22nd May 2015 06:41
LONDON (Alliance News) - UK equities are set to open flat Friday, following broadly positive sessions in the US and Asia, as investors await the release of some key macroeconomic data from the UK, Europe and the US, as well as a raft of speeches from central bankers.
The FTSE 100 has closed higher every day this week, but looks set to open flat Friday, with IG calling the blue-chip index to open at 7,013, having closed at 7,013.47 on Thursday.
The flat open is expected in spite of a positive session on Wall Street and in Asia overnight. In the US, the NASDAQ Composite closed up 0.4% at 5,090.794 Thursday, while the S&P 500 closed up 0.2% at 2,130.82 and the DJIA ended the day fractionally higher at 18,285.74. In Asia, meanwhile, the Nikkei in Tokyo has closed up 0.3% at 20,263.52, while the Shanghai Composite index is up 2.3% at 4,632.536.
"The Friday leading into the bank holiday weekend can quite often be a little quieter and see lower trading volumes, with traders turning it into an extended break," says Craig Erlam, senior market analyst at Oanda. However, "given some of the data being released today and the number of central bankers taking part in events in Portugal and Rhode Island, I think today is going to be a million miles from slow and boring," he adds.
In data already released, Germany's economic growth eased in the first quarter largely due to the weakness in foreign trade, final data from Destatis showed Friday.
Gross domestic product grew 0.3% quarter-on-quarter in the first quarter, slower than the 0.7% expansion seen in the fourth quarter. Annual growth slowed to 1.1% from 1.6% in the prior quarter. This was the slowest growth since the second quarter of 2014. The calendar-adjusted GDP also grew at a slower pace of 1% after rising 1.4% a quarter ago.
Still to come in the economic calendar Friday, German IFO readings for May and Italian industrial sales figures for March are released at 0900 BST. UK public net borrowing information is due shortly after at 0930 BST, with Italian retails sales data published at 1000 BST.
In the afternoon, focus will shift to the release of US consumer price inflation information for April, which is set to come out at 1330 BST. According to FXStreet.com, economists expectations are for US CPI to fall to 0.1% month-on-month in April, down from the 0.2% posted in March, but to remain unchanged on a yearly basis at negative 0.1%.
"With US investors still holding onto the belief that the [US] Federal Reserve will raise rates at some point this year, the one thing that looks sent to prevent them is weak inflation numbers," says Michael Hewson, chief market analyst at CMC Markets. "Given the weakness elsewhere in the world, it is hard to suggest that the US would be able to stand apart from the slide in global prices," he adds.
In the FX market, ahead of the UK equity market open, the pound trades at USD1.56780, EUR1.40480, CHF1.46362 and JPY189.302.
On top of the economic data, investors also will be keeping a close eye on a host of central bankers who are due to speak Friday. European Central Bank President Mario Draghi is due to give his first speech of the day at 0900 BST, with Bank of England Governor Mark Carney, Bank of Japan Governor Haruhiko Kuroda and Draghi also all expected to speak at 1430 BST. US Federal Reserve Chair Janet Yellen, meanwhile, is due to speak at 1800 BST.
In corporate news, ahead of the UK stock market open, FTSE 100-listed Severn Trent said its pretax profit more than halved in the last financial year due to losses on financial instruments, but underlying earnings and revenue rose, leading to the company increasing its dividend as expected.
The water company said its pretax profit for the year to end-March more than halved to GBP148.2 million from GBP318.9 million a year earlier. However, excluding exceptional items and losses on financial instruments, profit rose to GBP300.4 million from GBP276.1 million as revenue climbed to GBP1.80 billion from GBP1.75 billion.
Severn raised its dividend for the year by 5.6% to 84.90 pence per share from 80.40 pence, and the company reiterated plans to grow the dividend every year until 2020 in line with inflation.
Severn reported a GBP133.5 million loss on financial instruments in the year, swinging from a GBP58.0 million gain a year earlier, whilst exceptional items rose to GBP18.7 million from GBP15.2 million. Finance costs and finance income both experienced small falls.
Elsewhere, the UK's Competition and Markets Authority Friday said its provisional findings on the acquisition of the K-Y brand by Reckitt Benckiser Group has found that the deal may result in higher prices for consumers.
Reckitt reached an agreement in March 2014 to buy the K-Y personal lubricants brand from US healthcare company Johnson & Johnson and the acquisition was referred for a phase 2 investigation in January 2015 to examine the impact of the deal for consumers.
The CMA, the UK's antitrust regulator, said that after considering the evidence put forward, its provision findings on the deal is that the merger will lead to a substantial reduction in competition in the personal lubricants market, potentially through higher prices, meaning customers buying the products would be worse off.
In the mid-cap index, Close Brothers Group reported growth in its banking loan book and in its assets under management in the third quarter of its financial year, as well as improved market conditions for its Winterflood securities business.
In a statement, the banking and asset management group said its banking division is generating "solid" returns, with its loan book up 2.7% in the three months ended April 30 to GBP5.6 billion. Assets under management increased to GBP10.6 billion, up 4% in the quarter, due to "solid" net inflows and positive market movements, while the revenue margin remained "broadly stable" on the first half.
By James Kemp; [email protected]; @jamespkemp
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