7th Aug 2015 05:59
LONDON (Alliance News) - UK shares are set to open flat, ahead of the US nonfarm payrolls data due at 1330 BST, which investors will watch closely as they wonder when the US Federal Reserve will raise US interest rates.
"Expectations about a possible Fed move on rates in September have been building since last week?s Federal Open Market Committee meeting and US GDP revisions, and if anything this week?s US data has served to reinforce this particular narrative, though here, as in the UK, the narrative is anything but clear cut," says CMC Markets chief market analyst Michael Hewson.
Hewson notes that the debate about a rate rise in the US could well develop along similar lines as the Bank of England, "the only difference being that the Fed does seem to be in a hurry to get the first rate hike in, before the beginning of next year, given the looming proximity of the [US] Presidential elections, just over a year from now."
Lloyds Bank highlights that FOMC member Dennis Lockhart, "who is widely considered to be a 'centrist', commented this week that he will probably vote for a rate rise in September unless the economic data deteriorates significantly."
Thursday, the BoE's Monetary Policy Committee voted to maintain its bank rate at 0.50% in the policy session that concluded Wednesday, which was the first split vote this year. One of the MPC members, Ian McCafferty, voted to hike the base rate by 25 basis points, meaning the MPC vote was 8-1. Analysts were broadly expecting a 7-2 vote, as they expected MPC member Martin Weale to join McCafferty in supporting a lift of interest rates.
Meanwhile, policymakers unanimously decided to keep its assets purchase target at GBP375 billion.
The central bank for the first time released the minutes of the session along with the monetary policy decision announcement on Thursday.
"Inflation expectations remain well anchored," the central bank said. The MPC judged that demand growth would be sufficient to return inflation to the 2% target within two years. The two-year term inflation outlook was almost unchanged from the prior estimate. The bank forecast 2.8% growth for this year, which is larger than the prior estimate of 2.6%. Growth is forecast to moderate to 2.6% next year, which was unchanged from the May estimate.
IG says futures indicate the FTSE 100 to open flat at 6,747.70. The index closed down 0.1% at 6,747.09 on Thursday.
Wall Street ended lower Friday. The DJIA closed down 0.7%, the S&P 500 ended down 0.8% and the Nasdaq Composite finished down 1.6%.
In Asia on Friday, the Japanese Nikkei 225 trades up 0.3%. In China, the Hang Seng is up 0.9% and the Shanghai Composite is up 2.1%.
In a light corporate calendar Friday, bookmaker William Hill releases half-year results and housebuilder Bellway issues a trading statement.
In the economic calendar, alongside US nonfarm payrolls later in the day, German industrial production is due at 0700 BST and UK Goods Trade Balance is due at 0930 BST.
By Daniel Ruiz; [email protected]
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