FTSE preview: Shares down: BoE inflation

By Reuters
Updated: 02:55 EDT, 11 August 2010

The FTSE 100 is seen falling Wednesday after weakness yesterday, with sentiment gloomy ahead of an expected downgrade in Bank of England expectations for the economy.

Gloom: Sentiments is about to turn negative.

The Footise fell 34.11 points or 0.6% to close at 5,376.41 on Tuesday, retreating from a high since May 13 set on Monday.

The Fed's Open Market Committee said in a post-meeting statement that it would begin funnelling proceeds from maturing mortgage bonds into longer-term government debt to keep borrowing costs low.

But US stocks fell on the day suggesting investors did not think the actions would swiftly resolve the weak employment market or boost demand significantly.

Stocks in Asia also dropped with Japan's Nikkei average falling over 2.5% hurt by the yen's strength against the dollar, which hovered within sight of a 15-year low versus the Japanese currency after the Fed's move.

British consumer morale fell to its lowest since May 2009 last month as households took a bleaker view of the outlook following June's austere budget, building society Nationwide said on Wednesday.

Investors will closely watch the Bank of England's latest quarterly inflation report which is likely to suggest more subdued growth over the next two years than in the May report, due to the massive spending cuts announced by the new coalition government in its June budget.

The inflation forecasts, however, could be significantly higher to take account of a rise in value added tax from 2011 and a recent surge in wheat prices.

Ahead of that, employment data will be in focus. The claimant count is forecast to fall 16,500 for July while the ILO unemployment rate is forecast to remain stable at 7.8%.

Barclays, BT Group, Rio Tinto, RSA Insurance, Schroders and Standard Chartered and Unilever are all going ex-dividend, knocking a total of 6.10 points off the index.

An approaching storm in the Gulf of Mexico will delay by two to three days BP's work on a relief well, the final step in permanently killing the source of the world's worst offshore oil spill, the top US spill official said on Tuesday.

Barclay's investment banking unit Barclays Capital is planning to cut as many as several hundred jobs, the Financial Times said, quoting a source close to the bank, adding the cuts could be announced as soon as Wednesday follow a sharp fall in Q2 market activity.

The Unite union has blasted HSBC's decision to change the terms and conditions in the contracts of its 1,500 UK branch managers, the Daily Telegraph said. The managers will have to be more flexible with their working hours to extend Saturday working, while sick pay will be cut to a maximum of 26 weeks to bring them into line with the majority of HSBC's workers.

Gartmore looks like a 'sitting duck' for a takeover said the Daily Mail market report, citing rumours that Henderson Group could be the interested party.

There will be updates today from Standard Life, Thomas Cook, Balfour Beatty, Capital & Regional, and Micro Focus.