2nd May 2014 06:43
LONDON (Alliance News) - UK stocks indices are set to start quietly Friday, ahead of the monthly US non-farm payrolls report to come this afternoon.
The FTSE 100 is expected to open unchanged at 6,809, says CMC Markets.
At the individual stock level, the banks will be in focus after RBS reported a GBP1.6 billion first quarter profit, while pharmaceutical sector merger activity continues as Pfizer confirmed it has made an increased offer for the UK's AstraZeneca.
Pfizer confirmed that it has made an increased offer for the UK pharmaceutical company of GBP50 per share, in cash and Pfizer shares, up from an original offer of GBP46.61 per share. There have been calls from some commentators that any takeover should be subjected to increased regulator attention, with the debate likely to dominate the early session.
In anticipation, Pfizer released a letter it has sent to UK Prime Minister David Cameron, in which it promises to complete AstraZeneca's Cambridge R&D hub and to keep 20% of the combined company's total R&D workforce in the UK. Pfizer also said it would make the UK the combined firm's European headquarters and establish its corporate and tax residence in England.
UK indices made modest gains on Thursday, while Europe remained closed for the May Day holiday. US markets barely moved, all closing marginally lower despite a busy day in the corporate calendar.
The trend of US first quarter earnings has been for the majority of companies to report profits slightly ahead of forecasts. However, those forecasts have been drastically lowered in the weeks leading up to the results on the back of a string of disappointing economic data, which has all been blamed of an unusually severe winter.
With the winter behind us, the markets are now looking to the latest economic data for improvements, with a key US employment report due at 1230 GMT Friday. The consensus expectation is for 210,000 non-farm payrolls to have been added in April, up from 192,000 in March, while the headline unemployment rate is expected to tick down to 6.6% from 6.7% in March.
"If we are to get the strong bounce back in growth that markets expect in the second quarter then we really need to see much stronger jobs growth from today?s payrolls report," said CMC Markets chief market analyst Michael Hewson.
While a fairly quiet morning session may be expected ahead of the US jobs report, there may be an element of playing catch-up in Europe, where traders are returning from the May Day Holiday. A round of European data will be the morning economic focus Friday, with the Markit manufacturing PMI's for April due throughout the morning, and eurozone unemployment due at 0900 GMT.
The PMI's are expected to show continued slow improvement, with the economists expecting the German print at 0755 GMT to rise to 54.2 from 53.7, and the eurozone wide print at 0800 GMT to rise to 53.3 from 53.0. Unemployment in the region is expected to have remained stable at 11.9%.
From the UK Friday, construction PMI data is due at 0830 GMT and is expected to remain strong at 62.0 in April, although that would be slightly lower than the 62.5 print in March.
On Thursday, a strong Manufacturing PMI, combined with another bumper reading of the housing market, pushed the pound up to a four year high against the dollar of USD1.6920. Ahead of the equity market open Friday, the pound trades at USD1.6885.
The Bank of England appears to be starting to take notice of raging UK house price inflation, as Deputy Governor Jon Cunliffe said in a speech on Thursday evening that "it would be dangerous to ignore the momentum that has built up in the UK housing market since spring last year".
The situation in Ukraine continues to deteriorate, although markets also continue to put the issue to one side for now. The Ukrainian Prime Minister has warned that the country is entering its most dangerous ten days since independence, and has reinstated conscription laws, presumably in anticipation of needing as many troops as possible.
As well as AstraZeneca, Royal Bank of Scotland will be in focus after releasing its first quarter interim management statement Friday, showing it made a pretax profit of GBP1.6 billion in the period. The statement comes after Lloyds announced a better-than-expected first quarter on Thursday.
Also released already Friday, interim statements from Rentokil, Direct Line Insurance, and Intercontinental Hotel Group.
By Jon Darby; [email protected]; @jondarby100
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