20th Jul 2015 06:33
LONDON (Alliance News) - London-listed stocks are called to open flat Monday, while the prospects of a US interest rate hike later in the year has sent gold prices down to a fresh five-year low.
IG says futures indicate the FTSE 100 to open flat at 6,773.3 points. The index closed down 0.3% at 6,775.08 on Friday on expectations of rate hikes in the US and UK by the Federal Reserve and the Bank of England later this year following comments from Fed Chair Janet Yellen and BoE Governor Mark Carney.
Rhys Herbert, senior economist at Lloyds Bank, says that with little significant economic data this week, focus is likely to remain on the prospects of a US rate hike.
"Given the lack of data it is likely, in the absence of further developments in the Greek crisis or major fluctuations in the Chinese stock market, that markets will fall back on speculation about the next moves in monetary policy," Herbert says. "Of most interest to markets of course, is when the Fed is likely to make its first move to tighten monetary policy."
Gold has been sold off as speculation of a September US rate hike grows. The metal fell to its lowest price since February 2010 overnight to USD1,073.40 an ounce, but has since recovered to trade at USD1,114.40 ahead of the open Monday.
Also weighing on gold prices is the disclosure of lower-than-expected gold reserves held by China. The People's Bank of China on Friday said gold reserves in the country reached a record 1,658 tons as of June 2015, up a near 60% from 1,054 tons in April 2009. However, the surge was below analysts' expectations, dragging gold prices down sharply.
Wall Street closed mixed Friday, with the DJIA closing down 0.2%, the S&P 500 ending up 0.1%, and the Nasdaq Composite closing at a new record high, up 0.9%.
In Asia Monday, the Tokyo market is closed to celebrate Marine Day. The Hang Seng trades down 0.2% in Hong Kong, and the Shanghai Composite is up 0.5%.
Greek banks are set to open again Monday for the first time in three weeks. The decision for banks to reopen comes after European Central Bank President Mario Draghi said in a press conference Thursday that the ECB will raise its emergency liquidity assistance to Greece by EUR900 million for a week. However, capital controls largely remain in place, including a block on foreign bank money transfers and a ban on new account openings.
The Eurogroup's approval of a EUR7.16 billion bridging loan on Thursday is expected to be made available to Athens on Monday. It is expected that Greece would use the bridge-loan to repay the bond redemption to the ECB due Monday and the two missed loan instalments to the International Monetary Fund.
The Greek situation also took another step forward on Friday after the German Parliament approved the proposal for a new debt bailout. Austrian and Latvian lawmakers also gave their nod following the approvals by the parliaments of Finland and France.
However, while negotiations on a third bailout for Greece continue, Michael Hewson, chief market analyst at CMC Market, questions whether there could be another failure.
"This week discussions are set to begin on a fresh EUR86 billion bailout, after approval was granted on Friday in the German Bundestag. It is hard to see how any new bailout will succeed when the previous two have failed, given the measures the Greeks are having to swallow to get the money," Hewson says.
"The lack of any type of conditional debt relief as called for by the IMF, despite a slight softening of position at the weekend by Germany, could well make it much less likely that the IMF will even want to be involved, meaning that any program is much more likely to fail."
In UK corporate news, Rolls-Royce Holdings said it has struck two new deals, one covering TotalCare services in Saudi Arabia and one a Trent 700 engine order from International AirFinance Corp.
The FTSE 100 aerospace and engineering company said it has been selected by SAUDIA, Saudi Arabia's national airline, to provide TotalCare engine service support for 20 Airbus A330 regional aircraft. The deal is worth USD1.3 billion.
In a separate statement, Rolls-Royce said it has won a contract from International AirFinance to provide Trent 700 engines for 20 Airbus A330s. That deal is worth USD930 million.
FTSE 250-listed engineering software company AVEVA Group said it has struck a deal with Schneider Electric to acquire selected industrial software assets in a GBP1.3 billion reverse takeover.
Under the terms of the deal, AVEVA will acquire the software assets on a debt-free, cash-free basis and will received GBP550 million in cash from Schneider Electric for AVEVA shares, giving Schneider a 53.5% stake in AVEVA. The GBP550 million Schneider will pay will be distributed to AVEVA shareholders, which will hold a 46.5% stake in the enlarged company.
In a quiet economic calendar, there are eurozone current account at 0900 BST and UK public sector net borrowing at 0930 BST. At 1100 BST, the German Bundesbank releases its monthly report.
By Neil Thakrar; [email protected]; @NeilThakrar1
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