BAD NEWS WEEK LOOMS FOR BORROWERS
Most economic pundits have confidently predicted UK interest rates will rise slowly but steadily during 2004 - with Thursday likely to see the first hike.

The Bank of England's rate-setting committee, which in November voted for a 0.25% increase to 3.75% - the first since early 2000 - is expected to sanction a further rise to 4%.

Healthy economic growth and buoyant retail sales have given a green light, while a decidedly upbeat manufacturing sector survey from the Confedaration of British Industry has further raised expectation of an increase.

The CBI even said it did not oppose higher rates - provided any hikes were modest and infrequent.

An increase by the monetary policy committee on Thursday will mark a shift in mood from the last two months, when members voted 8-1 to freeze rates.

The only potential block to an interest rate rise are indices for the manufacturing and services sector - due on Monday and Wednesday respectively.

The January data would probably have to be unexpectedly weak to spur a change of attitude at the Bank of England.

This seems unlikely. The December index for industry was the strongest for four years - services dipped, but it was still close to November's six-year high.

Heavweight trio due Thursday

Thursday sees big names report, with industrial chemicals group ICI due to issue full-year results.

The City will hope for better figures than those presented for the third quarter back in October, when a 60m restructure charge decimated profits.

Although the improving US economy will have helped the group, the dollar's weakness and higher pension costs may undermine much of the benefit.

Oil and gas giant Shell also reports Thursday, having already hit investors with a bombshell this year.

The Anglo-Dutch giant's admission three weeks ago it overestimated reserves of both fuels sent the shares tumbling, sparked a US class action and calls for the head of chairman Sir Phil Watts.

By contrast, smaller rival Cairn Energy has been the toast of the City since it announced an Indian oil strike.

Medical devices group Smith & Nephew is the other member of the FTSE 100 trio due to report on Thursday.

Last year was marked by a major setback for S&N, when its agreed 1.5bn bid for Swiss group Centerpulse was effectively gazumped by US rival Zimmer.

However, some City analysts said it was right to avoid a bid war and the group has already full-year sales growth of 10% thanks to its orthopaedics unit.

Also reporting this week...

A stronger US economy and demand from China for base metals should lift full-year earnings at mining giant Rio Tinto when it reports on Monday.

Retailer Carpetright said pre-Christmas sales had flagged but had started to pick up, so Tuesday's trading update will be studied for signs of revival.

Housebuilder Bellway follows with its own update Wednesday, but has already said 2003 was its eighth record year.

MONDAY February 2

Finals: Portman Building Society, Rio Tinto.

Interims: Filtronic, Murgitroyd, NWF Group.

CIPS report on manufacturing sector (Jan).

TUESDAY February 3

Finals: Henderson TR Pacific, XP Power.

Interims: BOC Group (Q1), Caffe Nero, Epic Group, Surfcontrol.

Trading update: Carpetright.

Confederation of British Inustry distributive trades survey (Jan).

WEDNESDAY February 4

Finals: Arc International.

Interims: Scottish Power (Q3).

Trading update: Bellway.

UK Official reserves; CIPS report on services sector (Jan). Bank of England monetary policy committee meets.

THURSDAY February 5

Finals: ICI, Shell, Smith & Nephew.

Interims: Regent Inns.

Trading update: GWR Group (Q3), Signet (Q4).

Interest rate decision. British Retail Consortium shop price index (Jan).

FRIDAY February 6

No major results or data yet scheduled.

* Halifax house price index for January also due this week - issue date as yet unconfirmed.


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