21st May 2015 06:36
LONDON (Alliance News) - London shares prices are set to open lower Thursday, with investors digesting Wednesday's minutes from the Federal Reserve, in which the central bank downplayed the possibility of a US rate hike in June.
IG says futures indicate the FTSE 100 to open 14 points lower at 6,993.3. The index closed up 0.2% at 7,007.26 Wednesday.
Only a "few" Federal Reserve members anticipate raising US interest rates in June, the minutes said. Back in March, "several" members said the Fed was on track to raise rates in June, but policy makers appear more reluctant to tighten given the fragile nature of the US economic recovery.
April's dismal US retail sales report came out days after the meeting and was therefore not factored in. US retail sales were flat despite warm weather and pent up demand following a brutal winter, prompting a number of analyst to downwardly revise second quarter GDP estimates.
Wall Street ended mixed Wednesday, after the minutes were issued, with the DJIA down 0.2% and the Nasdaq Composite flat. Meanwhile, the S&P 500 closed down 0.1% at 2,125.85, but having reached a new record intraday high at 2,134.72.
"Last night?s market reaction to the latest Fed minutes can only be described as undecided, with US markets initially rallying strongly with the S&P 500 setting another new record, before closing more or less unchanged, as investors tried to establish whether the minutes could be construed as hawkish or doveish," says Michael Hewson, chief market analyst at CMC Markets UK.
European investors will focus Thursday on PMI readings from the single-currency region. France Markit manufacturing, services and composite PMI is due at 0800 BST, while the same from Germany is at 0830 BST and from the eurozone as a whole at 0900 BST.
In the UK, retail sales are set for 0930 BST, with economists generally expecting a rise of 0.4% after a 0.5% decline in March. However, Hewson does not agree.
"Today?s expectation for UK retail sales is for April to see a bit of a bounce back, but that is by no means certain given the uncertainty we saw ahead of May?s [UK General] Election," says Hewson. "Last week we saw the BRC retail sales numbers for April show a 2.4% decline, so there is certainly a case for exercising caution with respect to market expectations."
In Asia on Thursday, the Nikkei 225 in Tokyo closed flat, and the Shanghai Composite is trading up 0.6%. Meanwhile, the Hang Seng in Hong Kong is down 0.5%.
The manufacturing sector in China remained in contraction in May, albeit at a slower pace, the latest survey from HSBC revealed on Thursday with a two-month high PMI score of 49.1. That was shy of expectations for a score of 49.3, although it was up from 48.9 in April. It also remained beneath the boom-or-bust line of 50 that separates expansion from contraction.
In the corporate front, Royal Mail Thursday reported higher profit for its last financial year as a better-than-expected performance in reducing costs in the UK offset lower-than-expected revenue in its parcels business, and the company said it will step up its transformation plan in the face of a challenging trading environment.
It reported a pretax profit of GBP569 million for the year ended March 29, up from GBP421 million a year earlier, even though revenue declined to GBP9.42 billion from GBP9.46 billion. Its operating profit after transformation costs rose to GBP595 million from GBP488 million as its operating margin improved by 20 basis points. Excluding the transformation costs, the figure rose to GBP740 million from GBP729 million on a 40 basis point margin increase.
National Grid reported profit before exceptional items that beat analyst expectations but said pretax profit after those items fell. The power grid operator increased its dividend as expected, but not by as much as analysts had forecast.
The FTSE 100-listed company reported a profit before tax of GBP2.62 billion in the year ended March 31, down from GBP2.74 billion a year earlier. Before exceptional items and remeasurements, pretax profit rose to GBP2.87 billion from GBP2.58 billion, as revenue experienced a lift to GBP15.20 billion from GBP14.80 billion. Pretax profit before exceptional items beat analyst expectations.
Also in the economic calendar Thursday, in the US, initial jobless claims are due at 1330 BST, while the Philadelphia Fed manufacturing survey is at 1500 BST.
By Daniel Ruiz; [email protected]
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