What to Expect from the Week Ahead

The headlines are likely to be dominated by this week's budget, but investors will simply be hoping it does enough to stave off a de-rating of the UK's debt.

Morningstar 21 March, 2010 | 8:05PM
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Last week brought good news on the UK economy with lower borrowing, lower unemployment and a promising update from Lloyds, but it did little to convince markets that the UK was recovering. Gordon Brown will no doubt attempt to convince the electorate that the UK's situation is improving and markets may or may not believe the spin. There is plenty of domestic economic data this week that could support or undermine him.

The CPI and retail sales figures should provide some insight into the relative health of the UK economy. Inflation reached a nailbiting 3.5% in January from 2.9% in December. Mervyn King has so far been sanguine about the statistics saying that inflation is likely to dip in a few months’ time and the latest meeting minutes show the MPC unanimous on keeping interest rates at their current level. However, any significant rise in inflation or strong retail sales is likely to prompt market jitters about interest rate rises.

With retail sales in mind, a number of the big high street names have earnings announcements this week. Next, Ted Baker and B&Q-owner Kingfisher all report on Thursday. Next last updated the market in January, showing a robust Christmas season, but warned that 2010 still looked uncertain. The market is expecting a rise in pre-tax profits to £494m from £429m.

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