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Monday, November 16, 2009

Investors eye London market above 5,300

London investors await a new round of corporate results and key macroeconomic data next week that could help maintain the FTSE 100 index above 5,300.

The index on Friday finished at 5,296.38 points, a gain of 2.99 percent from the previous week.

Trading sentiment was supported by a Bank of England report with optimistic growth forecasts for 2010 and by news of the planned merger of British Airways and Spain's Iberia.

While the FTSE index has broken through the 5,300-point level in the past, it has quickly fallen back. But analysts say the data to be released next week, including British
inflation figures, could push the index over 5,300 and keep it there.

Howard Archer, chief European economist at Global Insight, has forecast an annual inflation reading of 1.6 percent in October after a five-year low of 1.1 percent in September.

The slide in September had raised fears of deflation in Britain and indications that inflation has picked up would be seen as signs of economic stabilisation. The Bank of England's chief task is to keep annual inflation at a government-set target of 2.0 percent.

Deflation, a prolonged period of falling prices, dampens economic momentum as consumers postpone purchases in hopes of even further price declines. Another indicator to be published next week, covering retail sales, is likely to have "picked up appreciably in October after volumes were disappointingly only flat month-on-month in both September and August."

"Specifically we are looking for an increase of 0.7 percent month-on-month in October, which would push the year-on-year increase up to 3.1 percent from 2.4 percent in September."

Low-cost carrier easyJet, brewer SABMiller, plumbing and heating supply firm Wolseley and advertiser Aegis are among companies that will be reporting financial results next week.

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