918 on Friday, up 16-points on the day. By contrast the FTSE 250 gained a mere 0.8% during the week, to close at 6,780.

One of the top performers in the FTSE 100 was consumer products company Unilever. The group, responsible for brands such Magnum ice-cream and Dove soap, gained 3% - after announcing that its profits rose a better than expected 8% in the first quarter - operating profits ended the period at E1.5bn euro. So does this make the shares an automatic buy? Not necessarily: the numbers aren't quite as good as they look. Click here for more:

- Barclays has said it will pay around R33bn for a 60% stake in South Africa's Absa bank. Britain's third-largest bank, which was initially stymied by Absa investors who were not happy with the price, has now gained approval from 63% of Absa shareholders, making a successful bid look all the more likely.

- Barclays traded 0.3% up at 551p on Friday. And probably for good reason. The deal will give Barclays the largest retail presence of any retail bank in South Africa - a growth market - with 30,000 staff and nearly 700 outlets

- The MPC meet today to decide whether to raise interest rates or not. But should they? Many think not. With house prices falling and retail sales getting weaker and weaker - retailers Matalan and HMV warned of tougher trading conditions on the high street last week and they are far from alone in seeing their sales growth falling - higher interest rates won't help.

- Yet here's the problem: the MPCs brief is not to control house prices but to control inflation. And inflation is already moving outside the Bank of England's comfort zone. The CPI is running at 1.9% and the RPI at well over 3%. We doubt that rates will rise today but we suspect that they should. Click here for more: ------------------- Just like the Muslim pines to visit Mecca, and the 'Catholic dreams of going to Rome', so every investor aims to make it to Omaha Nebraska: the home of the world's greatest value investor, Warren Buffett, says MoneyWeek editor-in-chief Merryn Somerset Webb in the Sunday Times. So what's it like in this investing Mecca? 'The truth is that it is pretty awful,' she notes. 'I went this year for the first time and I rather wish I hadn't.' What didn't she like? See

- We think of China as the country that 'defies economic principles with low inflation, high growth and masses of money supply', writes Karim Rahemtulla in The Oxford Club. But lets not forget the rest of China's characteristics: the corruption, the skewed government statistics and the inability of the government to control the less savoury efffects of the wave of capitalism sweeping across the nation. Surely these are good reason for investors to steer clear? Click here to see why they are not..

- 'US stocks enjoyed a monumental rally which came to an abrupt halt five years ago;' says Tim Price of Ansbacher and Co. Then they collapsed. Then they started to recover and have now retraced around half their falls. But if you look at bonds, or 'more specifically bond yields over the same period ,you realize the bond rally never stopped'. That means the two asset classes have decoupled...and that surely points to 'big problems potentially ahead'. To read on, click here

Until tomorrow,

Heather D'AltoMoney Mornin