15th Jul 2015 06:29
LONDON (Alliance News) - London share prices are set to open sightly lower Wednesday, with investors likely to focus on the UK unemployment and average earnings data, due at 0930 BST, following Bank of England Governor Mark Carney's warning on Tuesday that UK interest rates may rise soon.
IG says futures indicate the FTSE 100 to open 5 points lower at 6,748.80. The index closed up 0.2% Tuesday at 6,753.75.
"The hawkish comments from the Bank of England helped the British pound burst higher [Tuesday]. Whether that momentum can continue could depend on the release of unemployment and average earnings data on Wednesday," says CMC Markets analyst Jasper Lawler.
Speaking in front of the Treasury Committee in the House of Commons on Tuesday morning, BoE Governor Carney suggested that the UK central bank soon could start to normalise UK monetary policy. "The point at which interest rates may begin to rise is moving closer, given the performance of the economy," Carney said.
Lloyds Bank says recent months have seen some signs of a slowdown in labour market activity, but highlights that pay growth has picked up sharply since the turn of the year, and that last month?s 2.7% ex-bonuses print was the highest reading since early 2009.
"With the ongoing weakness in productivity growth, a continuation of this pickup would further boost unit wage costs and pose an upside risk to medium-term inflation prospects," writes Lloyds. "We anticipate sharp increases in both regular and headline pay growth to 3.0% and 3.3% respectively, alongside a third consecutive 5.5% print for the LFS unemployment rate."
Ahead of the release of the data, the pound is trading at USD1.5651 Wednesday morning.
On the UK corporate front, Burberry Group on Wednesday reported a rise in revenue in the first quarter of its financial year and said profit for the year will be GBP20 million higher than the prior year if exchange rates remain at current levels.
The fashion retailer said that retail revenue grew 10% to GBP407 million in the three months to June 30, as it experienced double-digit growth in Europe, the Middle East, India and Africa, high single-digit growth in the Americas, and low single-digit growth in Asia Pacific, hit by a challenging market in Hong Kong.
Meanwhile, Severn Trent said there has been no material change to the business since its last report in May, except it expects its interest charge for the full year to be lower year-on-year. The FTSE 100-listed UK water and waste-water company reiterated its full-year cost guidance and dividend expectations, and said it continues making progress on making efficiency savings across the water division.
In Asia on Wednesday, the Japanese Nikkei 225 closed up 0.4%. In China, the Hang Seng in Hong Kong is down 0.7% and the Shanghai Composite is down 3.6%.
China's economy grew in the second quarter of this year by 7% year-on-year, the National Bureau of Statistics announced, slightly outpacing predictions. Growth was also 7% in the previous quarter, according to the authority. Analysts had expected a slightly weaker growth of 6.9% for the second quarter.
"The national economy has been running within a proper range and the major indicators picking up steadily, showing moderate but stable and sound momentum of development," the bureau said. It said agricultural and industrial production, commodity consumption, residents' income and foreign trade all grew steadily while consumer prices remained stable.
CMC Markets' Lawler says "this data out of China is a big positive for the prospects for global growth going forward and also eases concerns over the country?s recent stock market rout."
Wall Street ended higher Tuesday. The DJIA closed up 0.4%, the S&P 500 ended up 0.5% and the Nasdaq Composite finished up 0.7%.
US Treasury Secretary Jacob Lew will travel to Germany and France for talks on the Greek bailout deal, officials said Tuesday. Lew will travel to Frankfurt on Wednesday to meet European Central Bank President Mario Draghi. He was due in Berlin on Thursday to meet German Finance Minister Wolfgang Schaeuble.
Lew was then to go to Paris to meet French Finance Minister Michel Sapin before returning to Washington, the US Treasury Department said.
Greek Prime Minister Alexis Tsipras on Tuesday defended a preliminary agreement brokered in Brussels to pass belt-tightening reforms in exchange for loans to keep Greece in the eurozone amid mounting domestic anger over its conditions. Tsipras has until the end of Wednesday to rally support in the Greek parliament to ratify key parts of the deal and allow formal bailout negotiations to move forward, as labour unions and political factions promised strikes and demonstrations to protest renewed austerity measures.
"I won't tell the Greek people what I bring you is a success story," Tsipras said on Tuesday night in an interview on state broadcaster ERT, "but I have tried to do what was humanly possible."
Later Wednesday, the market focus will shift to US Federal Reserve Chair Janet Yellen, who is due to give a speech in the Semiannual Monetary Policy Report to the US Congress at 1500 BST.
Also in the US economic calendar, industrial production is due at 1415 BST, while the US producer prices index is due at 1430 BST. EIA Crude Oil Stocks are due at 1530 BST. The Fed's Beige Book is due at 1900 BST.
By Daniel Ruiz; [email protected]
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