9th Jul 2014 06:35
LONDON (Alliance News) - UK equities are expected to extend their recent losses Wednesday, opening fractionally lower, as investors take positions ahead of the release of the minutes from the US Federal Open Market Committee's latest policy meeting.
UK stocks have fallen sharply in the first two days of this week amid disappointing data releases from the UK and Europe and a warning from the International Monetary Fund that it is likely to downgrade its global growth forecast once again later this month.
"Was it really only last Thursday that we saw the best US employment report in a long time and the first time in years that saw jobs gains to the tune of plus 200,000 for five months in a row?" asks Michael Hewson, chief market analyst at CMC Markets. "Yet here we are less than a week later, and the declines of the last couple of days have seen all of last week's gains in Europe pretty much wiped out."
The decline is set to continue Wednesday. Prior to the UK equity market open, the FTSE 100 is indicated to open marginally lower, having closed at 6,738.45 on Tuesday. CMC Markets and Alpari expect the blue-chip index to open fractionally lower at around 6,735, while IG calls it to open down at 6,731.
"There is no doubt that the US will dominate proceedings during today?s session but we will have to wait until 1900 BST for the markets to get into full swing," says James Hughes, chief market analyst at Alpari.
The US Federal Open Market Committee releases the minutes from its latest monetary policy meeting after the UK equity market close at 1900 BST. At the meeting, the Fed decided to keep its interest unchanged and cut its monthly asset purchasing programme by USD10 billion a month to USD35 billion.
"While we don?t expect too many surprises from them (the minutes), given recent commentary from some Fed officials the market could well be underestimating the timing of a rise in interest rates in the US," says Hewson. "The fact is a continued improvement in US data brings the potential for an eventual rise in rates that much closer, and despite recent comments from Fed chief Janet Yellen about rates remaining low for some time to come, she won't be able to hide behind those words for ever," he adds.
In data already released Wednesday, China's National Bureau of Statistics has revealed that Chinese consumer prices inflation slowed in June. Consumer prices increased 2.3% year-on-year in June, following the 2.5% increase in May, missing economists' estimate of a 2.4% rise. On a month-on-month basis, consumer prices declined 0.1% in June, reversing the 0.1% increase in May.
In a separate report, the statistics bureau said that producer prices in China fell 1.1% year-over-year in June, following a 1.4% decrease in May, as had been expected by economists.
Still to come in a relatively quiet data calendar Wednesday, the US Mortgage Bankers Association releases its MBA mortgage applications data at 1200 BST.
In the forex market, ahead of the UK equity market open, the pound trades at USD1.7139, EUR1.2575, CHF1.5287, and JPY174.125. The euro trades at USD1.3626.
In corporate news, aluminium producer Alcoa Inc kicked off the second-quarter US earnings season late Tuesday. The company said that it swung to a second-quarter profit, as all of its four business segments were profitable during the quarter. The company's quarterly earnings per share, excluding items, also came in above analysts' expectations as did its quarterly sales.
In the UK, FTSE 250-constituents Galliford Try, Centamin, Interserve, JD Wetherspoon, and Booker Group have all released trading updates ahead of the UK equity market open.
By James Kemp; [email protected]; @jamespkemp
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