18th Aug 2015 11:08
LONDON (Alliance News) - UK stocks are mixed Tuesday, while Wall Street is expected to open lower, with investors mostly focusing on the release late Wednesday of the Federal Open Market Committee minutes from the last US Federal Reserve monetary policy meeting.
But before that, US housing starts data will take centre stage in Tuesday's US economic calendar.
Societe Generale analyst Kit Juckes looks for a "steady" 1.18 billion pace of starts year-on-year. Meanwhile, economists are slightly more positive and call for 1.19 billion.
"Maybe market expectations of Fed moves will get more help from tomorrow's FOMC minutes, but today looks unlikely to move the dial much," notes SocGen's Juckes.
US housing starts data, alongside US building permits data are both expected at 1330 BST.
Tuesday's US economic data will come following a big miss by the New York Empire State Manufacturing index on Monday. The New York Fed said its general business conditions index tumbled to a negative 14.9 in August from a positive 3.9 in July, with a negative reading indicating a contraction in manufacturing activity. The sharp drop came as a surprise to economists, who had expected the index to climb to a positive reading of 5.0.
Despite some analysts saying a September interest rate hike by the Fed is now a closer call, UBS analyst Drew Matus still expects it.
"We believe the FOMC will announce the first Fed funds target rate increase in more than nine years at its September 16-17 meeting," Matus says. "However, the Fed funds rate increase will be only one of the interest rate levers to be pulled the day the Fed begins its rate hike cycle."
"Furthermore, rate hikes will only be the first step towards policy normalization, a change that will require not just the adjustment of rates but also a substantial adjustment to the Fed's balance sheet shortly after the start of tightening," the UBS analyst writes.
The release of the FOMC minutes is scheduled for Wednesday at 1900 BST.
US futures are called for a lower open, with the DJIA, the S&P 500 and the Nasdaq 100 all pointed down 0.2%.
In London, the FTSE 100 index is down 0.6% at 6,527.11 points, the FTSE 250 is up 0.1% at 17,630.77 and the AIM All-Share is up 0.1% at 751.73. In Europe, the CAC 40 in Paris is down 0.3% and the DAX 30 in Frankfurt is down 0.1%.
Miners are the main weight on the FTSE 100, as copper prices continue to trade near six-year lows. Antofagasta is the worst FTSE 100 performer down 2.1%, while BHP Billiton is down 1.9% and Anglo American is down 1.8%. In the FTSE 250, Lonmin is the worst performer, down 6.2% having fallen to a new all-time low, and Evraz is down 2.6%.
Oil stocks also are under pressure after US benchmark West Texas Intermediate fell to a new six-and-a-half year low at USD41.41 a barrel. Brent oil trades at USD48.51 a barrel.
Weir Group trades down 1.8%, Royal Dutch Shell 'A' is down 1.7% and BP is down 1.1%.
Separately, the US government gave Shell the green light Monday to begin exploratory oil drilling in the Arctic Ocean off Alaska. The Department of Interior earlier this year granted preliminary approval of Shell's plans, but drilling hadn't begun because a key piece of emergency equipment was not on hand.
Persimmon is amongst the worst blue-chip performers, down 1.4%. The FTSE 100 housebuilder said its pretax profit surged in the first half as it boosted margins, sold more homes and did so at higher prices, all while saying that its performance thus far in the traditionally slower summer selling season still looks robust.
However, analysts at Shore Capital, Numis and The Share Centre all said the valuation on Persimmon shares looks stretched at the moment and concerns about this appear to have trumped the robust results.
In the AIM-All Share index, Mariana Resources is up 17%. The miner said it has secured a maiden resource estimate for the Hot Maden project in Turkey and said there is no doubt this will increase in the future. The gold and copper project has a total mineral resource estimate of 3.0 million ounces of gold equivalent, comprised of 2.0 million ounces at the indicated level and the remaining balance made up of inferred resources.
Shares in Akers Biosciences are down 18%. The medical devices company posted a widened pretax loss for the first half of 2015, mostly as a result of lower revenue and increased investment in its sales and marketing. For the half year to end-June, the company posted a pretax loss of USD3.4 million, widened from a loss of USD1.1 million a year before, as a result of a fall in revenue to USD1.5 million from USD2.5 million, and a rise in sales and marketing expenses.
Outside UK stocks, the pound shot up against other major currencies after UK inflation surprised to the upside. UK consumer prices rose unexpectedly in July and core inflation reached a five-month high, data from the Office for National Statistics showed. Consumer prices advanced 0.1% in July from last year, while the index was expected to remain flat, as it did in June.
Meanwhile, consumer prices declined 0.2% month-on-month after showing no change in June. This was the first fall in six months but was slightly slower than the expected 0.3% decrease. Core inflation accelerated to a five-month high of 1.2% in July from 0.8% in June. Economists had forecast it to rise marginally to 0.9%. The retail price index, on which next year's UK rail fares will be based, rose 1.0% year-on-year, unchanged from June.
The pound shot higher against the dollar as the rise in inflation suggested the Bank of England may raise interest rates sooner than some people expect. Sterling trades at USD1.5702 at midday, while it is at EUR1.4197 against the euro.
By Daniel Ruiz; [email protected]
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