18th Aug 2021 07:02
(Alliance News) - Stocks in London are called higher Wednesday but all eyes will be firmly fixed on the inflation data coming from the UK and Europe this morning.
IG futures indicate the FTSE 100 index will open 20.59 points higher at 7,201.70 on Wednesday. The blue-chip index closed up 27.13 points, or 0.4%, at 7,181.11 on Tuesday.
"It's not been a great week thus far from European markets, although losses have been modest thus far, given the gains we've already seen this month," CMC Markets analyst Michael Hewson said.
In Tokyo, the Nikkei 225 index was up 0.8% on Wednesday. In China, the Shanghai Composite was also 0.8% higher, while the Hang Seng index in Hong Kong was up 0.9%. The S&P/ASX 200 in Sydney was slightly higher.
Following BHP's announcement on Tuesday of a merger of oil assets with Australia's Woodside Petroleum and the transfer of its primary listing to Sydney, the miner's share were trading down 7.0% on the ASX on Wednesday, while Woodside was down 1.5%.
Woodside on Wednesday declared a 15% dividend increase, as post-tax profit doubled in the first half.
Hewson continued: "This uncertainty about a slowing global recovery may well have prompted a little bit of weakness in the past two days, however Asia markets appear to be shrugging that off after the [Reserve Bank of New Zealand] kept rates unchanged instead of raising them in response to the new lockdown imposed in New Zealand. Consequently Asia markets have found a bit of a bid and as a result markets here in Europe look set to open higher, despite concerns that increasing outbreaks of the delta variant will stall the economic recovery completely."
A coronavirus case that plunged New Zealand into a snap national lockdown was confirmed as the Delta variant on Wednesday, Prime Minister Jacinda Ardern said, as four more cases emerged.
Ardern said one of the new cases was a nurse at Auckland Hospital, which had been placed in "internal lockdown" while all staff and patients were tested. The prime minister said the spread of the virus justified her decision to issue nationwide stay-at-home orders on Tuesday after the initial case was identified.
The first case, a 58-year-old Auckland man, ended a six-month run without community transmission in New Zealand, which has recorded only 26 Covid-19 deaths in a population of five million since the start of the global pandemic.
ING said: "Financial markets have turned a little sour today. That isn't just a response to the Delta variant's progress, but a mixture of that, some softer US data, and perhaps a sombre reflection on what is going on in Afghanistan."
US President Joe Biden and UK Prime Minister Boris Johnson discussed Afghanistan on Tuesday and announced a virtual summit of the G7 leaders on the crisis, the White House said.
"They agreed to hold a virtual G7 leaders' meeting next week to discuss a common strategy and approach," the White House said in a statement.
This was the first phone call between Biden and a foreign leader since the startling weekend takeover by the Taliban of Kabul, prompting a panicky operation to withdraw final US and allied personnel from the city's airport.
The sudden Taliban victory has sparked fears of a large-scale humanitarian crisis both in Afghanistan and possibly involving waves of refugees seeking asylum abroad, including in western Europe.
Stocks in New York ended ended lower on Tuesday, easing from record-setting levels, following weak US retail sales numbers for July. The Dow Jones Industrial Average lost 0.8%. The S&P 500 ended down 0.7%, while the Nasdaq Composite finished 0.9% lower.
US retail sales slumped in July, data from the the US Census Bureau showed Tuesday, coming in far worse than market consensus.
Retail and food service sales in the US fell 1.1% in July compared to the previous month to USD617.7 billion, following June's revised 0.7% growth. Market consensus, cited by FXStreet, had expected a 0.3% fall in July.
Growing Delta fears will also see the US government set to announce that Americans should get booster shots for coronavirus vaccines eight months after their last shot, part of a campaign that could begin as early as mid-September, according to US media.
The move could be announced as early as this week, the New York Times reported Tuesday, citing unnamed sources in President Joe Biden's administration.
The campaign is likely to kick off with booster shots for nursing home residents and health care workers, followed by the elderly, all of whom were among the first to be eligible to receive their initial vaccinations. The general public would then follow, according to the Times.
The pound was quoted at USD1.3745 early Wednesday, flat on USD1.3742 at the London equities close Tuesday. The euro was priced at USD1.1716, flat from USD1.1715.
Against the Japanese yen, the dollar was trading at JPY109.65, up slightly from JPY109.60.
"The broad-based risk sentiment downturn has been supportive for the USD, and we continue to see most Asian currencies losing ground to the greenback, though the JPY should probably outperform in this environment," analysts at ING said.
Brent oil was quoted at USD69.32 a barrel Wednesday morning, down from USD69.75 late Tuesday. Gold was trading at USD1,787.90 an ounce, up against USD1,783.45.
The economic events calendar on Wednesday has inflation readings from the UK and eurozone at 0700 BST and 1000 BST respectively.
CMC's Hewson said this morning's UK inflation print could heap further pressure on UK policymakers to look at tightening monetary policy in the coming months.
"The Bank of England already expects that UK CPI could well head towards 4% by the end of the year, even if most MPC members appear to think it will be temporary in nature, and while today's numbers aren't expected to see an increase, that doesn't mean it won't happen given what's happening with factory gate prices, which are still increasing, and are up close to 10%," he continued.
Hewson added: "There are signs of some dissent to this wider transitory view with external member Michael Saunders dissenting on the bond buying component of the recent policy decision, with some signs that Deputy Governor Dave Ramsden might not be too far behind him."
He expects UK CPI numbers for July to see a slight fall to 2.3%, however, noted they could just as easily move higher, probably driven by the delayed economic reopening that was deferred from June.
In Europe headline CPI for July, Hewson said, is expected to rise to 2.2%, slightly up from 1.9%, although core prices are much more subdued at 0.7%.
In the evening, there is the latest minutes from the US Federal Reserve's most recent monetary policy meeting.
The UK corporate calendar on Wednesday has interim results from housebuilder Persimmon, gold miner Hochschild Mining and construction firm Balfour Beatty.
By Paul McGowan; [email protected]
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