23rd Jul 2014 06:40
LONDON (Alliance News) - UK stocks are set to open slightly lower Wednesday, as geopolitical tensions remain a key market driver ahead of the release of the latest Bank of England policy meeting minutes at 0930 BST that will provide the domestic focus of the morning.
After rallying 1.0% to a two-week high on Tuesday, futures indicate that the FTSE 100 will open about 0.1% lower Wednesday at 6,783 points.
Stocks in the UK and Europe made strong gains on Tuesday, as European leaders appeared unable to agree on the immediate imposition of harsher sanctions against Russia, which also would hurt their own economies, in response to the situation in eastern Ukraine.
Although there is still a possibility that further sanctions will be announced before the end of the month, a disagreement between EU leaders over the sale of arms to Russia appeared to hamper progress at Tuesday's meeting in Brussels. Moreover, US officials Wednesday said they can't find any evidence of direct Russian involvement in the MH17 crash.
With US earnings season hitting its peak, equity markets there yet again pushed to new all-time highs, with the S&P 500 breaking new ground and closing up 0.5% at 1,983.53, the DJIA closing up 0.4% at 17,113.54, and the Nasdaq Composite up 0.7% at 4,456.016.
Stocks have been mixed in Asia Wednesday, with the Nikkei closing down 0.1% but the Hang Seng continuing up 0.6% and the Shanghai Composite up 0.3%.
The violence between Israel and Hamas in Gaza continues to escalate, and amid a heightened nervousness in the aviation industry, a whole host of airlines, including easyJet, have reportedly followed the move made by Delta on Tuesday and cancelled flights to Tel Aviv following the explosion of a Hamas rocket near the airport.
The UK economy and its monetary policy will be in focus Monday, with the release of the minutes from the July 9 and 10 Bank of England policy meeting at 0930 BST, followed by a speech from BoE Governor Mark Carney at the Commonwealth Games Business Conference in Glasgow at 1245 BST.
The Monetary Policy Committee members voted at the latest meeting to keep rates at the historic low of 0.5%, as they have done every month for almost five-and-a-half years. However, whether the UK reaches six years under the current emergency monetary policy is debatable.
Wednesday's minutes will offer a new insight, given that July was the first time new Monetary Policy Committee member Kristin Forbes has voted. Forbes replaced Ben Broadbent, who has retained a vote, having been promoted to Deputy Governor after Charlie Bean's recent retirement.
Sterling and central bank watchers will be very interested to find out where the new member sits on the dove-hawk spectrum of the nine rate-setters. It's not entirely inconceivable that Forbes will have wanted to make an early impact and voted immediately in favour of a rate hike, but the consensus expectation is for a 9-0 vote in favour of taking no action to have been recorded.
The BoE has made clear that it is slack UK wage growth that is currently causing the most concern, so any discussion had by the committee with regard to average earnings will be of most interest Wednesday morning.
Otherwise the data calendar is relatively empty Wednesday, with just weekly US MBA mortgage applications at midday, and the eurozone consumer confidence index for July at 1500 BST.
In the UK corporate calendar Wednesday, full-year results have been released from FTSE 250 listed engineer Renishaw, along with interim results from Capita and AIM-listed Staffline Group. Interim management statements have also been released by Sage Group, Talk Talk Telecom, Brewin Dolphin and Charles Stanley. GlaxoSmithKline is scheduled to release first-quarter numbers at midday.
By Jon Darby; [email protected]; @jondarby100
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