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London stock market watches for next BoE move

/ 05:09 AM August 13, 2011

LONDON—After the somersaults which marked the past week’s trading the London stock market will next week pin its hopes on a boost from the latest economic figures.

London’s FTSE 100 index rose 1.39 percent to finish at 5,320.30 points on Friday, with a late rally making up for significant losses at the start of the trading week.

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The FTSE plunged almost ten percent the previous week amid fears of another vicious global downturn.

Following a bad week for bank shares, London traders will likely be following very closely the European debate on a short selling ban.

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Figures on key economic indicators inflation and unemployment will meanwhile be released on Tuesday and Wednesday respectively, with investors also set to dissect the minutes of the August meeting of the Bank of England’s Monetary Policy Committee (MPC).

The bank forecast on Wednesday that the British economy would grow less than expected this year amid concerns over the eurozone debt crisis, markets turmoil and government austerity measures.

The BoE predicted that gross domestic product (GDP) would grow by about 1.4 percent this year, compared with a previous forecast of 1.8-percent in May.

The bank also said that inflation was likely to hit 5.0 percent later this year in a report published one week after the BoE left interest rates at a record low of 0.50 percent for the 29th month.

It comes amid increasing talk of a possible relaunch of the Bank of England asset purchase programme.

Investors will therefore be looking for any sign this is gaining favor among the nine MPC members.

In 2009 the bank launched a £200 billion (229 billion euro) quantative easing program which expired in January 2010.

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Next week will also see the publication of July’s sales figures on Thursday, followed the next day by an update on public finances which have struggled to get back on track.

Investors will also likely be watching for developments in the eurozone debt crisis, with information on bond purchases by the European Central Bank to be released on Monday.

French President Nicolas Sarkozy and German Chancellor Angela Merkel will meet on Tuesday in Paris to discuss the crisis.

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