15th Jan 2014 07:40
LONDON (Alliance News) - UK stocks are set for a higher open Wednesday on the back of a strong US equity market rally Tuesday and a positive revision to the global economic outlook.
In the major data release from the US Tuesday, monthly retail sales came in ahead of expectations, showing a rise of 0.2% in December. Although this was slightly slower than the 0.4% in November, it beat economists' forecasts of a 0.1% rise.
The better-than-expected report triggered US stocks to rally, with Wall Street's major stock indices all posting their biggest daily gain of 2014.
Despite this, Michael Hewson, chief market analyst at CMC Markets, raises some question marks over the positivity of the data. "Dig a little deeper and the numbers tell a different story, because going into Tuesday?s figures US retail sales for the fourth quarter were showing a rise of 1.3%, in the form of 0.6% for October and 0.7% for November," he says.
"After the data release these previous numbers were revised down to 0.5% and 0.4% respectively, so in actuality we saw a decline of 0.2% to Q4 retail sales yesterday, and not an increase, as the net Q4 number fell back to 1.1%," Hewson adds.
Nevertheless, the DJIA closed up 0.7%, the S&P 500 closed up 1.1%, and the Nasdaq Compostie closed up 1.7%.
Further adding to positivity in the UK stock futures market, the World Bank has raised its growth projections for the global economy.
Releasing its latest Global Economic Prospects report, the lender said it now expects the world economy to grow 3.2% this year, stronger than the 3% expansion forecast in its report last June.
Encouragingly, the US economy is now forecast to grow 2.8% in 2014, materially faster than 2013's 1.8% expansion, with the eurozone projected to grow 1.1% this year, which will mark the end of two years of recession.
It was not all good news, however, as China's gross domestic product growth rate was projected to stay flat in 2014 at 7.7%, slowing to 7.5% for the next two years, weaker than the 8% forecast for 2014 and 2015 each, in June.
While the World Bank noted that growth prospects are sensitive to both US monetary policy and structural shifts currently taking place in China's economy, it said it expects global GDP to grow 3.4% in 2015, slightly faster than 3.3% forecast previously, with a 3.5% expansion in 2016.
Both IG and CMC Markets are indicating the FTSE 100 to open higher at approximately 6,786 points.
The World Bank's upgrade also has prompted Asian equities move higher. Ahead of the UK equity market open, the Nikkei trades up 2.5%, with the Hang Seng index up 0.4%.
Still to come in the data calendar Wednesday, the November Conference Board Economic Index for the UK is released at 1000 GMT. Eurozone trade balance numbers are also released at 1000 GMT.
In the US, MBA mortgage applications are released at 1200 GMT, with the NY Empire State Manufacturing index and PPI data scheduled for 1330 GMT.
In the corporate calendar, FTSE 100-constituents Tullow Oil and Burberry Group have been joined by FTSE 250-listed Taylor Wimpey in releasing trading statements Wednesday.
By James Kemp; [email protected]; @jamespkemp
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