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FTSE preview: Shares up; Banks threat

By Reuters
Updated: 03:01 EDT, 13 December 2010

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The FTSE 100 is expected to rise this morning, extending last week's advance in tandem with gains on Wall Street and in Asia following some reassuring economic data.

On the up: UK shares should rise.

The UK blue chip index closed up 4.99 points, or 0.1% on Friday at 5,812.95, having notched up a 1.2% gain over the week, buoyed by firmer mining stocks with copper near record highs, and after encouraging US data.

In the latest signs of improvement in the US economic recovery, a Reuters/University of Michigan survey showed consumer sentiment rose more than expected in early December, while the US trade deficit narrowed much more than expected in October.

US stocks rose on Friday, with the S&P 500 reaching its highest level since the week Lehman Brothers collapsed in 2008, and breaching technical levels that suggest the year-end rally will persist.

Asian stocks chalked up modest gains on Monday helped by the US data and after inflation news from China failed to spark any rate rise.

Chinese leaders said on Sunday they will ratchet up efforts to quell inflation in 2011 in response to data showing the country's rate of inflation soared past forecasts to a 28-month high of 5.1% in November.

Ahead of the data, the Chinese central bank raised the minimum amount of money lenders must keep in reserve for a third time in a month. Beijing, however, held back from lifting interest rates.

Other data published over the weekend showed China's industrial output in November beat expectations with a slight acceleration to 13.3% year-on-year growth from 13.1% in October, sending copper to a record high.

On the domestic front, asking prices for homes in England and Wales have fallen 3.0% over the past month to stand just 0.4% higher than a year ago, due to economic uncertainty and low mortgage approvals, property website Rightmove said on Monday.

No other British macroeconomic data is due for release on Monday, but it will be a busy week with the latest inflation, unemployment, and retail sales numbers all scheduled.

It will be a similar story across the Atlantic, with no US data due on Monday but retail sales and inflation numbers due later in the week.

The main focus, however, will be on the latest Federal Reserve Open Market Committee meeting on Tuesday, although no change to US monetary policy is expected, with the central bank having already having embarked on a second round of quantitative easing.

Reckitt Benckiser, the consumer goods company, said on Sunday it agreed to buy privately-held Indian firm Paras Pharmaceuticals for 32.6bn rupees ($726m).

General Electric could unveil a £755m-plus takeover of the British oilfield services company as early as Monday, the Financial Times said on Sunday.

Capital Shopping Centres has slammed as 'incapable of implementation and completely impracticable' an alternative funding offer from its shareholder and would-be bidder Simon Property. Earlier on Sunday, Simon Property had pitched to CSC's board a plan to help fund the UK firm's £1.6bn mall acquisition, which it argues offers better terms while potentially lifting Simon's stake in CSC up to 27%.

Asian insurance group AIA said it has little interest in bidding for the Far East assets of Prudential, quashing speculation that it could take over Britain's biggest insurer, the Sunday Telegraph reported.

Diageo is in preliminary talks to buy Turkish spirits company Mey Icki, people familiar with the matter said, as part of the push by the world's biggest drinks company into high-growth emerging markets.

Lord Myners, City minister in the last government and a key figure in the financial bail-outs at the height of the global crisis, has called for a break-up of Britain's Lloyds Banking Group and Royal Bank of Scotland, The Financial Times said on Monday.

Rio Tinto may sell some aluminium smelters and refineries with limited growth potential, and is considering a major capital investment at its Alcan unit, Chief Financial Officer Guy Elliott told The Australian newspaper.

Also, Rio Tinto said Monday that heavy rain in central Queensland on Friday and Saturday has continued to impact its coal mining operations in Australia.

British Airways is discussing changes to its pension scheme rules that would enable it to slash its pension shortfall almost in half, The Financial Times said on Monday.

Punch Taverns is considering defaulting on loans on more than 5,000 pubs to force bondholders to take possession of the pubs or allow the company to take them back on improved terms, the Sunday Times reported.

German utility E.ON has granted a consortium of foreign bidders exclusive rights to make an offer for Britain's second-largest electricity distribution network, the Sunday Times reported.

Also, British energy regulator Ofgem has ordered a review of pension liabilities of some of the UK's biggest gas and electricity companies, the Independent on Sunday reported.

There will be an update today from Polar Capital Technology Trust.

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