18th Mar 2014 07:36
LONDON (Alliance News) - UK stocks are set to open flat Tuesday, having closed firmly higher on Monday, as investors await further updates from Ukraine.
US and European bourses closed much higher on Monday as investors held their nerve after Sunday's Crimean referendum saw voters, as expected, vote overwhelmingly in favour of rejoining Russia.
The FTSE 100 ended the day up 0.6%, the FTSE 250 closed up 1.1%, the CAC 40 closed up 1.3%, and the DAX 30 closed up 1.4%. On Wall Street, the DJIA, S&P 500, and NASDAQ Composite, closed up 1.1%, 0.8%, and 1%, respectively.
Asian markets have followed suit Tuesday, with the Nikkei closing up 0.9%, and the Hang Seng and Shanghai Composite index trading slightly higher ahead of the UK equity market open.
However, "while Monday's strong rally in stock markets was a welcome development after the strong losses over the last few days, the prospect for unpleasant surprises still remains high with the potential for further flash points on Ukraine's eastern border," warns Michael Hewson, chief market analyst at CMC Markets.
In the latest development, Russian President Vladimir Putin has brushed off US and EU sanctions that were put in place on Monday and has approved a decree that recognises Crimea as an independent and sovereign state.
The decree is highly symbolic, enabling Moscow to accept Crimea without Ukraine's consent, and came just hours after the US and the EU had hit high-level Russian and Ukrainian officials linked to the Crimean crisis with travel bans and asset freezes.
"It seems that Putin is of the opinion that EU leaders may lack the stomach to implement further measures given yesterday?s rather timid first salvo," says Hewson.
Accordingly, the FTSE 100 is called to open close to flat Tuesday, having closed at 6,568.35 in the previous session. CMC Markets indicates the UK's blue-chip index to open fractionally higher at approximately 6,572 points, while IG calls it to open marginally lower at 6,565.
Away from the Ukraine crisis, "the results of the German ZEW survey for March will attract considerable attention this morning, ahead of next week's 'flash' PMIs," notes Jonathan Thomas, senior economist at Lloyds Bank.
"The index of expected economic growth, which serves as a leading indicator for German and euro area activity, has staged a fairly steady recovery since mid-2012," Thomas says. However, "the index eased a little last month on the back of a softer outlook for emerging market activity, a strong euro, mounting deflation risks and tensions in Ukraine," he adds.
These factors are expected to continue to keep March's print under pressure, with economists expecting the index, which is released at 1000 GMT, to fall to 53.0, down from the 55.7 recorded in February.
The equivalent reading for the euro area is released at the same time and is also expected to reveal a small decline. Economists forecast the reading to edge lower to 67.3 in March, having come in at 68.5 in the previous month.
Also in the data calendar, trade data for Italy and the eurozone are released at 0900 GMT and 1000 GMT respectively. In the US, building permits, housing starts and consumer price inflation data are released at 1230 GMT, ahead of the Redbook index at 1255 GMT.
After the close of UK equity markets, Bank of England Governor Mark Carney delivers the annual Mais lecture at Cass Business School. "According to reports, Carney is expected to use the address to reveal his latest thinking on reforming the Bank's operational structure," says Thomas.
In the corporate calendar, Resolution Limited, Antofagasta, Xaar and Cairn Energy, amongst others, have released full-year results for 2013 ahead of the UK equity market open. FTSE 250-listed Berkeley Group and IG Group Holdings have released interim management statements.
Meanwhile, J Sainsbury has provided a fourth quarter trading statement and ASOS, the largest company on AIM by market capitalisation, has released a second-quarter trading update.
By James Kemp; [email protected]; @jamespkemp
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