Watch out for negative reaction to an MPC split

MARKETS are expected to open marginally lower this morning on a weak US lead from after the close on Friday, and amidst trepidation ahead of an active economic calendar for the coming week, as talk grows of a double dip recession in the UK.

GFT is calling the FTSE 100 index to open down 5 points at 5,270.

The German DAX index is quoted around 6,097, down 13 points from Friday and the French CAC is seen opening down 10 points at the 3,600 level.

Data to focus on from the UK economic front include inflation numbers tomorrow and retail sales on Thursday, but the highlight of the week is likely to come from the release of the minutes of the Bank of England’s latest monetary policy committee (MPC) meeting, due out on Wednesday.

The first three-way split amongst the MPC for the first time in two years is possible, with divergences emerging among members over the need for more quantitative easing to stimulate what is expected to be a slow and difficult recovery, keeping interest rates on hold or even raising rates to combat sustained high levels of inflation.

On that basis we foresee a broadly flat to negative tone to the week but the risk is to the down side, so watch out for unexpectedly negative news.

Martin Slaney is director of global dealing operations at GFT