5th Mar 2014 07:38
LONDON (Alliance News) - UK stocks are set to open marginally lower Wednesday, after closing sharply higher on Tuesday, shrugging off large gains made on Wall Street overnight.
"Equity markets registered strong rebounds Tuesday as events in Ukraine appeared to move away from actual war towards merely an angry war of words," says Rabobank analyst Michael Every in a morning note to clients.
Stocks around the world jumped Tuesday, having suffering heavy losses on Monday, after Russian President Vladimir Putin allayed fears about a potential war with Ukraine.
Wall Street closed markedly higher, following on from significant gains on UK and European bourses. The DJIA, S&P 500, and NASDAQ Composite closed up 1.4%, 1.5%, and 1.8%, respectively, with the NASDAQ Composite closing at its highest level since April 2000, and the S&P 500 hitting a new record high.
However, "that relief perhaps looks past the underlying message that the West no longer has the financial muscle or stomach for military action: that may see other nations try to copy the 'Putin play-book' at some stage in the future, and so increase longer-run market volatility," says Every.
"While the Ukraine saga looks set to rumble on and Europe?s markets get set for a slightly negative open, the focus can now shift back to the mundane matters of economic data," says Michael Hewson, chief market analyst at CMC Markets.
Both IG and CMC Markets indicate the FTSE 100 to open down at approximately 6,816 points Wednesday, having closed at 6,823.77 on Tuesday.
In data already released Wednesday, China's service sector growth quickened in February. The seasonally adjusted purchasing managers' index for the service sector came in at 51 in February, up from the 50.7 recorded in January, with business activity in the sector also increasing, recovering from January's 29-month low.
The world's second largest economy also said that it aims to achieve economic growth of 7.5% this year, the same as last year's target, and plans to boost domestic spending. The government maintained its 3.5% inflation target for 2014
In the UK, shop prices reported deflation for the tenth consecutive month in February. A report from the British Retail Consortium showed that the shop price index dropped 1.4% on an annual basis, which marks the biggest contraction since the series began in 2006. Economists had forecast a more modest decline of 1.1% for February, following a 1.0% decline in January.
"There are a number of releases in the euro area (Wednesday), none of which, in our opinion, will sway the European Central Bank ahead of its rate setting meeting (on Thursday)," says Carl Paraskevas, senior international macroeconomist at Lloyds Bank.
The Spanish services PMI reading is released at 0813 GMT. The Italian equivalent is scheduled for 0843 GMT, ahead of France's reading at 0848 GMT, Germany's at 0853 GMT, and the eurozone's at 0858 GMT. The second preliminary reading of fourth quarter gross domestic product for the eurozone is released at 1000 GMT, at the same time as retail sales data for the single currency bloc.
"UK February services PMI, however, may garner more interest," says Paraskevas. "The PMI dropped for a third consecutive month in January to record its lowest level since June, although at 58.3, it still suggests healthy levels of expansion," he says.
FXStreet.com says economists expect the reading, which is released at 0928 GMT, to reveal a further drop to 58.0.
In the US, the number of MBA mortgage applications for the week ended February 28 is released at 1200 GMT. ADP employment change data for February is released at 1315 GMT, ahead of the Markit services PMI reading at 1358 GMT. The ISM non-manufacturing index is released at 1550 GMT.
In the corporate calendar, FTSE 100-constituents Admiral Group, Legal and General Group, Melrose Industries have been joined by FTSE 250-listed Dignity, BBA Aviation, Carillion, Michael Page International, SOCO International, amongst others, in releasing full-year results. Standard Chartered Bank results are scheduled as well.
By James Kemp; [email protected]; @jamespkemp
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