The Week Ahead: HBOS climbs the property ladder

Investors will be hoping for a quiet week as the succession of festive gatherings takes its toll, but a barrage of trading statements and the possible announcement of deals will keep the market busy.

Investors will be hoping for a quiet week as the succession of festive gatherings takes its toll, but a barrage of trading statements and the possible announcement of deals will keep the market busy.

Wm Morrison, the UK's fifth largest supermarket operator, could launch a bid for its bigger rival Safeway this week after Patricia Hewitt, the Trade and Industry Secretary, gave it the go-ahead on Monday.

Expect a positive update from HBOS, the UK's biggest mortgage lender, which announces a trading statement on Tuesday. The bank is likely to have benefited from the resilient housing market and the weakness of its nearest rival, Abbey National, whose sales are thought to be stalling as it transforms its product range.

Lloyds TSB is likely to report a slight fall in underlying profits, but investors will be asking how it plans to expand in the UK, after years without progress. Sales of savings products through its branches have been disappointing ever since it bought Scottish Widows for £5.7bn in 1999. It remains to be seen if the new head of the investment division, Archie Kane, can turn things around.

Pearson, the publisher of school textbooks and owner of the Financial Times, is expected to show little progress due to slow growth in US educational publishing and the elusive recovery in advertising sales. The market will be looking for signs of improvement in 2004.

Investors are waiting for updates from some of the UK's biggest house builders, including George Wimpey, Persimmon and Wilson Bowden. Low borrowing costs have fuelled demand for property, but there are concerns about the sustainability of this boom, given the recent rise in interest rates.

McCarthy & Stone, the leading builder of retirement homes, is likely to attract attention for other reasons, when it holds its AGM tomorrow. Questions will be asked about its standards of corporate governance, after the National Association of Pension Funds, a shareholder lobby representing firms with more than £600bn of investments, recommended its members vote against the re-election of finance director, Matthew Thorne, who is on a two-year rolling contract.

Among tech companies, Misys, the software provider for the banking industry, is expected to remain cautious about its prospects as its customers continue to skimp on budgets.

Trading at GKN, the car parts to aerospace group, is also likely to be tough. The defence business is expected to be strong, but this will be offset by weakness in the automotive and civil aircraft markets.

Hanson, the supplier of building materials, is expected to show a fall in profit due to declining volumes in the United States (which accounts for 40 per cent of sales), a weak dollar and higher pension costs. The market continues to worry about litigation issues, as the company faces claims for asbestos-related illnesses as well as a $200m lawsuit from the state of California, which is suing Hanson for unpaid royalties.

It will be a nervous week for Dixons and Kesa Electricals, the owner of Comet, as the Government prepares to reform the way retailers sell extended warranties on electrical products. Any changes would be bad news for electrical retailers, which rely on warranties for a significant amount of their profits.

Companies will be holding their breath on Wednesday as the investor activist group Pirc announces its annual review. As well as assessing boardroom behaviour over the last 12 months, it will look forward to issues likely to dominate 2004, including the Granada/Carlton merger and the on-going integration of the Higgs report.

It will be a busy week on the economic front as the Bank of England publishes minutes for December's Monetary Policy Committee meeting. Interest rates were kept on hold at 3.75 per cent, but the market will be looking for an indication of how soon the next rate rise could be. Simon Rubinsohn of Gerrard, the fund manager, said: "There is a lot of speculation about how many people voted for an interest rate rise this month. The consensus view is that the next hike will be in February, but I wouldn't be surprised if it took a little longer than that. I think the Bank of England will take a 'wait and see' attitude over the Christmas period." The MPC raised interest rates last month, but remained wary about the impact of higher borrowing costs on heavily indebted consumers.

The market will also be looking out for figures on inflation, unemployment, retail sales, mortgage lending and consumer borrowing.

Calendar

Tomorrow 15

UK: Results: (final) Windsor

Trading statement: Aggreko, George Wimpey, Lloyds TSB

AGM: McCarthy & Stone, Premier Direct

Tuesday 16

UK: Results: (F) Image Scan Holdings, Slimma; (interim) Carpetright

Trading statement: Bunzl, GKN, HBOS, Pearson, Persimmon

AGM: Actif

Wednesday 17

UK: Results: (F) Baggeridge Brick; (I) Homestyle, Kleeneze, Scipher, Vantis

Trading statement: Hanson, Misys

AGM: Fibernet

Thursday 18

UK: Results: (F) Leeds Group
AGM: Camaxys, Smart (J) & Co

Friday 19

UK: Results: (I) Ensor Holdings

Trading statement: IMI, RMC, Wilson Bowden

AGM: Avionic Services, Creighton's, Medical House, Stavert Zigomala