FTSE 100 preview: Index to start week higher after US rebound

The UK benchmark index looks set to start the week on the front foot, following an equities rebound on the other side of the Atlantic. On the corporate front, Tesco (LON:TSCO) is reportedly looking to take on discount rivals with a new chain of stores.

Upbeat start on the cards

IG’s opening calls suggest that the FTSE 100 will start the session 1.02 percent higher at 7,165 points. The blue-chip index looks set to recoup most of the previous session’s losses after US stocks recovered some ground on Friday, paring the week’s losses, fuelled by inflation concerns.

“What’s happened here is an understanding that inflation is returning and that the central bank quantitative easing that we’ve grown accustomed to is coming to an end,” Jim Bianco, head of the Chicago-based advisory firm Bianco Research, told CNBC. “Since the financial crisis, this is the first 10 percent correction in stocks that has not been accompanied by a significant fall in rates.” Asian shares meanwhile have been steady this morning.

At home the Footsie tumbled on Friday, shedding 78.26 points to end the last session of a volatile week 1.09 percent in the red at 7,092.43. Reuters, however, quoted Rory McPherson, head of investment strategy at Psigma Investment Management, as saying that other indicators did not signal the start of a bear market.

“Interbank lending rates are still pretty low, credit spreads have moved up slightly from record lows but haven’t blown out, and earnings season is coming along pretty well,” McPherson pointed out, adding that equity markets were sold off because stocks were overbought and slightly over-valued.

Monday’s agenda

There are no major macroeconomic releases out of Europe to guide the markets this morning. In company news, The Times reports that Tesco has called in Boston Consulting Group to help create a separate brand which would match or beat German discounters Aldi and Lidl on price.