24th Oct 2014 06:32
LONDON (Alliance News) - UK stocks are set to open a little lower Friday as investors tread carefully amid a number of market concerns, from falling Chinese house prices, to the upcoming results of the EU banking system stress tests, to the spread of Ebola. Domestically, the first reading of third quarter UK economic growth will be in focus Friday morning.
Futures indicate that the FTSE 100 will open 25 points lower at 6,394.
UK stocks had a bumpy ride on Thursday, initially opening heavily lower, only to be lifted by a surprisingly strong eurozone manufacturing data. However, while major European markets went on to record strong gains, the FTSE 100 never managed to break significantly into positive territory and closed up just 0.3%.
Amid some strong corporate numbers, on the busiest day of earnings season so far, US markets went to record a strong gain, with the DJIA up 1.3%, the S&P 500 up 1.2%, and the Nasdaq Composite up 1.6%.
Chinese house prices fell by 1.3% in September, with every major city bar one now seeing falling prices for new homes, according to official data released overnight. That "should dent some of the optimism that China can somehow brush aside what will likely prove a long downturn in a sector that accounts for up to 25% of GDP," says Rabobank analyst Michael Every.
Further weighing on sentiment ahead of the open Friday, a doctor who recently returned from volunteering in West Africa was being treated in a New York City hospital early Friday after he tested positive for the Ebola virus in the first confirmed case in the city, officials said. The Malian government meanwhile confirmed that a 2-year-old girl had also tested positive for the disease after arriving from neighbouring Guinea, in the country's first recorded case.
The lift to European markets on Thursday came when flash PMI data showed German manufacturing activity unexpectedly expanding again in October after having dipped into contraction last month. There is further good news from Germany Friday, with the Gfk consumer confidence survey rising to 8.5 in September from 8.4 in August. Analysts had been expecting the survey reading to drop to 8.0.
The EU has been grabbing newspaper headlines in the UK Friday by demanding that the UK pay an extra EUR2.1 billion towards the EU budget because the economy has performed better than expected in recent years. Remarkably, Greece also has been asked to contribute more, while Germany will receive a rebate. The request would appear to make difficult reading for UK Prime Minister David Cameron, who is seeing growing dissent within his own party over UK membership of the EU, with a number of Conservatives defecting to anti-EU party UKIP.
Furthermore, the EU will remain in focus over the weekend as the long-awaited results of the Asset Quality Review, or bank stress tests, are due for release on Sunday. An unconfirmed report earlier in the week said that 11 banks have failed the test, and analysts say there is likely to be some caution in the markets Friday ahead of the results.
The main domestic economic event of the day will be the initial estimate of third quarter UK GDP. The numbers are due at 0930 BST and economists are expecting year-on-year growth of 3.0% over the last three months, down from the 3.2% recorded in the second quarter. On a quarterly basis, a print of 0.7% is expected, down from 0.9% in the second quarter.
"Today's GDP numbers are expected to show that we've probably seen the high-water mark on the recent recovery after the revision higher to the second quarter numbers to 0.9%. The problems in Europe will have inevitably had a cooling effect here in the UK," says Michael Hewson, chief market analyst at CMC Markets.
Outside of that, it's a relatively quiet day for economic data compared to recent sessions, with just home sales data to come later in the day from the US.
From the UK corporate calendar Friday, TSB Banking Group has released an interim management statement, as has Dechra Pharmaceuticals, Spectris, and Vesuvius.
Recently jilted Irish drug maker Shire will be in focus at midday when it is due to release its third quarter results.
By Jon Darby; [email protected]; @jondarby100
Copyright 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
DPH.LSpectrisShireVesuvius