5th Jun 2015 06:41
LONDON (Alliance News) - UK stocks are expected to open lower Friday, extending the heavy losses posted on Thursday, as Greek authorities hardened the nation's stance towards the reform proposals of its international creditors after high-level talks failed to produce a deal for the country to gain access to much-needed money to avoid default.
A proposal presented by the International Monetary Fund and European institutions "contains extreme positions that cannot be accepted by the Greek government," the statement from Athens said late Thursday, a day after a meeting in Brussels a day earlier with the international creditors. Greece said the creditors "have not taken a step back, independently of the fact that over the past four months the two sides had converged on reforms, which the Greek government included in its own proposal."
The statement came after Greece delayed a key debt repayment of about EUR300 million due Friday to the IMF. The Washington-based crisis lender said Thursday that Greek authorities had declared their plans to bundle four payments due this month into a single EUR1.6 billion lump sum now due on June 30.
The IMF said that under a board decision adopted in the late 1970s, member nations "can ask to bundle together multiple principal payments falling due in a calendar month." An IMF spokesman said the procedure was "intended to address the administrative difficulty of making multiple payments in a short period."
"Late on Wednesday evening Greek Prime Minister Alexis Tsipras assured an assembled pack of journalists that Friday?s repayment to the IMF of EUR300m would get paid on time, but as a week is a long time in politics, a day goes by in a blink of an eye, and last night?s sudden change of mind has raised the stakes even further as this high stakes game of Jenga goes on between Greece and its creditors," says Michael Hewson, chief market analyst at CMC Markets.
"One false move from one side or the other, and the whole fragile edifice could well come tumbling down," Hewson adds.
The FTSE 100 is called to open significantly lower Friday, with CMC Markets, IG and OANDA all expecting the blue-chip index to open approximately 20 points lower at 6,839, having closed down 1.3% at 6,859.24 on Thursday.
"We?re seeing risk aversion in the markets in pre-market trading on Friday, as investors opt for the caution approach ahead of the US jobs report and after it was reported that Greece will refuse to repay EUR300 million to the IMF that is due today," says Craig Erlam, senior market analyst at OANDA.
In the US, stocks closed lower overnight, with the DJIA, S&P 500 and NASDAQ Composite all closing between 0.8% and 0.9% lower.
In Asia, meanwhile, equities are mixed. The Shanghai Composite index is up 0.4%, while the Nikkei in Japan has closed down 0.1% and the Hang Seng is down 1.1%.
In data recently released Friday, Germany's factory order growth exceeded expectations in April helped by foreign demand, Destatis revealed. Factory orders increased 1.4% month-on-month, faster than the 0.5% rise forecast by economists.
Still to come in a busy economic calendar Friday, French trade data for May is due at 0745 BST, with UK consumer inflation expectations released at 0930 BST.
Shortly after, eurozone gross domestic product data for the first quarter are published at 1000 BST. According to FXStreet.com, economists' expectations are for eurozone GDP to remain unchanged from the preliminary readings that were released in May, showing a 0.4% rise quarter-on-quarter and a 1.0% rise on a yearly basis.
In the afternoon, investors will shift their attention to the release of the latest US non-farm payrolls figure at 1330 BST. The expectation, according to FXStreet.com, is for the US economy to have added 225,000 jobs in May, marginally higher than the 223,000 jobs added in April.
"Today's payrolls report will as usual be seen as probably the number one monthly indicator for the US," says Rhys Herbert, senior economist at Lloyds Bank. "Indeed, the [US] Federal Reserve's identification of further labour market improvement as one of the key pre-conditions for a hike in interest rates has, if anything increased its importance," he notes.
"Recent comments from Fed officials have suggested that a June interest rate hike is now unlikely but a move in September remains on the cards providing the data shows economic growth rebounding from its first quarter fall," Herbert says. "This week's economic data have so far mostly been consistent with a decent pick-up and markets will be watching closely to see if that is also true of payrolls," he adds.
The US unemployment rate, also released at 1330 BST, is expected to remain unchanged at 5.4%.
"I still believe that the Fed wants to hike interest rates this year and begin the process of normalizing interest rates, and if the data picks up in May, I think it would be the correct decision," says OANDA's Erlam. "I find it hard to believe that when unemployment is at 5.4% the US requires monetary policy as loose as this. I also struggle to see have a 0.25% hike will make such a big difference, in fact it should be seen as a sign of confidence, the economy is on a sustainable path to recovery," he adds.
Ahead of the UK stock market open, the pound trades at USD1.5346, EUR1.3664, JPY191.094 and CHF1.4326, while the euro trades at USD1.1234.
In corporate news, FTSE 100-listed Lloyds Banking Group Friday took action on bonuses for its executives after being fined GBP117 million by UK regulators over the way it handled complaints relating to the payment protection insurance mis-selling scandal. According to the UK's Financial Conduct Authority, the fine was the largest retail fine that it has ever issued.
In a statement, Lloyds said awarded but unvested bonuses amounting to about GBP2.65 million in total will be forfeited by executives, while its Remuneration Committee has decided to cut the bonus pool for 2015 by about GBP30 million. Lloyds said it has now reviewed all customer complaints between March 2012 and May 2013, the period during which it made mistakes over the way it handled complaints. The FCA said that Lloyds assessed complaints over 2.3 million PPI policies in that time, rejecting 37% of them.
In the FTSE 250, Bellway said it expects its housing completions to rise at the close of its financial year, with its operating margin set to improve and its forward sales book strengthening. The housebuilder said it expects housing completion for the year to the end of July to be around 850 units higher than the 6,851 it reported a year earlier. The company said its full-year operating margin should improve by around 300 basis points to over 20% in the year, up from 17.2% a year earlier.
Bellway also said its forward sales position going into the new financial year is set to be around 22% higher in value year-on-year at GBP1.27 billion, up from GBP1.04 billion at the end of its 2014 financial year.
Mid-cap car parts and bicycle retailer Halfords, meanwhile, reported growth in profit in its recently-ended financial year as sales performed strongly in both its Retail and Autocentres divisions.
By James Kemp; [email protected]; @jamespkemp
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