London market: Blue Circle leads rise amid hopes of growth

UK STOCKS are expected to rise this week, led by such economically sensitive stocks as the cement maker Blue Circle Industries, amid optimism that growth in the UK will start to accelerate before the end of the year.

The UK's benchmark FT-SE 100 index fell 2.2 per cent last week, closing at 6,354.60 on Friday. The FT-SE 250 and the FT-SE small cap index both rose 0.7 per cent on the week. The smaller indexes include more economically sensitive companies - ones that stand to benefit most from faster growth - than the FT-SE 100.

UK bonds, meanwhile, could fall next week, with further signs of buoyant growth in the US expected to point to higher global inflation, bringing down prices in fixed income markets around the world.

Continuing signs of an upturn in the US economy "should convince the markets even more that Alan Greenspan [the US Federal Reserve chairman] is preparing to hike rates in May or June", said Neil Parker, an economist with Royal Bank of Scotland.

Mr Greenspan sparked a fall in global bonds last week when he said rising wages may herald faster inflation.

Investor expectations on growth were boosted last week when the Bank of England left interest rates unchanged, suggesting it believes it has reduced rates enough to spur economic expansion. Blue Circle, the UK's largest cement maker, gained 6.9 per cent through the week, though it fell 5.75p to 436.75 on Friday.

Retailers could rise on hopes that consumers will spend more. The Confederation of British Industry said on Wednesday that retail sales rose in April at their fastest annual pace since June.

Next, the UK's third-largest clothing retailer, rose 13.5p on Friday, taking its gain on the week to 4.2 per cent. Storehouse, the UK's third- largest children's clothes seller, shed 50p to 153 Friday, paring its weekly gain to 10.5 per cent.

Manufacturers, such as Invensys, the world's biggest maker of factory controls and automation equipment, may gain if the pound extends losses against the dollar after Eddie George, Governor of the Bank of England, said sterling, near a six-week high against the dollar, was overvalued.

Companies reporting results this week include BP Amoco, which analysts forecast to report a decline of as much as 52 per cent in its first-quarter profit because of charges related to cost-cutting after BP's takeover of Amoco.