STOCK MARKETS - THE WEEK IN VIEW : Rate rise gives the right signals

Stocks are expected to gain next week on optimism that inflation and growth are under control after the Bank of England raised interest rates on Friday. Insurance stocks could lead the gains as Norwich Union prepares to sell shares.

"Labour has been in power for a month and the early signs are that they will be sticking to the script," said Stephen Thornber, a fund manager at Threadneedle Investment Managers. "Financials should continue to gain."

This was the first time the central bank had the authority to change interest rates on its own since the Second World War. Rates were raised by a quarter point to 6.50 per cent, only a month after Chancellor of the Exchequer Gordon Brown increased them, also by a quarter point.

Insurance stocks are expected to lead the way because of a perceived shortage of stock in Norwich Union, which starts trading next Monday.

"Fund managers have to have Norwich," said Simon Smith at Albert E. Sharp. Investors running funds that track the FT-SE indices will have to increase their own weightings in the insurance industry as the sector expands.

On 21 May, Norwich said it would sell shares to investors at a price between 240 and 290p. The IG Index, a financial bookmaker that offers spread betting in the grey market, said it was quoting an 8p spread on Norwich shares, bidding at 332p and offering at 340p.

In a similar situation, the FT-SE 100 rose to a record 4,723.7 on 16 May as investors snapped up bank shares before Halifax, the former building society, became the country's third largest bank.

Cable & Wireless is also likely to prompt continued interest after it announced late on Friday that it had agreed to sell a 5.5 per cent stake in Hong Kong Telecom to the Chinese government for $1.2bn. The sale will give the company the financial muscle to pursue other acquisitions.

British stocks could also take their cue from the US, after the Dow Jones Index rose above 7,400 for the first time. Companies that make a lot of their profits in the US and have a large American shareholder base, like Glaxo Wellcome and British Petroleum, could rise.

Christian Salvesen, Unigate, Severn Trent, Northern Foods and Granada Group are the major companies reporting earnings this week.

Copyright: IOS & Bloomberg

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?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Day In a Page

John Palmer: 'Goldfinger' of British crime was murdered, say police

Murder of the Brink’s-MAT mastermind

'Goldfinger' of British crime's life ended in a blaze of bullets, say police
Forget little green men - aliens will look like humans, says Cambridge University evolution expert

Forget little green men

Leading evolutionary biologist says aliens will look like humans
The Real Stories of Migrant Britain: An Algerian scientist adjusts to life working in a kebab shop

The Real Stories of Migrant Britain

An Algerian scientist struggles to adjust to her new life working in a Scottish kebab shop
Bodyworlds museum: Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy

Dying dream of Doctor Death

Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy
UK heatwave: Temperature reaches 39.8 degrees on Central Line - the sweatiest place in London

39.8 degrees recorded on Tube

There's hot (London) and too damn hot (the Underground). Simon Usborne braved the Central line to discover what its passengers suffer
Kitchens go hi-tech: From robot chefs to recipe-shopping apps, computerised cooking is coming

Computerised cooking is coming

From apps that automatically make shopping lists from your recipe books to smart ovens and robot chefs, Kevin Maney rounds up innovations to make your mouth water
Jessie Cave interview: The Harry Potter star has published a feminist collection of cartoons

Jessie Cave's feminist cartoons

The Harry Potter star tells Alice Jones how a one-night stand changed her life
Football Beyond Borders: Even the most distruptive pupils score at homework club

Education: Football Beyond Borders

Add football to an after-school homework club, and even the naughtiest boys can score
10 best barbecue books

Fire up the barbie: 10 best barbecue books

We've got Bibles to get you grilling and smoking like a true south American pro
Wimbledon 2015: Nick Bollettieri - Junk balls and chop and slice are only way 5ft 1in Kurumi Nara can live with Petra Kvitova’s power

Nick Bollettieri's Wimbledon Files

Junk balls and chop and slice are only way 5ft 1in Kurumi Nara can live with Petra Kvitova’s power
Ron Dennis exclusive: ‘This is one of the best McLaren teams ever – we are going to do it’

‘This is one of the best McLaren teams ever – we are going to do it’

Ron Dennis shrugs off a poor start to the season in an exclusive interview, and says the glory days will come back
Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Cheaper energy on the way, but it's not all sunshine and rainbows

Cheaper energy on the way, but it's not all sunshine and rainbows

Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most