16th Apr 2014 06:44
LONDON (Alliance News) - UK stocks are set to open firmly higher Wednesday, paring some of the heavy losses posted on Tuesday, as investors take their cues from a strong close on Wall Street on Tuesday and a strong performance by Asian stocks overnight.
Europe's major equity indices turned firmly lower late in the session on Tuesday as mounting tensions and military action in Ukraine again weighed on equity markets.
Although US bourses were initially dragged down, following a strong start on the back of some positive earnings reports from the likes of Coca-Cola Co and Johnson & Johnson, they soon regained their strength to closer firmly higher.
Eventually, the DJIA, S&P 500, and NASDAQ Composite closed up 0.6%, 0.7%, and 0.3%, respectively.
It is a similar story in Asia, where, ahead of the UK equity market open, the Hang Seng trades up 0.7%, the Shanghai Composite index trades up 0.1%, and the Nikkei in Tokyo has closed up around 3%.
"For now it seems that the bulls and bears are fighting it out for supremacy in an environment that is fertile ground for both at the moment as equity markets dance to an uncertain tune," says Michael Hewson, chief market analyst at CMC Markets.
In the UK, the FTSE 100 is called to open significantly higher Wednesday. CMC Markets indicates the blue-chip index to open up at approximately 6,590 points, having closed at 6,541.61 on Tuesday, while Alpari and IG expect it to open even higher at around 6,594 points.
In data already released, China's gross domestic product gained 7.4% year-on-year in the first quarter of 2014. Although slower than the 7.7% posted in the previous three months, the reading topped economists' expectations of 7.3%.
Analysts believe that the results should please investors, since the Chinese economy appears to be healthier that was feared - but also not so powerful that it would rule out stimulus at a later date.
However, "the number still saw the Chinese economy grow at its slowest pace in six quarters," says James Hughes, chief market analyst at Alpari.
At the same time, the Chinese government revealed that retail sales climbed 12.2%, beating expectations for 12.1% and up from 11.8% in the previous month.
While industrial production gained 8.8% year-on-year in March, up from the 8.6% in February, it fell slightly short of the 9.0% that had been expected.
"Following the early release of Asian data, this morning's instant focus will be on the UK's labour market release," says David Page, senior UK Macroeconomist at Lloyds Bank.
Consensus expectations are for the unemployment rate, which is released at 0830 GMT, to have edged down to 7.1% in the three months to February, down from the 7.2% posted in January, but some economists, including Page, forecast the rate to have fallen to 7.0%. Average earnings (including bonuses) are expected to accelerate 1.8% year-on-year in the three months to February, up from the 1.4% recorded in January, which take it to an 8-month high.
"The labour market is certainly improving, but it is still a matter of debate as to how much it is tightening," says Page.
Soon after, after Tuesday's consumer price inflation reading for the UK and the US, CPI data for the eurozone is released at 0900 GMT.
In the US, the Mortgage Bankers Association releases mortgage applications information at 1100 GMT. Building permits and housing starts data are released at 1230 GMT, with industrial production figures at 1315 GMT.
There are also a raft of speeches scheduled from the US. Federal Open Market Committee member Jeremy Stein gives a speech at 1200 GMT, ahead of Federal Reserve Bank of Atlanta President Dennis Lockhart at 1530 GMT, and Fed Chair Janet Yellen gives her second speech of the week at 1615 GMT.
In corporate news, after the Wall Street close, Yahoo Inc reported a 20% decline in first-quarter profit. It posted a quarterly net income of USD312 million, or USD0.29 cents per share, compared with USD390 million, or USD0.35 per share last year. However, excluding items, adjusted earnings for the quarter were USD402 million or USD0.38 per share, beating analysts expectations of USD0.37 per share for the quarter.
Intel Corp. also reported that profit fell from last year, hurt mainly by higher income tax expenses, as revenue grew slightly. The world's biggest chipmaker reported net income for the first quarter of USD1.95 billion or USD0.38 per share, compared to USD2.05 billion or USD0.40 per share for the year-ago quarter, broadly in line with the USD0.37 per share that had been forecast by analyst.
Revenue for the first quarter edged up 1.4% to USD12.76 billion from USD12.58 billion in the same quarter last year. Analysts had a consensus revenue estimate of USD12.81 billion for the first quarter.
Investors are likely to be encouraged by the results, given that concerns about the over-valuation of technology stocks in comparison to their earnings have been weighing heavy on global equity indices for the last couple of weeks.
Meanwhile, in the UK, blue-chip Tesco has released full-year results, ahead of the UK equity market open Wednesday. FTSE 100-listed Hargreaves Lansdown, Persimmon, and Reckitt Benckiser, have been joined by FTSE 250-listed Evraz and Hunting, amongst other in releasing trading updates.
BHP Billiton and Fresnillo have both released production reports.
By James Kemp; [email protected]; @jamespkemp
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