London Market: Interest rate fears to depress UK stocks

UK STOCKS may fall this week, led by Lloyds TSB Group and other banks on concern the Bank of England's Monetary Policy Committee will not cut interest rates this week. But bonds are expected to change little: investors expect rates to fall in coming months even if there is a pause in March after five cuts in as many months.

The Monetary Policy Committee meets 2 and 3 March, with recent reports on jobs, faster inflation and a bigger-than-expected rise in retail sales casting doubt on whether the central bank will cut rates. "The MPC may wait a little bit longer before they cut rates again to see the impact of the last 0.5 point cut," said Graham Campbell at Edinburgh Fund Managers. "Growth was more robust than expected."

UK bonds fell on Friday as concern that US interest rates will rise upstaged expectations for lower rates in the UK. "The US has taken the lead the last couple of days," Wattret said. The benchmark 10-year bond yield rose 3 basis points to 4.51 percent.

Gilt yields have risen on the belief that investors have driven them lower than is warranted by the prospects for interest-rate cuts this week and later. "The gilt market was getting carried away with itself," said Geoffrey Dicks, a UK economist at Greenwich Natwest. "Whether it was flight to quality, or pricing in low inflation or bigger rate cuts, too much was priced in."

The FT-SE 100 index rose 2.4 per cent, to 6,175.10 last week. It closed at a record high of 6,307.6. Thursday after the dollar reached a 16-month high against the pound, boosting expectations for exporters.

Various firms due to report earnings could also trigger declines on speculation they willnot meet expectations - including Vickers and Billiton. Vickers said earlier this month it expects 1998 profits to be lower than in 1997 as declines in its weapons business offset higher profits in turbines and shipbuilding.

European defence and automobile stocks fell on Friday on concerns that price competition will slice profit margins. British Aerospace indicated that Airbus Industrie lost $200m (pounds ) in 1998 as it cut prices to compete with US rival Boeing.

"There is a risk that industrial companies will disappoint," Edinburgh's Campbell said. "There is oversupply; pricing has been going down, and they've all got a very high fixed cost base."

Billiton is also likely to report lower earnings as prices for aluminum, nickel and ferroalloys fell due to the global slowdown.

Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk