Week Ahead: City waits to see if the Bank will spoil the party

INVESTORS are still shaking their heads in disbelief. Even as manufacturers warn of job losses and recession if the pound does not fall, the stock market continues to see the future through the most rose-tinted of spectacles.

An uneventful March reporting season provided traders with enough reason to push the FTSE 100 index through the 6,000 mark for the first time - and keep it there. Why, even a profit warning from Next - traditionally the bellwether of the retail sector - could not hold back share prices.

What can possibly spoil the party? Well, the Governor the Bank of England could. As the pace of corporate announcements winds down before the Easter weekend, the City will spend the week "Waiting for Eddie". Mr George and his Monetary Policy Committee (MPC) meet on Wednesday and Thursday to decide on interest rates. The verdict will help decide whether the stock market has any chance of hanging on to its recent gains.

The decision is finely balanced. The committee is apparently split down the middle on whether to raise rates or leave them unchanged. A base-rate hike would confirm what many have expected for some time. But it would also support the strong pound, causing more pain for exporters and increasing the political scrutiny of the Bank.

A decision to leave rates unchanged, however, would prompt accusations that the newly independent Bank had succumbed to political pressure. What's more, inflationary pressures are such that the market would simply expect the MPC to raise rates next time, instead.

Either way, investors are unlikely to commit any more cash to this high- octane market until Eddie speaks on Thursday.

On Monday, a batch of retailers report their figures, giving industry watchers a chance to see whether the profit warning from Next was a one- off or signalled a wider malaise across the sector.

The largest is Moss Bross, the suit rental and retail group, which is expected to continue its recent strong growth with full-year pre-tax profits of pounds 19m, compared with pounds 15.9m in the previous year.

On the same day Oasis reports results for the year to January. The fashion retailer had a torrid time last year, issuing two profit warnings after it misjudged the market with the wrong mix of products. Analysts think profits will slump by a third to about pounds 10.2m, from pounds 15.6m last year.

Jeweller Goldsmiths also reports figures on Monday. Most of its sales are done around Christmas, and the company was able to please the market with an upbeat statement at the time.

Nevertheless, brokers will want to be reassured that the outlook remains bright. Expect pre-tax profits for the year to February of pounds 6.8m (pounds 6.02m)

These announcements will all be overshadowed by the talking point in the retail industry, however, which is by just how much GUS will raise the stakes in its hostile bid for Argos.

Lord Wolfson, GUS's chairman, technically has until Friday to raise his offer, but is expected to make a decision earlier in the week. With the Argos share price closing at 646p last week, against GUS's initial offer of 570p, there seems little doubt that investors are expecting a higher bid. But how much higher?

To win, GUS will have to offer something substantially more than 600p. But investors expecting a premium to the current share price are likely to be disappointed.

Also on Monday the epic battle between Emerson Electric, the US giant, and minority shareholders in Astec (BSR), the electronics group which Emerson is trying to take over, starts again in earnest as the two parties fight each other in court.

The Astec shareholders are attempting to make legal history by arguing that Emerson, which owns 51 per cent of Astec and wants to buy the rest, has broken the law by threatening to cut dividend payments to Astec shareholders if they did not sell out. Emerson is trying to have the case thrown out.

JBA, the computer software group, will be trying to rebuild some credibility with the City on Tuesday. The company watched its share price halve in February when it issued a shock profit warning.

It had failed to win a few key software contracts, prompting fears that its business was being squeezed by larger competitors like SAP, the German group. Analysts now expect profits to come in at about pounds 15m.

Investors will largely ignore Tuesday's figures from RJB, preferring to quiz the mining group about suggestions that the Government is planning to bail it out by requiring power generators to buy a certain amount of British coal.

RJB currently enjoys guaranteed supply contracts, allowing it to produce profits of about pounds 176m in the year to last December. But those contracts run out soon and if RJB has to compete with cheap coal imports it will probably have to close half its pits. Some Government help, however, would dig the company out of its dreadful hole.

RMC will report profits of about pounds 306m on Wednesday, up from pounds 295.3m in the previous year. The building materials group is struggling to cope with the depressed German construction market and the continued strength of the pound, which has wiped out much of the profit growth RMC has managed to achieve in that country.