London Stock market forecast week september 12 2011

London Stock market forecast week september 12 2011 : Trading on the London Stock Exchange is likely to be driven next week by the fate of British banks as final recommendations are due on a shake-up to avoid further state bailouts of lenders.

The FTSE ended this past week down 1.46 per cent amid further global growth concerns and the shock resignation of the European Central Bank's chief economist, Juergen Stark.

As the week kicks off, investors will have their first chance to react to any developments from the two-day meeting of G7 finance ministers that ends on Saturday, although no major announcements were expected.

Investors will also be looking on Monday to the final recommendations by the Independent Commission on Banking, which is expected to confirm its initial proposals, published in April, that called for a "ring-fencing" of lenders' retail businesses, thus avoiding banks being sunk by investment division losses.

It is also likely to repeat calls for banks to set aside more capital to prevent future state bailouts and could again recommend that state-rescued Lloyds Banking Group sells more assets to boost competition.

However following intense lobbying by major British banks such as HSBC and Barclays, reports suggest reforms may not occur until after the country's next general election in 2015.

Bank stocks, which have been mauled in the past weeks, risk a further battering if the costs of reorganisation and increasing capital are seen as being too heavy.

If the general lines of the reform are well known, the particulars and calendar of its implementation could still swing the market.

Several data releases are also on the calendar. Foreign trade and August inflation readings are due out on Tuesday. August unemployment is to be released on Wednesday and retail sales figures on Thursday.

Kesa Electricals is to present its first quarter results on Thursday. Kingfisher, Europe's biggest home-improvements retailer, is also to release results on Thursday.

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