7th Mar 2014 10:48
LONDON (Alliance News) - Major stock indices in the UK and Europe are slightly lower Friday ahead of key US jobs data later, while the pound briefly gained against other major currencies after UK consumer inflation expectations dropped to their lowest level in four years.
By mid-morning Friday the FTSE 100 was down 0.4% at 6,762.35, the FTSE 250 down 0.4% at 16,599.84, and the AIM All-Share down 0.1% at 896.57.
UK consumers now expect prices in the UK to rise by 2.8% in the coming year, according to the latest Bank of England inflation survey. That was down from 3.6% recorded in November. The central bank also said that the two-year expectation fell to 2.8%, from 3.4%, and the five-year expectation dropped to 3.2% from 3.7%.
The near term inflation expectation is the lowest in four years and is supportive of the BoE's message that interests rates will stay low for some time to come. Even so, the bank's inflation attitudes survey showed that 40% of Britons expect interest rates to rise within the next 12 months, up from 34% in November.
The pound rose to a session high against the dollar as the survey results were released, peaking at USD1.6773. although it has since slipped back to trade flat on the day, currently at 1.6740.
The euro is also little changed against the dollar as the currency market remains quiet ahead of the US non-farm payroll report still to come Friday.
German wholesale prices fell unexpectedly in January, dropping by 0.1%, reversing the 0.3% rise seen in December and missing economists expectations of a rise or 0.6%. The German stock market is underperforming In Europe following the disappointing numbers. The DAX 30 is down 0.9%, while the CAC 40 is down 0.3%.
German industrial production numbers for January are due to be released at 1100 GMT. Economists expect a rise in monthly production of 0.7%, which would reverse the 0.6% drop recoded in December.
There's been interesting news from China Friday: Chaori Solar has defaulted on a corporate bond, marking the first firm to default in the country. "While not of immediate concern, this will be duly noted by investors questioning the position of China?s over-stretched shadow banking sector," said CMC Markets analyst Jasper Lawler.
A much emptier UK corporate calendar Friday has led to a quiet morning for UK stocks. Aviva is the top gaining blue chip stock for the second day running, currently up 3.8%. The insurance group issued strong 2013 earnings Thursday, and the stock has received a round of price target upgrades Friday, including from JP Morgan and Barclays.
Royal Mail shares are up 0.8% after the group also received a price target upgrade from JP Morgan.
US non-farm payrolls are still to come Friday, with the release at 1330 GMT. Economists are expecting a 149,000 rise in the number of people employed in February, which would be an improvement on the 113,000 jobs added in January. The headline unemployment rate is expected to remain stable at 6.6%.
Markets are likely to remain quiet ahead of the main event, with investors waiting to find out if the recent round of softer US data, which has been widely blamed of the weather, has translated into a weaker jobs market.
"The US economy is undergoing a reset phase as the ?polar vortex? disrupts activity. This is likely to lead to another subdued jobs report, and may prompt further downgrades to economic growth estimates," says Shore Capital analyst Gerard Lane.
Ahead of the numbers, the US futures markets are indicating a flat open on Wall Street.
By Jon Darby; [email protected]; @jondarby100
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