Investors rattled by sliding market

MARKETS are expected to come under renewed pressure this week as they struggle to find a floor following recent ominous declines. The FTSE 100 fell a further 3% to 4920 last week, its lowest level since the autumn, hammered by tension between India and Pakistan, conflict in the Middle East, US corporate scandals, and last week's gloomy profits warning from chip giant Intel.

Dan Bunting, strategist at investment bank Prudential-Bache, fears the FTSE could return to the autumn's 4434 low. 'At that point you will get a bit of support. The dividend yield on equities would be 3.2%, which would be better than the buy-to-let market net of costs, the new benchmark.'

Tech groups ARM, Logica and Electrocomponents face ejection in Tuesday's quarterly reshuffle of the index. Likely replacements include packaging group Bunzl, mining group Xstrata and platinum processor Johnson Matthey.

With investors rattled, 'safe haven' assets such as gold, now $326 an ounce, tobacco companies, property and utilities may continue to benefit. There are some positive signs. Business service companies have begun to recover and are their most optimistic since late 1998, says the Confederation of British Industry's quarterly survey. Even telecoms companies are a bit cheerier.

However, this has yet to translate into profits, as costs are rising faster than prices. Consumer services remained under pressure during the three months to May, it says. The England football team's success, if it continues, should provide a boost.

Overseas, mobile phone giant Nokia is expected to miss sales targets on Tuesday. More US companies confirmed regulatory probes into their books on Friday.

New York attorney general Eliot Spitzer is stepping up his investigation into investment banks. He has rejected their appeals for early, discreet settlement, specialist publication Financial News will today reveal.

Key US figures this week, including the closely-watched 'Beige Book' on regional economies, should provide some clues on the economy's direction.