6th May 2014 06:40
LONDON (Alliance News) - UK stocks are expected to open marginally higher Tuesday as UK market participants return from the Bank Holiday weekend ahead of a raft of services purchasing managers' index data from the UK and across the euro area.
However, focus also will be on Ukraine, where tensions continue to heighten.
"A combination of escalating violence and unrest in Ukraine at the weekend, as well as a disappointing Chinese HSBC manufacturing number saw European markets come under pressure yesterday, in the absence of UK markets," says Michael Hewson, chief market analyst at CMC Markets.
China's manufacturing sector contracted for the fourth successive month in April, survey data showed Monday. The HSBC PMI came in at 48.1 in April, missing estimates of 48.4, but rising marginally from the 48.0 posted in March. The sub-50 score signalled that the sector remained in contraction in April.
Meanwhile, "a breakdown in law and order in certain regions of the Ukraine have prompted rising concerns that Russia might feel compelled to intervene, in the event that the situation spirals completely out of control," says Hewson.
The crisis in Ukraine poses a significant risk to Europe's slowly recovering economy, EU Commissioner Siim Kallas said Monday. "When we consider what are the main risks for the European economy at this stage, the one main risk is clearly the external tensions and uncertainty which surrounds us, especially related to the crisis in Ukraine," he said.
At least four Ukrainian government troops and two pro-Russian militants were killed in fighting Monday in and around the eastern city of Sloviansk.
The DAX 30 in Frankfurt closed down 0.3% on Monday, while the CAC 40 in Paris closed fractionally higher.
Wall Street managed to shrug off these concerns to close marginally higher on Monday, following some better-than-expected US PMI data. The DJIA, NASDAQ Composite, and S&P 500 all closed between 0.1% and 0.3% higher.
The ISM said its non-manufacturing index for the US rose to 55.2 in April, up from 53.1 in March, and ahead of the more modest increase of 54.1 that had been expected by economists. The Markit services PMI rose to 55.0 in April. This was slightly lower than the 55.3 recorded in March, but came in ahead of economists' expectations of 54.2.
Ahead of the UK equity market open on Tuesday, the FTSE 100 is called to open slightly higher. Both IG And CMC Markets indicate the blue-chip index to open up at approximately 6,830 points, after it closed at 6,822.42 on Friday.
Tuesday's early focus will be on the latest readings of Markit services PMI data from the UK and eurozone.
In the UK, the services PMI reading, which is released at 0830 GMT, is expected to remain steady at 57.6 in April.
However, "with both manufacturing and construction PMI showing fairly strong readings for April last week, a similarly strong April services number today is likely to bode well for a similarly positive quarter for growth in the second quarter," says Hewson. "A good number is also likely to prompt some vigorous debate at this week?s Bank of England rate meeting about the timing of a potential future rate hike," he adds.
Italian services PMI, which is released at 0745 GMT, is expected to rise to 50.4 in April, up from the 49.5 posted in March. The French reading is released at 0750 GMT, and is expected to dip to 50.3 in April compared with March's 51.5. Germany's reading, released at 0755 GMT, is expected to rise to 55.0 from 53.0.
In the wider euro area, the final reading of April's Markit services PMI is forecast to rise to 53.1 from 52.2 in March.
Also in the data calendar Tuesday, eurozone retail sales data are released at 0900 GMT.
In the afternoon, the US Bureau of Economic Analysis releases trade balance data at 1230 GMT. Federal Open Market Committee member Jeremy Strein gives a speech at 2130 GMT.
In the UK corporate calendar, FTSE 100-listed Barclays and Glencore Xstrata have been joined by FTSE 250-listed Countrywide and Hiscox in releasing trading updates.
Blue-chip Aberdeen Asset Management has released interim results.
By James Kemp; [email protected]; @jamespkemp
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