London Market: FT-SE 100 - Outlook gloomy despite cut
Gilts are expected to be little changed, with investors unwilling to place big bets before the Bank of England publishes its quarterly inflation report on Wednesday, which is expected to boost hopes of lower interest rates.
"There's little incentive for most people to get involved in the market either way," said Tim Harris, a market strategist at National Australia Bank. Still, the inflation report "is likely to highlight the case for lower rates soon".
In addition, a report on producer price inflation and a survey of retail sales in October are also likely to bolster expectations that interest rates will fall further.
On Friday, the yield on the benchmark gilt rose 10 basis points to 5.12 per cent. The Bank of England's attempt to ward off recession will help stocks more than bonds, according to John McNeill, a market strategist at Sutherlands Stockbrokers. Monetary policy "will be set to sustain growth, and equities should outperform bonds" in that environment, he said.
The FT-SE 100 index last week rose 1 per cent to 5,491.0 making a gain of 18 per cent since 5 October, after plunging 25 per cent in the 10 weeks before then. Banks were the biggest gainers last week, with the FT-SE banking index up 3.36 per cent.
Investors don't expect banks' advance to continue. "The rate cut sends out mixed messages," said Mr George. "Either it says the Bank wants to send a good message to manufacturers suffering from the strong pound, or it says the economy is slowing more that we thought."
Financial service companies were boosted on Friday by speculation that Halifax and the Prudential could merge to create Britain's third largest financial company with a market capitalisation of some pounds 37bn.
"There have been so many of these rumours in the past - I wouldn't put too much into it," said Simon Smith, equities manager at Capel Cure Sharp. Copyright: IOS & Bloomberg
Gay couple beaten in park urge MPs to moderate language on gay marriage
Strewth mate. Aussies wave goodbye to Britain as it becomes too pricey to stay
World news in pictures
X marks the spot: The find that could rewrite Australian history
Oklahoma tornado: Frantic search for victims continues, as tales of survival emerge
- 1 'He was lucky he didn't die' - George Michael fell out of speeding car onto M1 motorway, according to eye witness
- 2 Tottenham to smash pay scale with £150,000-a-week contract in attempt to tie Gareth Bale to club
- 3 Austerity has hardened the nation's heart
- 4 Gay couple beaten in park urge MPs to moderate language on gay marriage
- 5 Why Arsène Wenger must spend to put icing on the cake and buy likes of Stevan Jovetic for Arsenal
BMF is the UK’s biggest and best loved outdoor fitness classes
Find out what The Independent's resident travel expert has to say about one of the most beautiful small cities in the world
Win anything from gadgets to five-star holidays on our competitions and offers page.
iJobs Money & Business
£180 - £230 per day: Orgtel: Operations Analyst - Leading Bank in the City of ...
£500 per day: Orgtel: A top tier banking client urgently requires Finance Busi...
£425 - £550 per day: Orgtel: Senior Finance Project Manager - £550 - Bristol -...
£150 - £250 per day: Orgtel: KYC Analyst - London - Banking - £150-250/day C...