FTSE preview: Shares down; US Fed meets

By Reuters
Updated: 02:49 EDT, 10 August 2010

The FTSE 100 is seen falling slightly on Tuesday, retreating after sharp gains in the previous session, ahead of a US Federal Reserve meeting later in the day.

Looking to America: Markets will react to the latest US Fed meeting.

The UK blue chip index looks set to shed 14-20 points, or as much as 0.4%, according to financial bookmakers.

The index ended up 78.13 points, or 1.5%, at 5,410.52, on Monday, its highest close since May 13, albeit in light volumes, with the index having traded just 53% of its 90-day average volume.

'Prices did break below 5,400 temporarily during the Monday session before the FTSE was able to buoy back above this psychological level, confirming that the bulls were willing to step in and support an intraday correction,' said Raghee Horner, chief market analyst at Autochartist.

'If prices again trade lower to this prior support, expect another wave of buyers to resume the intraday uptrend.'

British house prices fell last month and retail sales growth slowed abruptly according to two surveys on Tuesday that will raise concern the recovery is losing momentum.

The Royal Institution of Chartered Surveyors' house price balance fell to -8 in the three months to July - the first negative reading in a year - from a downwardly revised +8 in the three months to June.

A survey from the British Retail Consortium, meanwhile, showed the value of sales last month was just 0.5% higher than a year ago on a like-for-like basis, less than half the 1.2% growth recorded in June.

Investors were also awaiting June UK trade figures.

Across the Atlantic, the Federal Reserve may send a clear signal it is prepared to print more money to support a faltering economic recovery if necessary.

The central bank is widely expected to renew its vow to keep rates near zero for 'an extended period' and markets will watch closely for signs officials are growing more concerned the recovery is at risk or that there is danger of falling into a damaging vicious cycle of falling prices and slowing growth.

US stocks rose on Monday in the quietest session of the year on hopes the Fed may take some clear steps to boost the sluggish economy.

But Asian bourses retreated on Tuesday after Chinese trade data for July showed imports were weaker-than-expected.

The Daily Mail market report points to talk that a cash-rich oil giant has knocked on Cairn Energy chief executive Sir Bill Gammell's door at the group's Edinburgh headquarters with a 'friendly' takeover proposal that values the oil and gas explorer at £9.8bn, or £7 plus a share.

There will be updates today from InterContinental Hotels, TUI Travel, International Power, Greggs, Interserve, Mondi, NWF Group, Quintain Estates & Development.