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MARKET COMMENT: UK Stocks Expected To Open Cautiously Higher

22nd Jul 2014 06:42

LONDON (Alliance News) - UK stocks are set to open higher Tuesday, following a strong trading session in Asia overnight and after US equities managed to regain some ground after coming under pressure in early trading on Monday.

However, with geopolitical tensions still running high following the airliner disaster in Ukraine at the end of last week and continued violence in the Middle East between Israel and Hamas, trading is expected to remain cautious.

US stocks opened significantly lower on Monday, but managed to close well off their intra-day lows, with the S&P 500 and NASDAQ Composite closing down 0.2%, while the DJIA closed down 0.3%.

"Though US markets finished the day lower yesterday, they managed to close well off their lows after US President Barack Obama warned Russia of further consequences if they continued to be obstructive with respect to MH17, but refused to elaborate on further sanctions," says Michael Hewson, chief market analyst at CMC Markets.

"This ambivalence on further measures by the US president appears to be designed to put pressure on EU leaders to come up with further measures of their own, with the UK leading the debate ahead of today's EU foreign ministers meeting," Hewson adds. However, "It still seems that France and Germany remain reluctant to tighten the screw further," he says.

At the same time, Obama has reiterated his support for Israel's right to defend itself from attacks by Hamas, but expressed serious concerns about the rising number of Palestinian civilian deaths. The president said he has dispatched Secretary of State John Kerry to the Middle East in an effort to bring about a cease-fire.

In Asian ahead of the UK equity market open, the Hang Seng is up 1.3%, and the Shanghai Composite index is up 1.1%, while the Nikkei in Tokyo has closed up 0.8%.

In London, the FTSE 100 is called to open modestly higher Tuesday, having closed at 6,728.44 on Monday. IG and CMC Markets both indicate the blue-chip index to open approximately 23 points higher at around 6,751, while Alpari expects it to open up at around 6,753.

"There is a fair amount of data for traders to get their teeth into away from the geopolitical situations today as both the economic and corporate calendar are full with data," says James Hughes, chief market analyst at Alpari.

UK public sector net borrowing information for June is released at 0930 BST, with public borrowing expected to come in at GBP9.20 billion in June, compared with the GBP11.48 billion seen in May.

However, "the major talking points will come later this afternoon out of the US as CPI inflation figures are released, as well as existing home sales readings," says Hughes.

US consumer price inflation data are released at 1330 BST, ahead of the US housing price index at 1400 BST and existing US home sales data at 1500 BST. The Federal Reserve Bank of Richmond publishes its manufacturing index at 1500 BST.

"Given last week?s news that US housing starts fell by 9.3% during June, attention will be firmly focussed on existing home sales in June for further guidance on the recent 'soft patch' in US housing and its implications for broader growth," says Jonathan Thomas, senior economist at Lloyds Bank.

"While economic data out of the US is always an important event for the markets, it is likely to take on a little more significance in the coming months after (Federal Reserve Chair) Janet Yellen?s comments from last week," Hughes says. "The Fed chief told members of Congress that monetary policy would remain the same unless the data showed significant signs of improvement, in what was one of her more hawkish appearances since she took over the role as head of the US central bank," he adds.

In the forex market, ahead of the data and the UK equity market open, the pound trades at USD1.7080, EUR1.2628, CHF1.5343, and JPY173.452. The euro trades at USD1.3522.

In the UK corporate calendar, FTSE 100-listed ARM Holdings has been joined by FTSE 250-listed Beazley, and Croda International in releasing half-year results, while FTSE 250-contituent IG Group Holdings has published full-year results. Blue-chip Royal Mail and mid-cap QinetiQ Group have released trading updates.

By James Kemp; [email protected]; @jamespkemp

Copyright 2014 Alliance News Limited. All Rights Reserved.


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