FTSE-100 index to hinge on rates, economic data

05 Apr, 2004

A decision on UK interest rates and economic data from both sides of the Atlantic are likely to drive British share market activity in the run-up to Easter this week.
An expected update from the world's second biggest miner, Rio Tinto, at its annual general meeting on Wednesday is the main corporate news scheduled in an otherwise sparse week that will be shortened by the Good Friday holiday.
Britain's FTSE-100 share index entered the second quarter having recouped some of the losses that followed the March 11 bombings in Madrid. At mid-morning on Friday the index was trading near 4,415 points, down 1.4 percent since the start of the year.
Investors will turn their focus to figures that indicate the solidity of the economic recovery and which sectors are likely to take centre stage.
"What I anticipate next week is us drifting around 4,400, trading either side of that, before people come to terms with the question: 'Is that it for this year?'" said John Smith, head of equities at brokerage Brown Shipley.
"Economic data recently has obviously been suggesting everything is not rosy underneath, and at the same time - are we nearing the peak of economic growth?" Smith said.
On Thursday the Bank of England's Monetary Policy Committee will decide whether to raise base rates from 4.0 percent.
Markets initially expected a follow-up to February's rate rise no earlier than May. But a welter of evidence suggesting that rate hikes have so far failed to slow a runaway housing market and ballooning consumer debt have made an April rise increasingly plausible.
Higher rates would boost sterling, hitting exporters, but many analysts say future rises are already priced in.
The main economic data due during the week are the index of non-manufacturing activity from the US Institute of Supply Management and its British equivalent, the CIPS/Reuters survey of activity in the service sector, both released on Monday.
British Airways will kick off next week with its March traffic update, two days before figures from its no-frills rival Easyjet.
Tuesday's first-half figures from mid-cap house-builder Bellway could serve to reinforce positive sentiment about house-builders and property. Pendragon, Britain's largest car dealer, hosts its AGM on the same day.
Full-year results are due on Wednesday from small-cap Corin Group, a medical device manufacturer that has been touted as a possible take-over target for Smith & Nephew.
Stock market historian David Schwartz said previous downturns and rallies suggested shares could climb further in coming weeks.

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