FTSE preview: Shares down ahead of rates

By Reuters
Updated: 02:57 EDT, 7 October 2010

The FTSE 100 is expected to fall this morning after strong gains yesterday as investors await the latest interest rate decision from the Bank of England.

Waiting for rates: The Bank of England is likely to be torn three ways.

The UK blue chip index ended up 45.63 points, or 0.8% on Wednesday at 5,681.39, a fresh five-month closing high, with commodity issues heading the gainers as the demand outlook brightened on expectations that governments would do more to stimulate the global economy.

US stocks ended mixed on Wednesday, with the Dow Jones modestly higher but the broader indexes weaker after a poor reading on private-sector employment raised concerns ahead of Friday's key US jobs report, although it added to speculation about further quantitative easing from the Federal Reserve.

Asian stocks edged up to a two-year high on Thursday, supported by resource-related shares, but gains were capped and the US dollar held near a 15-year low against the yen by nerves ahead of that September jobs report.

The Bank of England is likely to be torn three ways for the first time since November, with dissenting voices arguing between a tighter or looser rate policy due to the highly uncertain economic outlook.

However, economists view the tangible outcome of the Monetary Policy Committee's October meeting as a foregone conclusion, and all 61 analysts polled by Reuters expect rates to stay at 0.5%.

Longer term, the consensus view is for rates to stay on hold until at least July next year, and fewer than a third of economists see it pumping more cash into the economy in the next six months.

The European Central Bank will also give its latest interest rate decision on Thursday, although no changes are expected either to eurozone monetary policy.

Ahead of those interest rate decisions, investors' will have British industrial and manufacturing output numbers for August to digest, with 0.3% and 0.2% monthly gains forecast respectively.

The US data focus will be on the latest weekly jobless numbers, another indicator for Friday's non-farm payrolls.

August USconsumer credit numbers will also be released. rom a technical perspective, the current consolidation on the 15-minute chart shows that the bulls have begun to lose momentum as the market consolidates within a triangle pattern, said Raghee Horner, Autochartist's chief market analyst.

'There will be downside support waiting at 5,655 and 5,634.5. If the FTSE can rally through 5,700, look for selling pressure waiting at 5,758.'

Marks & Spencer issues a trading update today.

Vedanta Resources issues a second-quarter production report.

SABMiller is in talks to buy the African beer operations of the privately-held French drinks group Castel in a deal worth £6bn, the Times said on Thursday.

Royal Dutch Shell has scaled back its plans to drill offshore the Alaska coast in 2011 and now plans only a single well for the Beaufort Sea.

Novelis Inc, a unit of Indian aluminium maker Hindalco Industries, is in talks to buy out BP's 60% stake in their US joint venture for $600m, the Mint reported on Thursday.

Also, BP's new chief executive, Bob Dudley is set to sign a deal to develop a natural gas field in Azerbaijan following meetings with Socar, the country's national oil company.

Revived rumours suggested that Lincoln Electric based is mulling a £1.42bn or 850p a share cash offer for British tools and equipment maker Charter International, the Daily Mail's Market Report said.

Bodycote gained on talk that Swiss counterpart Sulzer is planning a revised offer of £4 a share, the Daily Mail's Market Report said.

Easyjet's operations director Cor Vrieswijk has resigned after four years at the job, following a summer of delayed flights and cancelled services at the airline, The Financial Times said.

There will be updates today from Halfords, Ted Baker, Hays, Michael Page, Rank Group, Victrex, IG Group and UK Mail Group.