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FTSE preview: Portugal crisis deepens

By REUTERS
Updated: 04:28 EDT, 24 March 2011

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The FTSE 100 is expected to inch higher, with investors reluctant to take big positions as they consider the implications of Portugal's debt crisis.

Debt crisis: Investors will be eyeing developments in Portugal

The blue-chip index is seen gaining 5-7 points after it finished up 33.2 points at 5,795.9 on Wednesday.

Portuguese Prime Minister Jose Socrates resigned on Wednesday and warned of grave consequences for the country after parliament rejected his government's latest austerity measures aimed at avoiding a bailout.

The resignation was seen as increasing the likelihood that Portugal will join Greece and Ireland in requiring a bailout from the European Union.

An official eurozone source estimated in January that if Portugal asked for international aid, it might need between €60bn to €80bn.

'Traders are concerned that with no political direction on tackling the deficit, investors will demand unmanageably high yields to hold Portuguese debt, making a bailout all but inevitable,' said Jonathan Sudaria, a dealer at London Capital Group.

Failure by Western bombing to prevent Muammar Gaddafi's tanks shelling rebel-held towns and political turmoil elsewhere across the Arab world kept investors focused on risk and ensured that crude prices stayed above $115 per barrel.

In a sign of how global the impact of Japan's quake-induced nuclear crisis is, Toyota Motor Corp will slow some North American production because of supply disruptions.

Investors will watch retail sales data later for more clues on the state of the economy and timing of interest rate rises from the current 0.5%.

Retail stocks are seen falling 0.6% in February from a 1.9% increase the previous month.

Economists said slow wage growth combined with high inflation caused by the VAT hike in January and rising petrol prices meant people were now limiting their spending.

UK stocks to watch today include:

BHP Billiton, Rio Tinto and Xstrata: Australian mining companies won a major concession over a planned new 30% profits tax on Thursday, with the government agreeing to refund any future increases in state-based royalty charges.

Separately, the quake disaster in Japan had no material impact on global miner Rio Tinto's shipments to the country so far, the head of its iron ore division said on Thursday.

Lloyds Banking Group and Royal Bank of Scotland: A sale of the British government's $107bn stake in Lloyds Banking Group and RBS may start next year, Bloomberg said, citing four people familiar with the matter.

WPP: The advertising giant is likely to move its tax base back to the UK following changes to taxation proposed in Wednesday's budget.

Royal Dutch Shell: The firm's Ormen Lange station in Norway was due to be back online by early on Thursday. The power station's operator had previously said ramp-up to full power after an outage was taking longer than expected and that normal operations would resume some time Thursday morning.

Kingfisher: The DIY store chain releases its full-year results.

Next: The clothing retailer releases its full-year results.

Resolution: The insurer releases its full-year results.

United Utilities Group: The utility firm relases a trading update.

Imperial Tobacco: The tobacco company releases a trading update.

Clinton Cards: The greeting cards retailer releases its first-half results.

Premier Oil: The oil company releases its full-year results.

Salamander Energy: The gas explorer releases its full-year results.

Ted Baker: The fashion group releases its full-year results.

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