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Week Ahead: risk of an ‘accident’ in Europe
The focus on Europe’s debt woes is only likely to grow next week, alongside key a key report on Britain’s banking sector.
As investors take a collective deep breath after a particularly choppy few sessions in financial markets, the focus on Europe’s debt woes is only likely to grow next week, alongside key a key report on Britain’s banking sector.
A fifth ‘progress report’ on Greece by its international lenders, a Greek debt exchange and a host of bond purchases by the European Central Bank are all ‘risk events’ that could add further fuel to the debt crisis, warned Jörg Krämer, chief economist at Commerzbank.
‘There is a likelihood that an accident may occur’, he added. ‘Thus, high levels of market unrest are likely in the weeks and months ahead.’
And Jeremy Batstone-Carr, director of private client research at Charles Stanley, pointed out that while the ultimate outcome for the euro was still unknown, ‘we do know that the stakes are very high’.
Worries about the eurozone have weighed on UK banks of late – as have concerns about the impact of a much anticipated final report from the Independent Commission on Banking, due on Monday.
The government-appointed commission is expected to confirm proposals that would split banks’ high street and investment banking arms, but is unclear as to the speed and urgency with which they will be implemented.
Meanwhile, UK investors will await on Monday a trading announcement from AB Foods (ABF.L), the owner of discount fashion retailer Primark.
On Tuesday, emerging markets fund manager Ashmore Group (ASHM.L) will deliver its maiden full-year results as a FTSE 100 company, while official data is expected to show that UK inflation edged up 4.5% in August, according to Deutsche Bank.
Howard Archer, chief UK economist at IHS Global Insight, cautioned that there remained a ‘strong likelihood’ that consumer price inflation would hit 5% in the near-term due to jumps in utility prices – although it was likely to fall back in 2012.
Important data are also due on the UK trade balance, in addition to figures on retail sales in the United States.
Housebuilder Barratt Developments (BDEV.L) is to report full-year earnings on Wednesday, while Next (NXT.L), Britain’s second-biggest fashion retailer, and construction group Galliford Try (GFRD.L) are to publish interim results.
‘In keeping with purer housebuilders, we expect an upbeat statement from Galliford in terms of short term outlook and a maintained stance on the group’s ability to hit its housing targets by 2012/13’, said Howard Seymour, analyst at Numis.
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