The Week Ahead: The City takes a break as Nestlé waters down expectations

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The Independent Online

Tumbleweeds might as well be blowing down the City Road. The dog days of summer have arrived and, with most City workers on their annual summer break, news is getting thin on the ground.

Tumbleweeds might as well be blowing down the City Road. The dog days of summer have arrived and, with most City workers on their annual summer break, news is getting thin on the ground.

And that is not good for markets. With few hard facts on which to base rational decisions, global markets get jittery during the "silly season" and react, usually badly, to the slimmest of rumours. The odd spike aside, the FTSE 100, for example, has been heading south for most of August and no one is expecting any change this week.

Thank goodness, then, for Nestlé, the Swiss confectionery and foods giant that announces interim figures on Wednesday. Earlier this year, at the first-quarter update, the owner of KitKat, Nescafé coffee and Ski yoghurt said it was "cautiously optimistic" about the current year and posted a 3.4 per cent increase in sales. It was a good start after a disappointing 2003, when net profits fell 18 per cent to £2.65bn.

But over the past few weeks, analysts have raised concerns that the varied summer weather might have hurt Nestlé's water division, home to Perrier, San Pellegrino and Vittel. Last year's heatwave meant a surge in demand; 2004's more inclement summer is unlikely to have had such an impact.

The group's European sales are likely to be weak, particularly in the UK, Germany and France, which is Nestlé's second-biggest market after the US. North America, however, is expected to be more robust, boosted in part by new launches in frozen foods.

Analysts are pencilling in underlying sales growth of around 3 to 3.5 per cent. Total sales are predicted to rise by around 2.9 per cent to 42.6bn Swiss francs(£18.6bn).

Nestlé has also been threatening to sell Perrier if a thorny dispute over working hours and conditions is not solved, so investors will be looking for an update on this as well.

Elsewhere, and a handful of well-known brands are still issuing numbers. In Europe, the upmarket Danish electronics group Bang & Olufsen publishes full-year data, while in the States, investors will hear an overview from the retail sector, with booksellers Borders and Barnes & Noble, and retailers Saks, Foot Locker and The Gap all due to report.

Back home, and two big names commanding attention will be advertising and media giant WPP and mining group BHP Billiton. WPP produced a detailed five-month trading update in June covering the first five months of the year, so analysts are not expecting much to have changed at this interim stage. The dollar will continue to have had an impact, but pre-tax profits are expected to move from £197.1m to around £225.6m.

Meanwhile, net final profits at BHP are predicted to surge by a hefty 60 per cent to $3.15bn (£1.71bn) as it benefits from historic high prices for commodities such as copper, higher volumes and cost-cutting measures across the group.

Another well-known name returning to the news pages - but not in the way he would prefer - is disgraced media mogul Lord Black. On Friday, Richard Breeden, formerly the chairman of the US Securities and Exchange Commission, will present a court in Chicago with his report on $300m of disputed payments made from the coffers of former Telegraph Group owner Hollinger International.

It could then be used as evidence in a $1.25bn racketeering claim brought by Hollinger International against Lord Black and his associates. The SEC, which is investigating the payments, will also be interested.

On the economic front, the focus will be on the minutes of the Monetary Policy Committee's latest meeting, when interest rates were increased by a quarter point to 4.75 per cent.

They will outline what was discussed during the meeting and could well give an indication of if or when another rise will occur. Most believe it will not be next month - a theory backed last week by the Bank of England's Inflation Report, which implied that the MPC believes its work in getting rates back to normal is drawing to a close.

Also out this week are the latest house price survey from the Royal Institute of Chartered Surveyors and official retail sales data. No one is expecting these announcements to change that view on interest rates.

Philip Shaw, an economist at Investec bank, says: "Overall, the brief period of monetary policy aggression, when rates were raised three times in four meetings, seems to have given way to a return to more measured increases in interest rates.

"This suggests to us that rates will not rise again until November and that a final move to 5.25 per cent early next year will be sufficient to rein in the exuberant UK consumer."


Tomorrow 16

UK: Results: (interim) Lookers, Michael Page International, Systems Union Group.

Denmark: Results: (final) Bang & Olufsen.

Tuesday 17

UK: Results: (I) Angle, Berkeley Morgan; (second quarter) Turbo Genset.

Switzerland: Results: (I) Nestlé.

Wednesday 18

UK: Results: (I) BPP Holdings, Financial Objects, IQE.

US: Results: (Q2) Borders Group, Saks; (Q4) Estée Lauder.

Thursday 19

UK: Results: (I) Aricom, Edinburgh Oil & Gas.

US: Results: (Q2) Barnes & Noble, Foot Locker, The Gap.

Friday 20

UK: Results: (I) Quarto, T Clarke, WPP.