Amber alerts that are hard to ignore

Inexorably but not very slowly the weight of evidence is shifting towards a rise in British interest rates. This week's housing data might be too patchy for a definitive interpretation, although rising mortgage lending is unambiguous enough. But when the signs from Britain's beleaguered manufacturing industry sector begin flashing amber, it is time to take notice.

On that score, yesterday's figures from the Chartered Institute of Purchasing Managers are hard to ignore. The CIPM's index showed that Britain's manufacturing sector grew for a third consecutive month. That in itself is hardly enough to set the inflationary alarm bells ringing. We are, after all, talking about recovery from a low base.

The really worrying news from the survey for the Bank of England's monetary policy committee is that input prices rose in August for the first time in nearly four years.

The oil price spike is an obvious factor in what has happened to input prices. Sterling too has unwound a little from its best against the euro - achieved earlier this year - which has meant a rise in the price of imports.

The phenomenon of rising input prices is by no means a British phenomenon. Manufacturing prices in the euro zone rose at their fastest rate for two years in August.

Prices in the United States are rising. The Federal Reserve has launched a couple of pre-emptive interest rate strikes, although it is to be hoped it has not excluded further tightening.

How quickly the Bank of England's monetary policy committee should follow is open to question. Oil prices may fall, or sterling nudge higher. Next April's abolition of tax relief on mortgage interest payments may put a dent in consumer spending, although too late to register among the MPC's more immediate preoccupations. But even for those who had argued that there could be room for another cut in rates, the question must now be when - not if - a rise will come.

Britannic builds

Britannic can hardly be regarded as a stock market darling. It trades on a prospective price to earnings ratio of half that of Prudential or Legal & General. So it must have been with some relief that management saw the shares jump in response to the deal with Britannia Building Society.

Britannic is keen to present the agreement as a three-part package: a controlling stake in Britannia Asset Management; a 10-year deal on distribution of Britannic products through Britannia branches; and the acquisition of Britannia Life. Given the latter has been closed to new business for nearly two years and that Britannic has no plans to reverse the decision, it does seem that Britannia Life was integral only in the sense that Britannic had to take the life business if it wanted the rest.

That said, the rest looks tidy enough. The distribution side will give Britannic more than 180 high street outlets, to say nothing of 1.8m potential customers, to add to its army of door to door sales people. More product for lower overheads is never a bad thing.

The acquisition of BAM should boost the firm's pension fund asset management business, and Britannic thinks it will give it a strategic position in the stakeholder pensions market. But then, Britannic is not the only company in the sector hoping that business will prove a useful earner. Britannic does, however, still have the prospect of more deals.

Hub hiatus

Settlement has never been the glamour end of securities trading, but glamour is no reflection of importance. Little wonder, then, that with Europe making heavy weather of rationalising more than 31 settlement services there are mutterings that a group of securities houses may be preparing to go it alone.

Although most of the settlement providers serve national markets, the key is the development of a European framework. Euroclear, which has about 75% of cross-border settlement, wants to do it through a "hub and spokes" approach, with itself as the hub and national providers as spokes. Rival Cedel, linking up with Deutsche Börse, prefers a more integrated approach, although the two still speak to each other.

The latest development is yesterdays' announcement that JP Morgan, which founded Euroclear in 1968 but then sold it to its users, is to give up its combined role as day to day operator of and banker to the Euroclear system. Its functions will be carried out instead by a market-owned European bank.

Euroclear argues the change will give it the flexibility to develop the alliances dictated by its hub and spokes strategy and Morgan, which has withdrawn from related businesses like global custody, is not disposed to argue.

It is not leaving empty-handed. Over the next three years it is guaranteed pretax income of between $195m (£121m) and $295m a year, irrespective of whether the money is earned by Morgan itself during the transition period or by the new bank. Do not boggle: Morgan earned $253m, pretax, from Euroclear last year and $218m the year before. After 30 years it is entitled to depart with more than a gold watch.

But the figures could help explain why it is proving as tricky to develop settlement on a pan-European basis as to bring trading within a similar cross-border framework. Never mind the lack of glitz, just look at the revenue stream.

Beach bugged

Judging by the traffic the holiday period is drawing to a close. So did the old market adage of "sell in May and go away" hold good?

In London, the result is looking close to breakeven, while New York's May flies are slightly ahead of the game. But given the intervening market rollercoaster, players in both can consider the summer best spent on the beach.