Market Watch: Bad debts tipped to take shine off HSBC's performance

Even fears over the Bank of England's decision to pump an extra 50 billion into the UK economy failed to cause much of a dent in the rise and, at the end of a short trading week, the Footsie closed on Friday at 4,462.1 – a gain of 4.5 per cent over the week.

Financial firms were again in the spotlight in a week that saw updates from Royal Bank of Scotland and Barclays as well as an unscheduled report from Lloyds Banking Group.

RBS lost 7 per cent to 47.4p over the week, as investors took heart from strong investment banking results and losses that were not as bad as some had expected, despite news of 2.9bn in bad debts.

Another round of job cuts at BT and an update on bad debts from HSBC will dominate the City agenda this week. HSBC is the last of the big UK banks to report on first-quarter trading when it updates tomorrow. Analysts are expecting HSBC, one of the few UK banks not to have been bailed out by the government, to report strength from the wholesale side, with a strong investment banking business also adding support. But there may be more gloom on bad debts. Credit Suisse is forecasting about another 3.3bn in US consumer impairment charges. But the group has not had to turn to the government for recapitalisation, instead tapping shareholders for 12.5bn in the largest rights issue in UK corporate history.

Updates from newspaper publishing firms Trinity Mirror and Johnston Press are likely to underline the huge challenges facing a struggling sector on Wednesday.

The Bank of England's decision to pump an extra 50bn in newly created money into the economy came as a surprise last week. The move takes the monetary policy committee's (MPC) quantitative easing programme to 125bn – just 25bn below its permitted ceiling.

Markets will gain more insight into the thinking behind the decision when the Bank publishes its latest quarterly forecasts on inflation and growth on Wednesday.

Three months ago, the Bank made a dramatic downward revision to its growth forecast – predicting the economy could shrink by as much as 4 per cent in the summer and remain in recession for the bulk of 2009. Since then, official figures have shown a worse than expected 1.9 per cent fall in output for the first three months of 2009.

Although the MPC noted "promising signs" this week that the pace of decline is easing, its acceleration of the QE programme hints at gloomier growth forecasts this year, experts suggest.

The Bank will also publish its forecasts for Consumer Prices Index inflation, which it is charged with holding at 2 per cent. The wider Retail Prices Index, which includes house prices, has turned negative for the first time since 1960.

Thomas Cook will give an update on how the travel sector is faring when it reports interim figures on Thursday. These come after the recent swine flu outbreak. The group's shares were hit when the outbreak first surfaced, as were stocks across the travel and airline sector. But shares have since recovered some of the ground lost as concerns have eased over the severity of the outbreak.

THE WEEK AHEAD

TOMORROW

Centrica, Dignity, G4S, Henderson (AGMs), HSBC (trading updates); Southern Cross Healthcare (interims)

TUESDAY

Stobart (finals); Imperial Tobacco, InterContinental Hotels (interims); Interserve, Premier Foods (trading updates); William Hill (AGM)

WEDNESDAY

FirstGroup, Sainsbury's (finals); Barratt Developments, Johnston Press, Trinity Mirror (trading updates); Bunzl, Rentokil Initial, Unilever (AGMs)

THURSDAY

BT, Invensys, National Grid (finals); Thomas Cook (interims); Prudential (trading updates); ITV (AGM)

FRIDAY

UTV Media (trading update); Galiform, Standard Life (AGMs