20th Jun 2014 06:38
LONDON (Alliance News) - UK stocks are set to open marginally higher Friday, following another record-breaking session on Wall Street Thursday, but trading is expected to remain somewhat cautious ahead of the weekend amid continuing violence in Iraq
Though setting another record Thursday, US stocks struggled to post material gains on Wednesday's Fed-induced rally. The S&P 500 closed up 0.1% at 1,959.48, a record high closing level, while the DJIA closed up 0.1%, and the NASDAQ Composite closed fractionally lower.
Market sentiment continues to be broadly positive towards equities following the message that the world's largest economy is recovering, but not fast enough to lead to a policy tightening any time soon, meaning US interest rates are likely staying low for longer.
"Fed officials appeared to be dismissive of concerns about rising inflation, as the Goldilocks scenario of low rates and a slow improving economy continues, with markets unmoved by continued geopolitical concerns, and the rising price of oil," says Michael Hewson, chief market analyst at CMC Markets.
"Against that backdrop, stocks look likely to remain underpinned, though trading today is likely to be cautious as we head into the weekend, given what could unfold over the weekend in Iraq," Hewson adds.
In the latest development, US President Barack Obama said Thursday he is prepared to send up to 300 military advisors to Iraq to help the Iraqi military fend off the militant Islamist threat.
However, he will only deploy "precise military actions" - an apparent reference to the airstrikes requested by the Iraqi government - once intelligence on the ground improves and if the situation demands it.
"We do not have the ability to simply solve this problem by sending in tens of thousands of troops and committing the kinds of blood and treasure that has already been expended in Iraq," Obama said.
Ahead of the UK equity market open, the FTSE 100 is called to open fractionally higher Friday. Both IG and CMC Markets expect the blue-chip index to open around 4 points higher at 6,812, having closed at 6,808.11 on Thursday.
In the forex market, the pound continues to trade above the key psychological barrier of USD1.70 in the wake of hawkish comments from the UK central bank and dovish remarks from the US central bank.
Ahead of the latest tranche of data, the pound trades at USD1.7047, EUR1.2509, JPY173.642, and CHF1.5222.
In the economic calendar Friday, eurozone current account data and Italian industrial orders and sales data are released at 0900 BST, with UK public sector net borrowing information released shortly after at 0930 BST.
Economists' expectations are for UK public sector net borrowing to increase to GBP12 billion in May, up from the GBP9.63 billion posted in April. "Despite this, markets continue to drive the pound higher, even more so given that the Bank of England now looks even more likely to be the first central bank to increase rates, unless the Federal Reserve undergoes a similar chameleon-like Carney moment in the coming months," says Hewson, referring to BOE Governor Mark Carney.
In the afternoon, the preliminary reading of eurozone consumer confidence is published at 1500 BST.
In corporate news, FTSE 100-listed Debenhams has released a trading update, and AIM All-Share-constituent Polar Capital Holdings has released its full-year results.
Meanwhile, responding to press speculation, US drug maker Abbvie Inc has confirmed that it made an indicative approach for FTSE 100-listed Shire, but that a merger proposal had been rejected. AbbVie said that there can be no certainty that a firm offer will be made, adding that discussions are no longer taking place.
Focus also will be on TSB Banking Group, the retail bank Lloyds Banking Group that must divest to meet European conditions for its UK state bailout in 2009, which is set to start conditional trading at the equity market open Friday. The offer price has been set at 260 pence per share, which gives TSB a market capitalisation of around GBP1.3 billion, with 35% of TSB shares being offered, higher than expected.
By James Kemp; [email protected]; @jamespkemp
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