6th Mar 2014 07:30
LONDON (Alliance News) - Major UK and European stock indices are set to open marginally higher Thursday after a soft day for markets on Wednesday and ahead of the UK and European central bank meetings.
US stock markets closed marginally lower Wednesday, despite a much weaker than expected ADP employment report, which included a big downward revision to the previous month's reports, which cumulatively stripped back 138,000 jobs in the four months to January that was previously thought to have been added.
"These jobs downgrades point to a much weaker US economy than first thought, and as such potential lower trend growth for Q4, as well as the current quarter," says CMC Markets chief market analyst Michael Hewson.
The US Fed Beige book released last night showed that the unusually cold weather across much of the US obscured data on economic conditions in January and February. Markets have been taking solace from the notion that there is no deeper problem within the US economy.
In the London Thursday, Spreadbetters are indicating that the FTSE 100 will open about 0.3% higher at 6,785.00.
A busy day in the UK corporate calendar sees full-year results already released from Aggreko, Aviva and Balfour Beatty, along with Schroders, Inmarsat, and Cobham. Easyjet has also published its latest passenger traffic statistics, showing a 2.9% rise in February.
German factory orders, released at 1100 GMT, will be the morning economic focus. Economists expect orders to have risen by 7.5% year-on-year in January, speeding up from the 6.0% rise seen in December.
The European Central Bank announcement, followed by President Mario Draghi's press conference that follows at 1330 GMT, will be the main focus however. While Wednesday's service sector PMI's and retail sales data showed a recovery underway in the eurozone, Tuesday's data showed factory gate prices falling at 1.4% annually in the region, putting Draghi under increased pressure to take some action, with analysts split on what that action should be.
"Despite the more positive trends in Euro area growth, with the weakness of inflation an increasing concern, we think the ECB could try and strengthen their forward guidance somewhat," says Bank of America Merrill Lynch economist Laurence Boone. While BAML does not expect a rate cut, Boone argues that the ECB should pursue another form of policy easing, such as extending the fixed-rate full allotment Main Refinancing Option until 2016, to provide more liquidity.
Other possibilities, according to various analysts, include a further nominal interest rate cut, or a reduction of the sterilisation against the securities market programme, which would effectively introduce quantitative easing.
Thursday's meeting will be the first at which Draghi publishes official inflation forecasts for 2016, which could well provide an initial line line of questioning at the press conference.
The Bank of England also is meeting Thursday, with this week's meeting marking five years since the BoE dropped the base rate to its current historic low of 0.5%. Heading into the latest BoE meeting, the pound is trading close the high of its five-year range, with many expecting the low rates won't last another year. However, while the bank may be under scrutiny, after suspending one of its own staff Wednesday amid an internal probe into the potential manipulation of the currency markets, it is not expected to make any policy changes Thursday.
US weekly initial jobless claims will be the afternoon economic focus. The expectation is for a fall in claims to 338,000, from 348,000 in the previous week. Following the disappointing US data released on Wednesday, a higher-than-expected jobless claims print will likely add to fears of a weak non-farm payroll report on Friday.
Heading into the equity market open, after breaking above USD1.67 on Wednesday, the pound continues to trade at USD1.6710, while the euro trades at USD1.3725.
Commodities markets have settled over the last 24 hours, along with the easing of tensions in Ukraine. Gold currently trades at USD1,335.25 per ounce, while Brent Oil trades at USD107.90 per barrel.
By Jon Darby; [email protected]; @jondarby100
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