INTERNATIONAL MARKETS: LONDON: Boost for 'safe haven'

UK STOCKS are likely to reach new highs this week as investors snap up shares not exposed to Asia's economic turmoil and which will benefit from domestic growth. Bonds, on the other hand, are expected to fall if reports strengthen the case for a rise in interest rates this quarter.

Equity investors will focus on retailers' Christmas sales figures. Tesco, Storehouse and Body Shop International will issue trading statements. Lonrho, the industrial holding company, will report full-year earnings.

"People are looking at the UK as a safe haven," said Mark Gardner, fund adviser at Julius Baer Investments. "Exposure to Asia is low. If you stick to the domestic stocks, such as financials, property and pharmaceuticals, you are picking up on reasonable growth in the UK."

The FT-SE 100 index rose 97.3 points (1.88 per cent) on Friday to 5263.1, near the 3 October closing high of 5330.8. The index rose 2.43 per cent over the week. The FT-SE Gas Distribution sub-index was up 8 per cent as investors bought domestic stocks.

This week reports on government borrowing, retail sales and broad money supply for December, and a provisional estimate of fourth quarter growth will be issued. "On balance, I think the numbers will be negative for gilts, as they'll reinforce the belief that a rate rise is still on the agenda," said Philip Shaw, chief economist at Investec. "I expect a slowdown in GDP, but not enough to dispel expectations that rates will rise next month."

Mr Shaw expects the retail sales report to support anecdotal evidence that spending over Christmas was stronger than retailers first thought.

On Friday the benchmark 7.25 per cent 10-year gilt fell and the yield rose to 6.07 per cent. The rally in Tokyo stocks helped "take the edge off bonds as the flight-to-quality argument fades," said David Brickman, economist at PaineWebber International. The yield rose 28 basis points last week as hopes that interest rates had peaked faded after wages grew faster than expected, raising inflation fears, and Bank of England Governor Eddie George said interest rates could rise soon without signs of economic slowdown.

Philip Laing, a fixed-income fund manager at Scottish Life in Edinburgh, said another rise was not certain. "If they do hike again, I think there would be a strong feeling that that would be it and we could see gilts rally."

Even so, some investors are concerned that another rate rise may slow growth too much. The Bank of England raised rates five times last year in an attempt to control inflation. The Bank of England's monetary policy committee next meets on 4 and 5 February.

Asia's turbulent markets could also mean stocks of British companies that make a lot of their profits in the region will suffer more losses. The FT-SE Engineering sub-index led the percentage decliners last week, falling 9 per cent. "There is still a lot of uncertainty regarding Asia," said Mr Gardner.

Copyright: IOS & Bloomberg

Start your day with The Independent, sign up for daily news emails
News
people
Arts and Entertainment
Attenborough with the primates
tvWhy BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Sport
The RBS Six Nations trophy at the Aviva Stadium ahead of Ireland vs England
rugby
News
Campbell: ‘Sometimes you have to be economical with the truth’
newsFormer spin doctor says MPs should study tactics of leading sports figures like José Mourinho
ebooks
ebooksA special investigation by Andy McSmith
Arts and Entertainment
Kanye West found himself at the centre of a critical storm over the weekend after he apparently claimed to be “the next Mandela” during a radio interview
music
Sport
Wes Brown is sent-off
football
Voices
Lance Corporal Joshua Leakey VC
voicesBeware of imitations, but the words of the soldier awarded the Victoria Cross were the real thing, says DJ Taylor
Life and Style
Alexander McQueen's AW 2009/10 collection during Paris Fashion Week
fashionMeet the collaborators who helped create the late designer’s notorious spectacles
News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003
Barbara Woodward: Britain's first female ambassador to China intends to forge strong links with the growing economic superpower

Our woman in Beijing builds a new relationship

Britain's first female ambassador to China intends to forge strong links with growing economic power
Courage is rare. True humility is even rarer. But the only British soldier to be awarded the Victoria Cross in Afghanistan has both

Courage is rare. True humility is even rarer

Beware of imitations, but the words of the soldier awarded the Victoria Cross were the real thing, says DJ Taylor
Alexander McQueen: The catwalk was a stage for the designer's astonishing and troubling vision

Alexander McQueen's astonishing vision

Ahead of a major retrospective, Alexander Fury talks to the collaborators who helped create the late designer's notorious spectacle
New BBC series savours half a century of food in Britain, from Vesta curries to nouvelle cuisine

Dinner through the decades

A new BBC series challenged Brandon Robshaw and his family to eat their way from the 1950s to the 1990s
Philippa Perry interview: The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course

Philippa Perry interview

The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course
Bill Granger recipes: Our chef recreates the exoticism of the Indonesian stir-fry

Bill Granger's Indonesian stir-fry recipes

Our chef was inspired by the south-east Asian cuisine he encountered as a teenager
Chelsea vs Tottenham: Harry Kane was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope

Harry Kane interview

The striker was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope
The Last Word: For the good of the game: why on earth don’t we leave Fifa?

Michael Calvin's Last Word

For the good of the game: why on earth don’t we leave Fifa?
HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?