Trading on the London Stock Exchange is likely to be influenced next week by the publication Tuesday of Britain's third quarter growth figure, with a slowdown expected to influence monetary policy. The exchange's key FTSE 100 index gained 0.67 percent over the past five sessions to close Friday at 5,741.37 points.
For several months it has approached April levels without breaking the 5,800 mark. In the end the market did not suffer from the announcement Wednesday by the government of spending cuts of 83 billion pounds (130 billion dollars, 95 billion euro). Although they represent the harshest cuts in decades, the market had largely anticipated the move, analysts said, and the effects won't be felt for months to come.
Moreover, some analysts expressed doubts that the government will be able to realise such savings in practice.
For economists, the primary question is how much the cuts will slow down economic growth, which is why the first official estimate of third quarter growth is being so eagerly anticipated. After a jump to 1.2 percent in the second quarter, analysts expect a sharp drop in the growth rate, with the consensus at 0.4 percent.
A drop in growth below that level might spook investors, who are at this point not worried about the prospect of a double-dip recession as the weak pound is likely to support exports.
Moreover, a drop in the growth rate increases the likelihood the Bank of England will take new measures to support the economy, said analysts. The upcoming week will also see quarterly results announcements from a number of large companies, including British American Tobacco, British Airways and the insurer Aviva.
Investors will also be watching developments in the United States, where the US Federal Reserve also appears ready to inject more liquidity into the market.