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
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Content Writer - Global Financial Services

£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Web Developer - PHP

£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

Recruitment Genius: Loan Underwriter

£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

A nap a day could save your life - and here's why

A nap a day could save your life

A midday nap is 'associated with reduced blood pressure'
If men are so obsessed by sex, why do they clam up when confronted with the grisly realities?

If men are so obsessed by sex...

...why do they clam up when confronted with the grisly realities?
The comedy titans of Avalon on their attempt to save BBC3

Jon Thoday and Richard Allen-Turner

The comedy titans of Avalon on their attempt to save BBC3
The bathing machine is back... but with a difference

Rolling in the deep

The bathing machine is back but with a difference
Part-privatised tests, new age limits, driverless cars: Tories plot motoring revolution

Conservatives plot a motoring revolution

Draft report reveals biggest reform to regulations since driving test introduced in 1935
The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

The Silk Roads that trace civilisation

Long before the West rose to power, Asian pathways were connecting peoples and places
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

The honours that shame Britain

Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
When it comes to street harassment, we need to talk about race

'When it comes to street harassment, we need to talk about race'

Why are black men living the stereotypes and why are we letting them get away with it?
International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

International Tap Festival comes to the UK

Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory