22nd Jul 2015 06:35
LONDON (Alliance News) - London shares are called to open down on Wednesday, following Wall Street's lower close and weak trading in Asia, with UK investors focusing on the release of the minutes from the last Bank of England's monetary policy meeting.
IG says futures indicate the FTSE 100 to open 45 points lower at 6,725.80. The index closed Tuesday down 0.3% at 6,769.07.
Ahead of the minutes, due at 0930 BST, Bank of England Governor Mark Carney on Tuesday repeated his view that the picture on interest rate policy in the UK will become clearer towards the end of the year.
Speaking at an event held by think-tank The Policy Exchange, Carney said the UK economy is still facing challenges from the economic weakness in the eurozone, the strength of sterling, and further UK government austerity measures.
The remarks echo those Carney gave during a speech at Lincoln Cathedral last week, when he hinted that the central bank will start to consider changing its UK interest rate policy at end of 2015, but said that any increases would be slow and suggested that interest rates would rise to no more than 2.25% in the medium term.
As it was held amid global economic uncertainty related to Greece and a sharp correction in Chinese equities, Lloyds expects the minutes of the July MPC meeting to show an unanimous vote for no policy change.
Meanwhile, the Greek parliament is preparing for another vote on the final bailout negotiations on Wednesday as Prime Minister Alexis Tsipras seeks to close the third bailout deal that will offer up to EUR86 billion debt, after Greece repaid money due to the International Monetary Fund and the European Central Bank.
The Greek government expects the final bailout deal by August 20, which is the deadline for a EUR3.6 billion debt due to the ECB ahead of the EUR1.5 billion due to IMF in September. On Monday, the crisis struck country repaid the money due to the IMF, the ECB and the Greek central bank, worth EUR6.8 billion in total with the European Commission's EUR7.16 billion bridge-loan.
Meanwhile, on Tuesday, Standard & Poor's Ratings Services upgraded Greece's long-term sovereign credit rating to 'CCC+' from 'CCC-' on the view that the Greek default on its stock of commercial debt is no longer inevitable in the next 6 to 12 months. S&P's affirmed short-term credit rating at 'C' with a stable outlook.
In Asia on Wednesday, the Japanese Nikkei 225 closed down 1.2%. In China, the Hang Seng is down 1.0% and the Shanghai Composite is down 0.7%.
Wall Street ended lower Tuesday. The DJIA closed ended down 1.0%, the S&P 500 closed down 0.4% and the Nasdaq Composite finished down 0.2% after reaching a new closing high on Monday.
Despite record highs by the Nasdaq index over the past few days, CMC Markets chief markets analyst Michael Hewson says the move higher has been increasingly divergent from the DJIA, which is still significantly below its May highs.
"While the S&P 500 only just about managed to get within a whisker of its previous peaks, the decline that we saw yesterday shouldn?t really have been a surprise," he says.
Tech giant Apple reported its third quarter results Tuesday after the US stock markets close. It said its third quarter profit rose 38% from last year, driven by strong sales of iPhone and Mac as well as all-time record revenue from services and the successful launch of Apple Watch. The company's quarterly earnings per share also came in above analysts' expectations as did its quarterly sales. However, the company forecast fourth quarter sales slightly below analysts' current consensus estimate.
However, CMC Market's Hewson says, "last night?s earnings announcement from Apple reinforced concerns about US dollar strength with a 21% decline in China sales, while European sales also disappointed, with the company warning that it faced a 'difficult foreign exchange environment', as it downgraded its fourth-quarter guidance."
Since July 2014, the US dollar has been strengthening against the pound. From a high for sterling of USD1.7191 a year ago, the pound was trading Wednesday morning at USD1.5607.
Mining giant BHP Billiton reported a 6% increase in iron ore production for the fourth quarter, while production of metallurgical coal grew 13%. Total iron ore production for fiscal year 2015 increased 14% and exceeded the company's own outlook. Further, the company said it expects underlying attributable profit for the 2015 June half year to include additional charges of up to USD650 million, tied mainly to writedowns and redundancies in its copper business.
In London, ARM Holdings said it expects to meet market expectations for dollar revenues in 2015 as it posted a rise in pretax profit for its first half.
The chip designer posted a pretax profit of GBP198.1 million for the half year to end-June, up from GBP146.0 million a year before, as revenue rose to GBP456.0 million from GBP373.7 million. Within this, licensing revenue rose 7% to GBP95.8 million from GBP89.6 million, whilst royalty revenue rose 41% to GBP113.5 million from GBP80.3 million. ARM proposed an interim dividend of 3.15 pence per share, up from 2.52 pence in the previous year.
In the economic calendar, in the US, the housing price index is due at 1400 BST, US Markit purchasing manager's Composite and Services indices are due at 1445 BST, and US existing home sales are due at 1500 BST. EIA Crude Oil stocks are due at 1530 BST.
By Daniel Ruiz; [email protected]
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