About bikes and things…

Concerns over the economic outlook and corporate profitability in the US took their toll on the London market last week, with weakness compounded by investors’ reduced risk appetite and talk of stagflation.

The HBOS house price survey showed prices rising for a fourth month in September as cheaper borrowing boosted the property market after a year-long slowdown.

According to Quentin Smith, investment communications manager at Old Mutual Asset Managers in the UK prices rose 1.2% following a 1.9% rise in August. Annual house price inflation, which has slowed from a rate of 22% in July last year, accelerated for a second month in September to 3% from 2.5% in August.

The period of four consecutive monthly gains was the longest in more than a year.

The Bank of England kept its benchmark interest rate unchanged for a second month amid signs that inflation is accelerating as economic growth slows. The Bank's nine member Monetary Policy Committee voted to leave the repurchase rate at 4.5%, as had been widely anticipated.

Surging oil prices have led inflation up to an eight year high, limiting the central bank's scope to lower borrowing costs to stimulate economic growth, although weakness in the consumer and manufacturing sectors may prompt the bank to cut as early as next month.

Over the week all major UK indices fell by 2-3%,. Defensive areas such as pharmaceuticals headed a small group of sector gainers over the week, while resources were universally weak.

Severn Trent (+0.4% to 995p), the UK's second largest publicly traded water company, reported first half results in line with its full year forecasts.

The company said that an increase in regulated prices at the company's water supply and waste management units offset a disappointing first half at its Belgian waste division. Along with its competitors, Severn Trent is expanding into non-regulated businesses such as landfill sites to fuel growth.

Car parts and bicycle retailer Halfords (+0.1% to 290¼p) reported a 2.6% rise in fiscal first half same store sales as the company added products such as parking sensors.

Halfords, whose annual profit almost tripled last year after an initial share offering enabled it to cut debt, has added goods such as under-car lighting and children's DVD players to attract customers as UK consumer spending slows.

The company, which has a total of 402 stores, commented that the retail environment remains challenging, but that first half results give confidence for the second half.