British interest rates are expected to dominate trading on the London stock market next week as the Bank of England looks set to hike borrowing costs for a fifth time in 11 months on Thursday. The FTSE 100 index of leading shares finished at 6,607.90 points on Friday, up 40.5 points or 0.62 percent from a week earlier.
"In the short term, concern over interest rates is likely to be the dominating influence" for equity markets, said Mike Lenhoff, chief strategist at Brewin Dolphin Securities in London.
The Bank of England is expected to hike borrowing costs by a quarter-point to 5.75 percent on Thursday and to 6.00 percent before the end of 2007 amid strong inflation and consumer spending, according to most economists.
Higher rates can weigh on companies' share prices as they increase interest repayments while reducing consumers' spending power.
The likelihood of higher rates increased on Friday after the British government said that economic growth rose by 3.0 percent on an annual basis during the first quarter of 2007. That compared with an earlier estimate of 2.9 percent.
Aside from next week's rate decision, the airline sector is in focus as easyJet and British Airways publish their traffic figures for June.
This week, the main events in Britain affecting the market were the naming of a new finance minister and a postal strike. Experienced minister Alistair Darling replaced Gordon Brown as Chancellor of the Exchequer. Brown stepped up to the role of Prime Minister and leader of the governing Labour party following the resignation of Tony Blair.
Elsewhere, businesses counted the cost of Britain's first postal strike in more than a decade, which was triggered by a row over pay and government plans to cut thousands of jobs. The 24-hour walkout on Friday could be followed by further strike action next month, union leaders have warned.
Comments
Comments are closed for this article.