18th Sep 2014 06:31
LONDON (Alliance News) - UK stocks are set to open a little higher Thursday following a slightly higher close in the US on Wednesday after the Federal Reserve soothed some market nerves by maintaining the accommodative wording of its forward guidance.
The UK focus Thursday will be on news flow from the north, as Scotland goes to the polls to determine whether its future lies within the UK or as a separate nation. Polls opened at 0700 BST and close again at 2200 BST, although the final result won't be known until Friday morning.
Futures indicate that the FTSE 100 will open 15 points higher at 6,795 Thursday.
The US Federal Reserve last night tapered its monthly asset purchase programme by USD10 billion, as expected, leaving it on target to make a final reduction of USD15 billion at the October meeting, bringing an end to its massive quantitative easing operation.
A the same time, the Fed maintained the wording in its policy statement that says it will remain appropriate to keep the current low interest rate for "considerable time" after the bond buying ends. Speculation that the "considerable time" message would be removed had led to a consolidation in stocks in the run up to the meeting.
Gains were constrained, however, as a second Fed member, Dallas's Richard Fisher, joined Philadelphia's Charles Plosser in arguing that the wording is too doveish, suggesting that the balance of opining amongst the voting members is shifting toward a more hawkish stance.
"A fairly neutral Fed managed to walk the line of moving in the direction of hawkishness without spooking markets," said market analyst at CMC Markets Jasper Lawler.
The DJIA ended 0.2% higher Wednesday, with the S&P gaining 0.1%, and the Nasdaq Composite gaining 0.2%.
A mixed Asian session Thursday has seen the Nikkei gain 1.3%, while the Hang Seng is almost 1.0% lower and the Shanghai Composite continues down just 0.1%.
The issue of Scottish independence has been hanging over the markets for the best part of two weeks, since one poll put the "Yes" campaign marginally out in front, and investors have been growing ever more nervous of a possible vote in favour of independence since. While news from Scotland and reports of exit polls have the potential to cause volatility Thursday, the final verdict won't be known until early Friday morning.
"Indications are that the final result will be available between 0630 BST and 0730 BST, though it may be possible to call it earlier, depending on how the voting actually progresses," says chief UK economist at Berenberg Bank Rob Wood. "Edinburgh and Glasgow will be close to the last areas to declare their results, but will be vital to the final tally as they together account for around 20% of the votes," the economist says.
UK retail sales data at 0930 BST provides the morning data highlight. Economists are expecting a relatively strong increase of 4.1% month-on-month in August, up from the 2.6% growth recorded in July.
The pound has seen an increase in volatility in the run-up to the Scottish vote, and ahead of the days events sterling has seen a 60-point spike higher against the dollar to USD1.6323. Against the euro, the pound also has spiked, to a near-two-month high of EUR1.2685.
Yellen will be back in focus later in the afternoon, when she delivers a speech entitled "The Importance of Asset Building for Low and Middle Income Households" from a conference in Washington at 1345 BST. Given that it's only a few hours since we last heard all the Fed chair has to say on the state of the US economy, it seems unlikely that Thursday's appearance will bring any new information for the markets, but investors will have one eye on the central banker as always.
In the US economic calender, US housing starts data for August and initial jobless claims data for the week ended September 12 are scheduled for release at 1330 BST, followed by the Philadelphia Fed manufacturing survey at 1500 BST.
Also in the US Thursday, Alibaba is expected to announce the final pricing of its huge IPO, widely tipped to be the largest in history, ahead of its expected flotation on Friday. Recent estimates have put the value of the shares to be sold at USD22 billion.
Highlights from the UK corporate calendar Thursday include full-year results from FTSE 250-listed construction company Kier Group, as well as FTSE 250-listed life insurer Just Retirement Group.
By Jon Darby; [email protected]; @jondarby100
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