10th Jul 2014 06:44
LONDON (Alliance News) - UK stocks are set to open marginally higher Thursday in response to the steady course plotted by the latest Federal Reserve policy meeting minutes and following gains made on Wall Street, which also was supported by a positive start to the US earnings season.
The Federal Open Market Committee minutes released Wednesday, after the European market close but during US trading, confirmed market expectations that the Fed plans to completely unwind its asset purchase plan in October, with a final taper of USD15 billion, as long the economy continues to pick up.
There was very little in the way of an indication of the timing of the first interest rate rise after the asset purchases have been wound down, with Janet Yellen having learned an early lesson from the market volatility she caused at her first press conference by indicating a six-month time frame. Otherwise the minutes maintained an accommodative tone.
"The Fed remains dovish. The minutes of the FOMC?s June policy meeting showed that the rate-settersstill believed there was plenty of slack in the economy," says Berenberg economist Rob Wood.
Combined with a better-than-expected start to US second quarter earnings from Alcoa, the accommodative minutes allowed the US markets to make their first gains of the week, with the DJIA and the S&P 500 both gaining 0.5%.
The positivity continues into the Asian session, where stocks have broadly made modest gains, with the exception of the Japanese Nikkei, which has closed down 0.5% after an unexpected 20% plunge in monthly Japanese machine orders revealed Thursday.
Futures pricing indicates that the UK stocks will open a touch higher. After closing at a ten-week low of 6,718.04 on Wednesday, spreadbettters are calling the FTSE 100 to open between four to seven points higher Thursday.
The UK economy will be in focus throughout the session, with trade balance data due at 0930 BST, followed by the Bank of England interest rate decision at midday.
The UK trade deficit is expected to remain at near GBP9 billion, and there are no deviations from the 9-0 vote on rate rises at the central bank.
There is an increased possibility of a surprise at the Bank of England, however, given that there are new voting members this month. Andrew Haldane has replaced Spencer Dale, and Kristin Forbes has replaced Ben Broadbent, who has gone on to replace Charles Bean as deputy governor.
Recent comments from BoE officials have strongly suggested that the decision to raise interest rates is becoming more balanced, indicating that the first dissenting vote at the Monetary Policy Committee may not be far away, although it would still catch the markets off guard if it happened at Thursday's meeting.
"There doesn't appear to be any suggestion, new voting members aside, that there will be any change to the current stance this month," says CMC Markets chief market analyst Michael Hewson. "Though the minutes in a few weeks' time could well make for interesting reading as to the policy leanings of the two new members."
In the UK corporate calendar Thursday, Barratt Developments is the latest housebuilder to provide an update. In a full-year trading statement the FTSE 100 listing has said the average selling price of its homes was 13% higher in 2014 than a year before.
Supergroup also has published its full-year results, while Premier Oil has released a trading statement. Quarterly trading updates have also been released from Burberry, Halfords, Ashmore Group, Associated British Foods, and Hays.
Precious metals have been moving higher in recent session as equities and the dollar have been falling. The metals may be in focus Thursday as India's annual budget is due to be presented, with some big reforms expected from the new government.
There has been speculation that the new Indian government will cut the import duty on gold and silver from the current 10% to as little as 6%. Any cut, above or below the expected level may cause some volatility, analysts say, given that India is the world's second biggest consumer of physical gold.
By Jon Darby; [email protected]; @jondarby100
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