24th Mar 2014 07:42
LONDON (Alliance News) - UK stocks set to open lower Monday, following US losses on Friday and ignoring strong gains made in Asia earlier Monday, as investors grow increasingly wary of the increasingly tense situation in Ukraine.
Having snapped a three-week losing streak last week, the FTSE 100 is expected to start the new week in the red. Both IG and CMC Markets indicate the blue-chip index to open around 29 points lower at approximately 6,528, having closed at 6,557.17 on Friday.
"Markets in Europe look set to start the week on the back foot as concerns remain about the possible next movements of Russian troops on Ukraine's eastern border ahead of a visit to Europe by President Obama, with the commander of NATO forces warning of the possibility of a move towards the Moldovan region of Transnistria," says Michael Hewson, chief market analyst at CMC Markets.
The weak start will come after Wall Street overturned early positivity on Friday to close firmly lower. The NASDAQ Composite closed down 1%, the DJIA closed down 0.2%, and the S&P 500, having hit a record high in early trading, closed down 0.3%.
"Data releases this morning will set the tone for the rest of the week," says David Page, senior UK macroeconomist at Lloyds Bank.
Already released, the latest flash purchasing managers index from HSBC and Markit Economics revealed that China's manufacturing sector contracted further in March. The preliminary reading of the index came in at a seasonally adjusted 48.1, hitting its lowest level for eight months, having recorded 48.5 in February.
The reading was well below the 48.7 that economists had been expecting and moves the index further below the 50 mark, which separates expansion from contraction.
Despite this, ahead of the UK stock market open, Asian stocks are significantly higher amid speculation that the Chinese government will take steps to try and support the faltering economy. "We expect Beijing to launch a series of policy measures to stabilize growth," said HSBC. "Likely options include lowering entry barriers for private investment, targeted spending on subways, air-cleaning and public housing, and guiding lending rates lower."
The Shanghai Composite index is up 0.9%, the Hang Seng is up 1.7%, and the Nikkei in Tokyo has closed up 1.8%.
Focus will now turn towards preliminary manufacturing and services PMI data from France, Germany, the eurozone and the US.
"In the euro area, seeds of doubt were sewn by the sharp drop in the ZEW survey (last week)," says Page. However, "we suspect that this is more likely to reflect a dip in sentiment reflecting Ukrainian concerns, rather than signalling actual weaker activity," he says.
Economists expect the eurozone's services and manufacturing PMIs, which are released at 0858 GMT, to remain stable at 52.6 and 53.2, respectively. The composite reading is expected to slip fractionally to 52.6, from the 53.3 recorded in February.
The French readings, which are released at 0758 GMT, are forecast to show a slight improvement on February's numbers, while the German equivalents, released at 0828 GMT, are expected to record marginal declines.
Nevertheless, with France's services PMI expected to come in at 47.9, up from 47.2 in February, and the manufacturing PMI expected to come in at 49.8, up from 49.7 in February, both continue to show contractions.
Also in the data calendar Monday, the UK CBI distributive trade survey for March is released at 1000 GMT, while the preliminary reading of US Markit manufacturing PMI for March is scheduled to be released at 1358 GMT.
In the corporate calendar, FTSE 250-listed John Laing Infrastructure Fund and Kentz Corp have released full-year results for 2013.
By James Kemp; [email protected]; @jamespkemp
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