9th Apr 2015 09:45
LONDON (Alliance News) - UK equities are trading higher mid-morning Thursday, after the minutes from the recent Federal Open Market Committee meeting showed members were split on whether the US central bank should raise rates in June.
However, stock gains remain limited due to concerns about the situation in Greece, with the Greek government due make a debt repayment to the International Monetary Fund. According to a report by Reuters, in which it cites a government official, Greece will make a EUR450 million loan instalment to the International Monetary Fund on Thursday.
"The payment has been scheduled and will go out later today," the Greek official told Reuters.
The Greek government also is due to pay EUR194 million to private bondholders on April 17, followed by a further EUR80 million payment to the European Central Bank on April 20.
"Greece still has a long way to go, but this repayment would begin to repair the country's poor relationship the rest of the eurozone. Traders are more than aware Greece's economy is being crushed under the weight of its own debt, but as long as Athens appears willing to play ball with the ECB then equity markets will keeping edging higher," says IG market analyst David Madden.
The FTSE 100 trades up 0.7% at 6,986.16, the FTSE 250 is up 0.5% at 17,650.90, and the AIM All-Share is up 0.4% at 728.71.
In Europe, the German DAX 30 is up 0.2%. The French CAC 40 is up 0.7% after the Bank of France raised its first quarter growth estimate for the French economy back to 0.4%, citing growth in industrial production and stronger foreign demand.
London equities were given a boost at the open after the minutes of the two-day FOMC meeting, held in March, showed that several participants determined that the economic data and outlook were likely to warrant the beginning of the process of raising US interest rates in June.
Others said conditions would not be appropriate to begin raising rates until later in the year due to the effects lower energy prices and the dollar's appreciation have on inflation.
However, the meeting was held before the release of the latest jobs data last Friday, which showed employment in the US rose by much less than expected in March.
"In truth there was not a great deal that we did not already know, with any hike being data dependent and consideration taken over the strength of the dollar and the drop in the oil price. It was the division in the committee which will have pleased the dollar bulls though, and there has been a slight strengthening of the dollar in the hours since the release," says Richard Perry, market analyst at Hantec Markets.
The pound currently trades at USD1.4791 and the euro at USD1.0744.
Markets now will keep an eye on the last monetary policy decision by the Bank of England ahead of the UK general election, which is due at 1200 BST. Analysts largely believe that it will be a non-event, and the central bank will keep interest rates on hold.
"The Bank of England will remain on a 'wait-and-see stance' and hold its policy rate at 0.5% and the level of asset purchases at GBP375 billion. Election outcomes will, in our opinion, hardly cause unexpected policy action, even if a less economy-friendly coalition would take over," says David Meier, an economist at Julius Baer Group.
"It is still very early to assess a possible impact of the elections on monetary policy. However, we do not believe that a base case, seeing inflation back at 2% year on year in 2016, could be deteriorated strongly enough by an economy-unfriendly election outcome, preventing interest-rate normalisation in late 2015 or early 2016 or even reviving asset purchases this year," Meier adds.
The Bank of England's decision comes after data from the Office for National Statistics, which showed the UK trade deficit in goods widened by more than expected in February to its highest level in seven months. The visible trade deficit increased to GBP10.34 billion from GBP9.17 billion in January. Economists had forecast a shortfall of GBP9 billion.
On the corporate front, Burberry Group is the biggest gainer in the FTSE 100, up 3.4% at 1,802.00 pence. JP Morgan raised its forecasts for Burberry Group's financial years 2016 and 2017 due to the sterling cost benefit of the luxury fashion retailer's sourcing in euros. The bank also raised its price target on the stock to 1,560.00 pence from 1,470.00p to reflect the changes, and maintained its Neutral rating.
InterContinental Hotels Group, up 1.9%, is another big gainer after Jefferies upgraded it to Hold from Underperform. The investment bank says it sees the company as a potential takeover target.
Miners are underperforming after Credit Suisse downgrades. The bank cut Anglo American to Neutral from Outperform and downgraded BHP Billiton to Underperform from Neutral. The two miners are down 1.7% and 1.2% respectively.
In the FTSE 250, Cranswick is trading up 1.7%. The food producer said it finished its recent financial year with a "strong final quarter" as sales grew, and said it expects its full-year results to be in line with expectations. The company reported a 1% rise in underlying sales for its fourth quarter for the year ended March 31 as a lower input prices were passed onto customers, and it said its full-year underlying sales were in line with the year before. Total sales were up 4% for the fourth quarter and 1% for the full year, it said.
Aside from the Bank of England minutes, there are US weekly initial and continuing jobless claims at 1330 BST.
Futures indicate Wall Street for a lower opening, with the DJIA, S&P 500, and Nasdaq 100 all pointed down 0.3%.
By Neil Thakrar; [email protected]; @NeilThakrar1
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