Market braced for bad news in Inflation Report

ECONOMISTS have warned that markets should be braced for bad news this week as the Bank of England releases its quarterly update on the UK’s financial outlook.

“The upcoming Inflation Report is likely to project that inflation will still be clearly above the two per cent target two years ahead, and perhaps not even back to the target three years ahead,” said Citi analyst Michael Saunders.

“If so, this will be the first Inflation Report since early-2008 to forecast above-target inflation two years ahead.”

The report is due out on Thursday and follows Wednesday’s release of official inflation figures. The consensus forecast is for inflation in January to have stabilised at 2.7 per cent. However many economists predict it will rise above three per cent later in 2013. Less gloomy news is expected to come from this week’s Rics housing survey, which is likely to show house prices are rising gradually. Meanwhile official retail figures are also expected to be upbeat.

The corporate week starts today with full-year figures from Fidessa, interim results from Monitise and a trading update from Essar Energy.

The Eurogroup finance ministers are also set to meet.

Tomorrow will bring a slew of economic data, such as the retail price index and consumer price index.

The headline corporate news will come from banking giant Barclays. It is set to report its full-year results as well as its strategy review in which chief executive Antony Jenkins will outline his plans for running the bank.

The market will be paying close attention to his plans, especially what intentions he has for its biggest earning sector, the investment banking business.

Jenkins has said he is keen to change the image of the bank in the wake of the Libor-rigging scandal.

Full-year results are also expected tomorrow from Dragon Oil and Heavitree Brewery while Dunelm Group will give interim figures.

On Wednesday Telecity, Reckitt Benckiser, Anglo Pacific, African Barrick Gold and Tullow Oil are all set to update the market with year-end figures, while Town Centre Securities is set to deliver interim results.

Thursday, which is Valentine’s Day, is unlikely to be all hearts and flowers, with RBS already labelling the Eurozone’s expected quarterly GDP figures a “Valentine’s Day massacre”.

However Rolls-Royce and Shire are both expected to deliver rosier news with their full-year reports. Rio Tinto and SVG Capital will also give year-end figures.

Miner Anglo American will finish the week with year-end figures, while Darty is set to give a trading update.