The Week Ahead: Bank happier, but will Tesco's well-oiled wheels go wobbly?

The recent fall in the oil price is likely to placate the Bank of England's Monetary Policy Committee, which decides whether or not to lift interest rates this week. But the black stuff's huge gains earlier this year may hit profits at supermarket giant Tesco.

Goldman Sachs analyst Richard Chamberlain is expecting Tesco to lift underlying pre-tax first-half profits by 9 per cent to £1bn. But he said Tesco's operating margins could take a hit from energy-cost increases.

Yet Tesco's own petrol business is likely to add 1 per cent to like-for-like sales, according to ABN Amro. The stockbroker predicts that total like-for-like sales, including petrol, will increase to 6 per cent.

Analysts will be on the lookout for news on the chain's recently launched Tesco Direct online offering, and the pros- pects for its international operations following a warning from the authorities in Thailand last week. The ruling military council said it intended to restrict the expansion plans of major offshore retail groups. Thailand is Tesco's third-largest market after Korea and the UK.

Any update on the group's planned expansion into the US will also be welcome.

Another giant updating the market is BP. It has been a turbulent few months for the oil group, including the fallout from oil spills at its Alaskan operations, delays to the launch of its Thunder Horse platform in the Gulf of Mexico and a slowdown in the once-soaring price of crude. Investors will therefore be seeking assurances at this week's trading update that the company remains on track to hit annual earnings and production targets.

Oil and consumer spending will be key items on the Bank of England's agenda. Deputy governor Sir John Gieve recently revealed that he had seriously considered voting in favour of raising interest rates at last month's meeting. But Investec Securities economist Philip Shaw believes recent data pointing to an economy under control, and a significant fall in the price of oil, will offset the Bank's earlier concerns about rising inflation.

Shareholders will be having their say this week, with BAE Systems putting the proposed sale of its 20 per cent stake in the troubled Airbus project to the vote, while crosses will also be placed on the £351m takeover bid for House of Fraser.

BAE's investors are expected to approve the group's £1.9bn divestment to Airbus's controlling shareholder, EADS. That's despite the sale price coming in at well below the £3.5bn that analysts had expected before the project hit trouble in June.

Shareholders in the underperforming House of Fraser are also expected to vote in favour of the takeover bid.

The department store chain, which revealed last week that its first-half pre-tax profit losses had widened from £4.4m to £11.6m, has recommended the proposal from a consortium led by Baugur, the Icelandic investment firm which already owns a number of UK retailers, such as Somerfield and Karen Millen.

While the high street has proved disappointing for House of Fraser this year, Investec analysts Mark Charnock and Matthew McEachran are expecting a different outcome for fashion house Ted Baker. They forecast it will report an interim pre-tax profit of £6.7m, up from £6.3m in the same period last year.

Meanwhile, shoppers may become footsore if the European Commission decides to impose a tariff on Chinese and Vietnamese leather shoes later this week. Syed Kamall, Conservative MEP for London, warned that any protectionist measures would be a tax on shoppers.

Investors will get an insight into whether the big City bonuses are still finding their way into top-of-the-line products when the Danish maker of high-end television and music systems, Bang & Olufsen, reports its first-quarter results.

In the US, meanwhile, General Motors directors will discuss a contentious three-way tie-up with competitors Renault and Nissan, and from tomorrow, the Nasdaq will be free to revive its pursuit of the London Stock Exchange. But insiders say a new bid is unlikely to be imminent because it would have to pay at least £12.43 per share.

Back home and Sea Containers, the stricken owner of GNER, is set to announce progress on the refinancing of its debt. The company is up against a 15 October deadline, when a $115m bond repayment is due. Without an agreement, bankruptcy beckons.

Other companies updating investors include recruitment firm Michael Page, water company Severn Trent, mortgage lender Northern Rock and automotive parts retailer Halfords.

CALENDAR

Tomorrow 2

UK RESULTS: (final) Avanti Screenmed.

Tuesday 3

UK RESULTS: (F) Powerleague; (interim) EG Solutions.

Wednesday 4

UK RESULTS: (F) Fonebak.

Thursday 5

UK RESULTS: (I) Ted Baker.

Friday 6

UK RESULTS: none scheduled.