The Week Ahead: Frozen rates, but plenty of water under the bridge in the City

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The Independent Online

As the Bank of England is independent, decisions on interest rates are not affected by political events like general elections. Even if they were (which of course they are not) the election has now passed. So when the Monetary Policy Committee (MPC) meets on Thursday, it could raise rates without fear of political reprisal.

As the Bank of England is independent, decisions on interest rates are not affected by political events like general elections. Even if they were (which of course they are not) the election has now passed. So when the Monetary Policy Committee (MPC) meets on Thursday, it could raise rates without fear of political reprisal.

Except it probably won't. Most economists believe the MPC's fears of inflation are easing, replaced by worries over a slowing economy and weak consumer demand.

But there is also little chance of a rate cut at this stage. Economists from Investec Securities point out that the MPC will "not want to risk stoking up the housing market again". They are not alone: Bloomberg surveyed 40 economists who were unanimous in forecasting that rates will stay at 4.75 per cent for the 10th month in a row.

So to the City, where Carphone Warehouse releases full-year results on Tuesday. A strong trading statement in April forecast earnings at the upper end of expectations, and analysts expect pre-tax profits of £101m. Investors will want to know about plans for investment and for its landline subsidiary (and Big Brother sponsor) Talk-Talk.

The water sector has been performing strongly recently, and both Severn Trent and Northumbrian release results. Severn shares forged ahead after an upbeat trading statement in April, which exceeded most analysts' price targets, and a much-changed management team (a new chief executive, chairman and chief financial officer have swum on board) is expected to announce pre-tax profits of £253m on Tuesday. Investors will focus on whether the company can live up to its optimism.

Eyes will then turn north on Wednesday. Northumbrian has been the subject of persistent bid whispers, fuelled when French group Suez sold its 25 per cent share to a Canadian pension fund in April. The City will be watching directors' body language for clues to their intentions.

FKI is reporting annual results on Thursday. The engineering conglomerate is struggling to cut its debt and is also being hammered by the weak dollar against the pound as it makes 80 per cent of its profits and 60 per cent of its sales in the US. Pre-tax profits are expected to be around £71m, but investors will want some reassurance that its recovery is on track and that the performance of its materials-handling business, Logistex, is improving.

On the same day, car and bicycle accessory group Halfords will release a maiden set of annual figures as a public company. Analysts expect it to be affected by the consumer slowdown but believe it will end the year (to April) in positive like-for-like territory as it has no major competitors in its sector.

Jeweller Signet recently released a quarterly trading update which added to the domestic retail gloom. It noted a decline in sales in UK stores (which include the H Samuel chain) of 6.2 per cent, but said that this was outweighed by growth in the US businesses. Further news will emerge on Friday when the company announces first-quarter figures.

New Christian Salvesen chief executive Stewart Oades will release his first set of figures on Tuesday for the logistics group. After a series of profit warnings last year, the market was reassured to hear at the last trading statement that earnings were in line with expectations.

Elsewhere, regional brewers Belhaven (Tuesday) and Fullers (Friday) will be delivering results. While Fullers enjoys the protection of a significant family shareholding, there is no such backing for Scottish group Belhaven, and analysts will be keen to see the current management's plans. Seen as a bid target in a consolidating sector, the share price has moved up almost 20 per cent since November. House broker Collins Stewart anticipates a pre-tax profit of £17m.

Back on the UK economic front, manufacturing output figures for April are expected to show a 1 per cent year-on-year fall. This would still be an improvement on the 1.6 per cent fall recorded for March, which was the worst for 10 years.

On Tuesday, the British Retail Consortium releases its May figures and is expected to add to the despondency on the high street. Sales updates are also due from Woolworths and Austin Reed.

On Friday, the Chancellor and the Governor of the Bank of England end the week at the annual Mansion House dinner where they are expected to speak about the outlook for the UK economy. Don't expect good news.

CALENDAR

Tomorrow 6

UK: Results: (final) Hyder Consulting US: Results (second quarter) Quiksilver

Tuesday 7

UK: Results: (F) Belhaven, Carphone Warehouse, Christian Salvesen, Kewill Systems, London Scottish Bank, Protherics, RPC Group, Severn-Trent, Wagon

Wednesday 8

UK: Results: (F) Northumbrian Water, Wincanton

Thursday 9

UK: Results: (F) Alba, Charles Stanley, FKI, Halfords Statistics: MPC announces UK Base RateEurope: Results: (1Q) KBC Groep US: Results: (4Q) National Semiconductor

Friday 10

UK: Results: (F) Fuller Smith & Turner, Telecom Plus (1Q) Signet Europe: Results: (interim) Club Mediterranee US: Results: (4Q) Polo Ralph Lauren

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