While homeowners may still be digesting last week's news that house prices have fallen for the second month in a row, the City will be looking to Northern Rock for indications that the banking sector can still make money from mortgages.
Tomorrow will see a trading update from the lender, the first of the banks to provide indicators for third-quarter business. Analysts at Barclays Stockbrokers are keen to see if the buy-to-let market is holding up and what is happening with remortgaging.
The Newcastle-based bank reported a 45 per cent growth in pre-tax profits for the first half of the year to £294m. Its chief executive, Adam Applegarth, also reported that it had raised its market share of mortgages.
Although Northern Rock has in the past been one of the best-performing banks, analysts believe that the mortgage market in general is under pressure from climbing levels of bad debt and the slowing economy.
That concern will make next week's interest-rate decision by the Monetary Policy Committee (MPC) even more important. Rates were held at 4.5 per cent last month after a reduction in August. The City thinks the MPC is likely to hold the rate once again but that more cuts are on the cards.
Economists at Investec predict the rate will fall to 4 per cent by the middle of next year. The timing, they say, will depend on how long it takes members of the MPC to realise that the Bank of England's outlook for the economy is too rosy. Philip Shaw, an Investec economist, says: "We don't expect a cut until February but if there's more data showing that spending is down, that could change."
Interest rates may have little effect on BP, however, as it prepares to publish a trading statement this week ahead of third-quarter results. The oil giant can't help but book record numbers, and energy analysts will be keen to see if this trend can continue. First-half profits were $10.4bn (£5.9bn) on the back of high oil prices, but the current lack of refineries and drilling equipment could mean that oil companies will have to invest substantially to recover reserves and process them.
High oil prices have also affected the airlines, including British Airways and easyJet. But for this week, all interest will be on the carriers' traffic figures.
Meanwhile, the economy remains a sensitive issue for the retail sector, where a run of poor results has only deepened the gloomy atmosphere on the high street. Both Austin Reed, the upmarket men's clothing chain, and Ted Baker, the designer clothing manufacturer and retailer, produce interims, but there the comparison ends.
Analysts have little reason for cheer with Austin Reed, which has been affected by poor sales from its Country Casuals outlets, prompting action to bring in new stock. Predictions for the half-year range from a loss of £1.2m to £1.7m, with a consensus forming around break even for the full year. The City is especially concerned about the effects of the London bombings on the company's flagship store on Regent Street.
Meanwhile, Ted Baker seems to be bucking the high-street trend. Pre-tax profits for 2004 were up 21 per cent to £16.8m, with the growth coming on the back of a raft of new stores, mostly in the US. Analysts see that continuing, and predict an increase in sales of 18 per cent for the half-year, with pre-tax profits set to reach £6.3m. Geoff Lowery at DKW says it is "difficult to believe Ted Baker is entirely immune", but that the brand has "resilience".
From retail fashion to car spares, and Halfords has already been struck by low expectations for its trading update. Brokers Merrill Lynch revised predictions for pre-tax profits down 6 per cent, and the company's share price plunged. Investors will be seeking reasons for optimism in the update.
But there are no doubts about the performance of the drinks giant Cadbury Schweppes, which is presenting trading figures this week. Cadbury is believed to be on track to grow by its target of 3 to 5 per cent this year, bearing in mind that the company has already said that growth is better than expected. While the update will focus on US divisions, Cadbury has also made business-news headlines amid rumours that PepsiCo is interested in buying its European beverage arm.
UK: Results: (final) Charteris, Tristel; (interim) Northern Rock.
UK: Results: (F) James Halstead; (I) John David Group.
UK: Results: (F) Medical House; (I) Alexandra, MTL Instruments, Chesnara, Sinclair Pharma; (Q3) Michael Page.
UK: Results: (F) MJ Gleeson Group; (I) Ted Baker, Austin Reed Group.
UK: Results: (F) Waterman Group; (I) Shanta Gold.Reuse content