Stock Markets - The Week in View: Shares express steams ahead

UK stocks are expected to extend their record-setting advance this week amid optimism that interest rates will not have to be raised several times to keep inflation hobbled.

A series of economic figures, including the public sector borrowing requirement, retail sales and gross domestic product, are expected to show moderate economic growth, unaccompanied by accelerating inflation.

That could give London's FT-SE 100 Index the impetus to build on a 10- day run that has generated eight all-time highs.

"The economic news we have seen recently is good and the market seems used to the idea that rates will have to rise slightly to keep ahead of inflation," said John Parrot, head of research at Commercial Union Asset Management. "There is no sign of this market running out of steam."

Bank stocks are likely to shoulder the market to new records as investors scramble to stock up on shares in Abbey National, Lloyds TSB and Barclays before the June 2 distribution of Halifax building society shares to the public.

The Halifax will have a market capitalisation of about pounds 10.4bn and will instantly become a member of the FT-SE 100, exposing the stock to a range of index-linked funds around the world.

The problem facing fund managers is that the new shares will be given to members and will not be sold initially to the public. That means investors that want to maintain a balanced weighting of bank shares will have to buy Halifax shares on the open market.

"There is clearly interest in the financial shares," Mr Parrot said. "None of the funds will be able to buy enough shares in the building societies and they are having to buy the others."

The FT-SE Banks sub-index is the best-performing industry group so far this year, rising 33 per cent since January 1.

The market may see its gains capped with many investors unwilling to wager funds before a meeting of the US Federal Reserve's policy-setting Open Market Committee on Tuesday.

An increase in US rates may trigger a decline by US markets, sparking a domino-effect through markets worldwide.

"The main focus will be the rate meeting in the US and we will probably be pretty cautious," said Mike Butler, a trader at Panmure Gordon. "I would be reluctant to put too much money in without knowing what's around the corner."

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