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Last Updated: Sunday, 26 October, 2003, 15:10 GMT
US growth in the spotlight
Analysis
By Myles Neligan
BBC News Online business reporter

stock market trader
Investors will be looking at US GDP data

Investors will be looking for encouraging growth data from the US to push share prices higher this week.

Forecasts for the first official estimate of annual GDP growth in the third quarter, due out on Friday, range from 4% to 7%.

A figure at the top end of the range would give markets worldwide a welcome lift, helping the FTSE 100 share index claw back some of last week's losses.

On Friday, the FTSE closed at 4,239, little changed on the day, but 2.4% down on the start of the week.

It was the FTSE's biggest weekly drop since March.

Rate speculation

The decline reflected a sharp sell-off on Wednesday and Thursday after the Bank of England revealed that it came within a whisker of raising interest rates earlier this month.

The bank said four of the nine experts who sit on the its rate-setting panel backed a 0.25% increase in borrowing costs, losing the vote by the narrowest possible margin.

On the corporate front, investors were unnerved by weaker than expected third quarter results from drug maker Merck and chemicals firm DuPont.

There's a bit more juice to extract from the orange
Graeme Dickson, Blue Index
There was disappointment also over figures from software giant Microsoft which suggested that information technology spending by businesses remains weak.

Caution

The downbeat news cast a shadow over the US earnings season, which had previously yielded results largely in line with or better than expectations.

Some investors believe last week's decline was a blip, saying the underlying trend remains firmly upwards.

"It was an excuse to take profits. We're still pretty bullish. There's a bit more juice to extract from the orange," said Graeme Dickson at Blue Index, who expects the FTSE to finish the year at 4,500.

But others take the view that positive corporate earnings have already been priced into the market, making further strong gains unlikely in the absence of strongly encouraging economic news.

Worries that future interest rate increases may lead to a sharp cutback in consumer spending, depriving the economy of one of its main growth drivers, also persist.

Concerns over the impact of the US budget and current account deficits are also weighing on the market.

Fed in the frame

Aside from the US growth figures, investors will be focusing on yet more corporate results in the week ahead.

In the US, figures from a string of blue chip firms including Boeing, American Express and Lockheed Martin will round off the third quarter earnings season there.

In the UK, third quarter updates are expected from oil giant BP, financial information group Reuters, and leisure firm Whitbread.

Some European corporate giants will also join the fray, with results due from drinks group Interbrew, industrial conglomerate ABB, and aluminium producer Pechiney.

The US Federal Reserve, which holds its monthly interest rate meeting on Tuesday, is expected to leave US interest rates on hold at their current 48-year low of 1%.

And in Germany, the closely-watched IFO index of business confidence, also on Tuesday, will provide some clues as to the outlook for Europe's biggest economy.


MARKET DATA - 11:37 UK

FTSE 100
5428.78up
22.84 0.42%
Dax
5732.06up
18.55 0.32%
Cac 40
3783.91up
14.37 0.38%
Dow Jones
10403.79up
78.53 0.76%
Nasdaq
2273.57up
35.31 1.58%
Data delayed by at least 15 minutes

SEE ALSO:
US earnings take centre stage
19 Oct 03  |  Business
FTSE 100 steadies
23 Oct 03  |  Business
D-day for Safeway?
21 Sep 03  |  Business
Investors tune in to ITV merger
05 Oct 03  |  Business
Investors search for positive signs
15 Sep 03  |  Business
Dow Jones hits 14-month high
19 Aug 03  |  Business
UK shares hit 12-month high
14 Aug 03  |  Business


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