International interest rate reports due

Investors will be able to digest a raft of economic and corporate updates this week, from interest rate decisions in the both the UK and US to results from Marks & Spencer and British Airways.

Airline British Airways rounded off a turbulent year recently when it was demoted from the prestigious FTSE 100 Index. On Tuesday, it reports its first set of interim figures since its departure from the top flight.

The group, rocked by the downturn in travel following September 11 and the weak economic climate, has seen passenger numbers slide although the crucial load factor has increased as BA cuts capacity. Costs have also been slashed.

Fund manager Gerrard is predicting pre-tax profits, before disposals, of £144m against last year’s pre-tax losses of £56m. But with the global economy still weak, BA is expected to remain cautious about its prospects going forward.

Last month Marks & Spencer confirmed its recovery was powering forward with a buoyant second-quarter update. Like many in the sector it suffered from an unseasonably warm September but sales still beat forecasts.

On Tuesday M&S posts interim results and analysts are looking for a jump in pre-tax profits, from £193.9m to £281.2m. Strong growth in its key markets of womenswear, menswear and lingerie, as well as food, are expected to be the main drivers.

Should the figures please the market, full-year forecasts could be pushed up. But in common with the rest of the retail sector, the key focus now will be on how M&S performs over the crucial festive season.

Fears are already growing that telecoms group BT may not be able to match its ambitious revenue growth targets when it unveils interim figures on Thursday.

First-quarter growth was judged by some to be relatively disappointing and analysts will be paying close attention to the sequential improvement, especially in the Wholesale and Ignite divisions.

But profitability is likely to benefit from extensive cost cutting across the group and a major overhaul that has transformed the business. Fund manager Gerrard is expecting interim pre-tax profits to jump from £224m to £417m.

Investors will be bracing themselves for chilling news on Thursday when Big Food Group, home to frozen food chain Iceland, delivers interim figures.

BFG has struggled over the last six months as it fails to halt a decline in sales at Iceland and market forecasts for the group, which also owns the Booker cash and carry chain, have now been downgraded twice.

Pre-tax profits are expected to have slumped from £24.2m to £5m and the City will be hoping for signs the worst is over. An indication of how Iceland is performing will be welcome although analysts are not expecting a detailed trading update.

It has been a rough few months for Royal & Sun Alliance and the insurance industry in general, as sliding stock markets prompt solvency concerns.

But RSA has further depressed the market with talk of having to launch a rights issue and slow growth, which led to the departure of chief executive Bob Mendelsohn in September. Investors have taken fright and RSA has seen about 70% sliced off its market value since the start of the year.

On Thursday the group unveils third-quarter figures and operating profits are expected to drop from £465m to £321m. Its capital position will continue to be a key issue for investors although the market will also be looking for guidance on general insurance premium rates and net asset value per share.

Interest rates dominate this week, with decisions due from the Bank of England, the US Federal Reserve and European Central Bank. Opinion is mixed over what the Monetary Policy Committee will do this month, exactly a year since rates were last cut.

Some point to continuing weakness in manufacturing, poor stock markets and the faltering global recovery. Three members of the MPC were also in favour of cut last month. But with the house market still strong and retail sales holding up, the only thing economists are agreed on is that it will be a close call when the MPC’s deliberations are announced on Thursday.

Other updates out this week, all of which will help investors gauge the strength of recovery in the UK, include manufacturing production, data from the services sector and a retail sales report from the CBI.