The Week Ahead: Bank provides the beef while Diageo slakes traders' thirst

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The Independent Online

And so the pace starts to ease. As July and the slower summer months get under way, the news flow starts to ebb - a state of affairs not helped this week in particular by the Americans enjoying a four-day week because of tomorrow's Independence Day celebrations.

That said, there will still be enough updates announced and decisions made to keep traders at their desks for a while longer at least.

One of the biggest announcements will be from the Bank of England. Its interest rate setting body, the Monetary Policy Committee, meets this week but few are expecting much change to the cost of borrowing following two successive quarter-point rises. As a recent research note from broker Williams de Broë comments: "The MPC is likely to pause for breath in July, while leaving open the option of raising rates in August once it has seen the forecasts prepared for the August inflation report."

However, a report out tomorrow by HSBC warns that interest rates could rise more sharply than many are predicting. Rates are currently at 4.5 per cent, with most commentators believing a rise to around 5 per cent next year is likely. But HSBC is warning that the Bank of England's attitude has changed and they could now peak at 6 per cent at the end of 2005.

Says economist John Butler: "Now that the global recovery is in place, [the MPC's] language is shifting, which suggests they are reacting to news differently to how they used to." Mr Butler cites recent comments from the Bank's Governor, Mervyn King - who voiced concerns about a slowdown in the housing market - as an example of how attitudes at are changing.

Other economic announcements to watch out for include updates on the services sector, news on manufacturing output and trade deficit figures.

On the corporate news front, no blue chips are reporting results, but there will be updates from a number of heavyweight sectors and companies.

One such group is Diageo, the drinks giant and owner of Guinness, Baileys and Smirnoff. Its interim numbers revealed underlying operating profits were up by 3 per cent - but also warned that dollar weakness would have a greater impact in the second half. Analysts are therefore expecting Diageo to announce this week that underlying operating profits will be flat year-on-year. Volume growth for the biggest brands is likely to be around 10 per cent in total for the year, although the popularity of "ready-to-drinks", to use the industry's more straight-laced term for alco-pops, continues to wane.

Also updating on trading is Emap, for the first time since it produced final results in May. The owner of various business-to-business and consumer magazines - including Heat, FHM and Empire - as well as the radio stations Kiss and Magic has seen estimates for the current year downgraded due to weakness in France - a notoriously competitive market. British consumer titles are, however, expected to show another robust performance.

From the finance sector, the City will hear from hedge fund group Man and FTSE 100 venture capital business 3i.

Recent times have been good for the latter, particularly since the end of the economic downturn, which had left new deals scarce and most exit routes from existing investments closed. In the first quarter of this financial year, 3i's exits were robust, with the £80m sale of clothing group Ben Sherman an example. Others are in the pipeline, including Pets at Home for an estimated £230m. The level of investment is expected to fall slightly as the year progresses, but overall, the City is pleased with 3i's performance.

At Man, analysts expect the group to reiterate the recent disappointing performance from AHL, its core hedge fund. This was down around 10 per cent in the three months to the end of June, and that will hit management and performance fee income. Yet not everyone is taking a bearish view of the blue chip. Stockbroker Gerrard comments: "Such a performance is already factored into the recent drop in Man's share price, which we view as overdone. We expect Man to reiterate that demand for hedge funds remains strong, both from private clients and institutions."

Also updating the City will be the aviation sector, with British Airways, easyJet and Heathrow owner BAA all due to publish traffic data for June. Elsewhere, Taylor Woodrow provides the update from the housebuilding industry, while retail is represented by discount specialist Matalan's annual general meeting and a trading update from sports and leisure chain JJB Sports.

Over on the Continent, second-quarter sales figures are due from French retail chain Carrefour, interim sales from its compatriot L'Oréal, the beauty products giant, and first-half numbers from Swedish engineer and car maker Saab.

CALENDAR

Tomorrow 5

UK: Results: (Final) Air Music and Media, Total Systems; (interim) Terrace Hill.

Tuesday 6

UK: Results: (F) Halladale, Northgate, Stonemartin, Vega; (I) Alphameric.

Wednesday 7

UK: Results: (F) Bespak, Broker Network Holdings, DTZ Holdings, Kleeneze, Reg Vardy; (I) Low & Bonar.

Thursday 8

UK: Results: Birse, Debt Free Direct, Heath (Samuel) & Sons, Inter Link Foods, Planit Holdings; (I) Kensington.

Friday 9

UK: Results: None scheduled.

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