FTSE preview: Rates and Libya knock shares

By Reuters
Updated: 03:06 EDT, 10 March 2011

The FTSE 100 is expected to suffer falls this morning after losses overnight in Asia, as nerves remain on edge over violence in Libya and with markets awaiting and interest rate decision at noon.

Market watcher: Eyes will be on interest rates today.

The UK blue chip index closed down 37.46 points, or 0.6% on Wednesday at 5,937.30 dragged back by weak commodity stocks and banks as oil prices climbed again on the continued turmoil in Libya, reviving worries over their impact on global economic recovery.

Brent crude rose 0.3% to surpass $116 on Thursday after forces loyal to Libyan leader Muammar Gaddafi bombed oil industry infrastructure, inflicting what could be longer-term damage on the country's exporting capacity.

After a flat performance overnight on Wall Street, Asian equities fell back on Thursday unsettled by high oil prices, and by weak Chinese trade data which showed a surprise deficit in February as the Lunar New Year holiday dealt a sharper blow to export activity than had been expected.

China's export data was also well short of forecasts, but economists said China's first trade deficit since March last year was likely to prove temporary.

British interest rates are likely to be a focus on Thursday, with the latest Bank of England monetary policy decision due at 12 noon.

The Bank of England looks set to keep interest rates at a record low of 0.5% on Thursday, judging that Britain's recovery is currently too fragile to sustain a spiral of rising prices.

It is not a foregone conclusion, however. Some policymakers are growing increasingly nervous about the threat of inflation, and the European Central Bank gave a strong hint last week that it would raise rates next month.

Three of Britain's nine-strong Monetary Policy Committee voted to raise interest rates in February, so it would only take two to switch camps to get a majority.

Ahead of the rate decision, the latest British industrial and manufacturing output data will be released, with manufacturing output seen rebounding by 0.8 percent month-on-month in January, after a 0.1% decline in December, giving a year-on-year rise of 6.5%, up from 4.4% in December.

Monthly industrial output is seen up 0.4% in January, after a 0.5% rise in December, giving an annualised increase of 4.2%, up from 3.6% in the previous month.

Across the Atlantic, aside from the latest initial weekly jobless claims, January US international trade data will also be released, with February's Federal Budget due after the London markets close.

Australian takeover target Riversdale Mining said it was not aware of any competing offers to a sweetened A$3.9bn bid from global miner Rio Tinto.

Royal Dutch Shell is close to completing the sale of its stake in four Nigerian onshore oil blocks after receiving bids from several foreign and local companies, industry sources close to the deals said.

ICAP, the world's largest inter-dealer broker, is aiming to team up with fledgling technology firms in an effort to stay ahead of regulatory changes set to sweep across over-the-counter markets.

Aviva's asset management arm said on Thursday it has received a license to sell funds to retail and institutional investors in Taiwan, further expanding its business in Asia.

There will be results today from Morrison Supermarkets, Standard ife, Schroders, Aggreko, Home Retail Group, Laird Group, IG Group, Cineworld and DS Smith.