FTSE preview: Shares to recover US falls

 

The FTSE 100 index is seen rising on Tuesday, recovering after sharp falls in the previous session when S&P downgraded its outlook on the US credit rating to 'negative', with investors seen likely to tread with caution as we head towards the Easter break.

Dealers monitor their screens on the trading floor of IG Index in London

Jumpy: Shares have been volatile.

A raft of corporate news is due for release on Tuesday. Retailers could come into focus as Tesco posts results, as could the luxury goods sector, with both Burberry and LVMH scheduled to unveil numbers.

Across the Atlantic, Goldman Sachs, Intel Corp and IBM are among companies reporting.

The UK blue chip index looks set to climb 6 to 11 points, or as much as 0.2%, according to financial bookmakers, after it ended down 125.93 points, or 2.1%, at 5,870.08 on Monday - its lowest close since March 23.

The FTSE 100 volatility index, a barometer of investor anxiety, jumped nearly 26% on Monday, its biggest one-day percentage gain since November 2009. The higher the index, the lower investor appetite for risky assets such as stocks.

Wall Street fell more than 1% on Monday. Rating agency Standard & Poor's slapped a negative outlook on the United States's top-notch credit rating and said there's at least a one-in-three chance that it could eventually cut it.

'This news is certainly going to skew demand for risk - we've already seen gold come within a whisker of the big $1500/an ounce level and this may lend a degree of support amongst the mining sector and precipitate the typical defensive moves into non-cyclical,' Chris Weston, institutional trader at IG Markets, said.

'But otherwise, with volumes thinning out ahead of the long Easter weekend in Europe, there may be little reason to move back into the market just yet.'

With no important UK economic data scheduled for release on Tuesday, investors will be looking across the Atlantic for further macro direction, with US March housing starts numbers due.

Technical analysis for the FTSE 100 on a long-term view looked bearish. 'Looking at the rally from the March 15 bottom at 5,591.59 to the April 11 top at 6,070.78, it appears this index is set up for a decline to 5,831.19 to 5,774.64,' James Hyerczyk, an analyst at Autochartist, said.

However, he added: 'A test of this price zone is likely to trigger interest from value-based buyers.'

Vedanta Resources bought an 11% stake worth about $1.5bn in Cairn India through block deals in the market, a source said, even as Vedanta faces a delay in its $9.6bn acquisition of the energy firm.

A multi-million pound pay deal for Royal Bank of Scotland's chief executive and the lender's mounting losses in Ireland are set to come under attack at its annual investor meeting on Tuesday.

Tesco is expected to post a 10% rise in underlying profit to £3.75bn for the year ended February, according to the mean forecast of 15 analysts polled by Reuters.

There will be updates today from SABMiller, Burberry, Reed Elsevier, Hargreaves Lansdown and Redrow.