The Week Ahead: Shopping shows no sign of dropping

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The Independent Online

There is no longer any escaping it: the dog days of summer are upon us. This week, a grand sum of just 13 companies is reporting and only one of those is a blue chip. Likewise, while the FTSE 100 pushed past the 4,200 mark last week, few expect a repeat of such bullish behaviour, as low volumes ensure that the top flight stays locked in a narrow trading range.

Yet the City will, of course, keep ticking over and helping it on its way will be a number of economic updates. On Wednesday, the Bank of England releases minutes from the Monetary Policy Committee's latest interest rate decision. Meeting at the beginning of the month, the group decided - much as expected - to leave the cost of borrowing at 3.5 per cent, and economists believe that would have been a unanimous move.

Instead, the discussion at the meeting is likely to have focused on the Bank's new inflation forecasts, and the Committee's comments on that will be read with interest.

A snapshot of the high street comes from July's retail sales figures. Trying to predict what these will show, however, is difficult. Sales rocketed ahead by a massive 1.9 per cent in June, a statistic that took many - except perhaps the retailers themselves - by surprise. Corrections often follow such large hikes, so it would be logical to predict a drop off. Yet the heatwave has continued unabated, and many people like nothing more than a trip to the shops when the weather gets warm.

The fate of the supermarket sector also takes a step closer to being resolved this week. The Competition Commission delivers its report on the takeover of Safeway to the Government tomorrow, after its first deadline was extended by six days. The Commission has spent nearly five months examining the offers by Wm Morrison, the Wal-Mart-owned Asda, Tesco and J Sainsbury. Once it has the report, the Government could give its decision within the month.

The shopping theme continues Stateside, with a number of retailers reporting figures. These include children's favourite Toys R Us and the bookstores Barnes & Noble and Borders. Just as in the UK, the figures will be scrutinised for evidence that consumers are continuing to spend, helping to bolster the economy in the process.

Back home, the future of Drax, the UK's largest coal-fired power station, could be sealed on Friday. Earlier this month AES, the owner of the Yorkshire facility, threw in the towel after failing to reach agreement with the 53 banks and bondholders. Drax was plunged into crisis after its largest customer, TXU Europe, collapsed. Creditors, which are owed £1.2bn, have two offers to consider - both of which lapse on Friday. International Power is offering £80m for a portion of Drax's debt which, because of the complex way the facility is structured, would give IP a 36 per cent of Drax's equity. Alternatively, Goldman Sachs is offering up to £130m for 21 per cent of the debt. While on paper the Goldman offer appears more attractive, it is for a different proportion of the debt. Some observers, however, believe the creditors will reject both offers and retain the equity themselves as there have been signs that wholesale electricity prices are rising.

Another company that will be closely watched is Hong Kong's Hutchison Whampoa. The group, which is posting interim results on Friday, has a 65 per cent stake in 3, the first full third-generation mobile phone offering. Analysts and investors will be poring over the results in a bid to see how the service is faring. The group has been pushing it hard in the UK, with offers of free Premiership goal clips and cut-price calls all designed to lure a somewhat sceptical public. It paid £4.4bn for its 20-year licence and is currently aiming for one million UK subscribers by next year.

Other overseas companies reporting include hardware giant Hewlett-Packard in the US, Swiss watchmaker Swatch and food group Nestlé. Most analysts are expecting a lacklustre set of results from the food giant, notably because of tough conditions in the US market. Although some products should have fared well elsewhere, notably ice cream, group sales and net profits are expected to be lower, particularly after the impact of currency translation.

The sole update from the FTSE 100 comes from WPP. It has been a busy few months for the advertising giant as it strives to win control of debt-laden rival Cordiant. An update on its integration will be welcomed. Pre-tax profits are expected to slip from £210m to £200m.

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