The Week Ahead: Bank to hold fire, Fed to pull trigger, 3i to shoot from hip

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The Independent Online

Wednesday looms large in the City's calendar this week, with the Bank of England set to unveil its inflation report in the morning and the US Federal Reserve slated to give its latest rate decision after the UK markets close.

Higher energy costs and rising council tax bills have fuelled speculation in recent weeks that an interest-rate hike is in the offing. But the Bank's Governor, Mervyn King, is expected to reveal that inflation is on track for its 2 per cent target for the year. "Our take is that a rate increase will probably not be needed," said Philip Shaw, an economist at Investec.

Despite signs last week that job growth has slowed in the US, the Federal Reserve chief, Ben Bernanke, is expected to announce a 0.25 per cent hike to bring the US primary lending rate to 5.0 per cent. If Mr Bernanke does pull the trigger, most observers are betting it will be the last in the cycle after 15 straight rises dating back to the summer of 2004.

Speaking of cycles, venture capital group 3i is expected to wow the market with its best-ever annual results on Thursday, as it benefits from a private equity market on an unprecedented run of outstanding returns. Dresdner Kleinwort Wasserstein expects 3i to report £520m of net capital gains on a series of handsome exits. But investors will be wondering, as they do with its peers, just how long the party will last.

3i's chief executive, Philip Yea, will also be pressed for further details of the company's previously announced plan to return up to £500m to shareholders. Doing this could reduce the chance of 3i getting itself involved in risky, and pricey, buyout deals.

NTL, the New York-listed telecoms group, will unveil first- quarter numbers on Tuesday- its first results call since Telewest Global, the rival it bought last year, was delisted in London. Investors will dig for any nuggets about the integration of Virgin Mobile, which NTL finally bought for £962m last month after much haggling.

Insurer Royal & SunAlliance will unveil its first-quarter performance on Thursday, and Williams de Broë expects it to show a £187m pre-tax profit. Roger Hill of UBS, however, said the company would need to clarify its stance on its American business, where the market is hoping for an exit.

"It's had a hard life in the US," said Mr Hill, adding that the business has been hobbled by losses from the recent hurricanes and, before that, the 11 September terrorist attacks.

Analysts will also want to hear the view of its chief executive, Andy Haste, on where the company is in the business cycle. Insurance rates have come down but have yet to drag on performance given that the payout environment has been, in Mr Hill's words, "relatively benign". That raises the question of whether the profits are sustainable.

Energy company International Power, which forked over $1.14bn ($640m) to buy a Texas power plant last month, will trumpet its latest purchase when it publishes its quarterly results on Thursday. Williams de Broë has increased its price target from 300p to 340p on projections that the acquisition will add significantly to profits.

Optimists are hoping that steel giant Mittal will finally launch its €5bn (£3.5bn) hostile approach for rival Arcelor this week. But insiders believe there is likely to be a little while longer to wait. Mittal's interest first emerged in January, but until regulators in various European jurisdictions finish reviewing the approach, the formal bid - and defence - cannot get under way.

In the meantime, investors will have to be satisfied with first-quarter results from both companies and Mittal's annual general meeting. Analysts at BNP Paribas expect Arcelor's results, on Friday, to "outshine" Mittal's and are predicting earnings before costs of €1.29bn.

Sage, the accounting software firm, will give its third-quarter results on Tuesday. Although the question will surely be asked, the company isn't expected to back down on its refusal to go beyond the £330m offer it made for Norwegian software group Visma. London buyout firm Hg Capital offered £380m last month, and the target's board has recommended the bid.

Sub-Saharan gold miner Randgold Resources, whose stock has soared to all-time highs over the past month as the gold price surges, is expected to have more good news. The company, which will report its first-quarter results on Monday, announced last month that its reserves had more than doubled last year, and the gold price remains near an all-time record.


Tomorrow 8

UK RESULTS: (final) Addworth; (interim) 2 Ergo, Connaught, Diploma, Hardide, Minorplanet Systems, NDS, Randgold Resources.

Tuesday 9

UK RESULTS: (F) First Derivatives, N Brown; (interim) Acambis, Dicom, Sage.

Wednesday 10

UK RESULTS: (F) MP Evans; (I) Dimension Data, Fenner.

Thursday 11

UK RESULTS: (F) 3i, Findel, Oakdene Homes; (I) BOC, International Power, Royal & SunAlliance, Crosby Capital Partners, Phytopharm.

Friday 12

UK RESULTS: (I) Crosby Capital Partners.