30th Jan 2015 07:00
LONDON (Alliance News) - UK equities are expected to open modestly higher Friday, following on from a strong close on Wall Street overnight.
"We can expect to see a higher European open after a late rally in the US saw a strong finish helped by some good weekly jobless claims and some reported remarks made by Fed Chair Janet Yellen to Democratic lawmakers that the Fed saw no need to raise rates imminently," says Michael Hewson, chief market analyst at CMC Markets. "Though I?m not quite sure why this would be a surprise to anyone given the outcome of Wednesday?s FOMC meeting," he adds.
The FTSE 100 is called to open around 12 points higher at 6,822, having closed at 6,810.6 on Thursday.
The positive open would follow on from a strong close on Wall Street overnight, where a late-day rally helped the markets recover from the sell-off over the course of the two previous sessions. The DJIA closed up 1.3% Thursday, while the NASDAQ Composite and S&P 500 closed up 1%.
Yellen's remarks to a group of Senate Democrats at a private luncheon seemed to ease concerns about the outlook for interest rates in the US, which contributed to the pull-back on Wednesday. Positive sentiment also was generated by a report from the US Labor Department showing that initial jobless claims fell to a fourteen-year low in the week ended January 24.
In Asia, ahead of the UK market open, trading is mixed. The Shanghai Composite index is down 0.6%, while the Hang Seng is close to flat, and the Nikkei in Tokyo has added 0.4%.
There has been a raft of data released from Japan overnight. The Ministry of Internal Affairs and Communications reported that consumer prices in Japan were up 2.4% year-on-year in December, topping expectations for 2.3% and coming in unchanged from November. However, core CPI, which excludes the volatile costs of food, added 2.5%, which was below forecasts for 2.6% and down from 2.7% in the previous month.
Still to come in the data calendar Friday, German retail sales data for December are published at 0700 GMT, ahead of French consumer spending information at 0745 GMT. UK consumer credit and mortgage approvals data for December are released at 0930 GMT. The eurozone's unemployment rate for December is due at 1000 GMT, alongside the preliminary reading of consumer price inflation for the single currency area for January.
"January's 'flash' estimate of eurozone CPI is likely to show deflation accelerating, with the risk of an out-turn below consensus expectations of -0.5% after the weaker-than-expected German CPI data yesterday," says Michael Sawicki, senior economist at Lloyds Bank.
In the afternoon, focus will shift to the preliminary reading of fourth quarter US gross domestic product, which is scheduled to be released at 1330 GMT. Economists' expectations are for an increase of 3.3% year-on-year in the fourth quarter, following the 5.0% growth recorded in the third quarter.
That said, "expectations for this afternoon?s reading have come down somewhat after this week?s really poor durable goods numbers and revisions, which could well see a disappointing number this afternoon," says CMC Markets' Hewson. "The recent drop in oil prices could also start to see some evidence of a manufacturing slowdown," he adds.
Investors will also be keeping a close eye on US personal consumption expenditure data, which is released at the same time. Later on, the Chicago purchasing managers' index for January is published at 1445 GMT, while the Reuters/Michigan consumer sentiment index for January is due shortly after at 1500 GMT.
In the corporate calendar, FTSE 100-listed BT Group is scheduled to release a trading update Friday, while FTSE 250-listed Vedanta Resources is expected to publish third-quarter production results.
By James Kemp; [email protected]; @jamespkemp
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