8th Sep 2014 06:39
LONDON (Alliance News) - UK stocks are set to open a touch softer Monday, while the pound has slumped against other major currencies, after a weekend poll of Scottish voters put those planning to vote "Yes" for independence ahead of the "Better Together" camp for the first time.
Futures indicate that the FTSE 100 will open 15 points lower at 6,840.
A disappointing US non-farm payroll report on Friday failed to provide a sustained boost to UK equities, and stocks slumped into the weekend, as investors remained cautious amid a shaky ceasefire agreement in eastern Ukraine.
US stocks, however, made a turn-around after the European close and went on to record relatively strong gains, with the S&P gaining 0.5% to close at a record high, while the DJIA gained 0.4%, and the Nasdaq Composite gained 0.5%.
The US unemployment report is closely watched as a key indicator of the health of the economy and therefore also as an indicator as to when the Federal Reserve will raise interest rates. A disappointing jobs number therefore tends to push back rate-hike expectations and boost equity valuations.
A mixed session in Asia on Monday has seen the Nikkei close up 0.1%, while the Hang Seng is down 0.1%. The Shanghai Composite remains closed for the mid-Autumn festival.
Chinese trade surplus rose unexpectedly in August to USD49.83 billion as exports surged to a record and imports unexpectedly declined, figures from China's General Administration of Customs showed Monday. Economists had expected the trade surplus to decline from the previous month to USD40 billion.
Meanwhile, a weekend opinion poll about the upcoming Scottish independence referendum put "Yes" voters fractionally ahead of "No" voters. It is the first time that an opinion poll has indicated that a split from the UK is likely.
The pound has had a strong negative reaction to the poll, plummeting in the Asian session by more than 1.5 cents against the dollar to reach a near 10-month low of USD1.6159. Even against the euro, which is reeling from the further easing measures announced by the European Central Bank last week, the pound fell to a two-week low of EUR1.2471.
"For quite some time investors had dismissed the prospect of a ?Yes? vote as an outlier, but recent opinions polls have shifted that perception, and this has been no better demonstrated by the plunge in sterling in Asia this morning," said CMC Markets chief market analyst Michael Hewson.
The Scottish referendum takes place on September 18, and given the market reaction to the weekend poll, it seems likely that there could be increased volatility in the pound, as well as UK stocks exposed to a potential split in the coming two weeks.
"One of the biggest drivers for the UK in the coming weeks is likely to be the referendum on Scottish independence," said Alpari market analyst Craig Erlam.
Investors appear to have been correct not to place too much confidence in the ceasefire in eastern Ukraine on Friday, as little over 24 hours into the agreement, fresh fighting on Sunday threatened to undermine the agreement between pro-Russian separatists and government forces. One woman was killed and three people injured in the city of Mariupol, after the city's eastern outskirts were attacked during the night, the city council said.
From the UK corporate calendar Monday, Primark-owner Associated British Foods has said that it expects its full-year earnings per share to be ahead of last year, with sales at discount retailer Primark set to be 17% ahead on a constant currency basis. Dechra Pharmaceuticals also has released full-year results Monday morning, showing higher pretax profit and revenue, while raising its dividend.
It's a relatively quiet start to the week in the economic calendar. Germany has echoed a similar trade balance picture to that seen in China over the weekend, with exports on the rise, while imports have fallen, leading to a increase in its trade surplus to EUR22.2 billion in July.
The eurozone Sentex investor confidence index for September is due at 0930 BST, but there's no top-line UK data scheduled until Tuesday, when the latest industrial production data is due.
By Jon Darby; [email protected]; @jondarby100
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