11th Oct 2013 06:51
LONDON (Alliance News) - UK stocks are set to open firmly higher Friday as investors remain confident that the US government will avoid a debt default.
Prices are expected to push onward from strong gains made Thursday, following the US markets, which "had their second best day this year on optimism that politicians on Capitol Hill are close to coming to a temporary agreement to extend the deadline for raising the debt ceiling," says Michael Hewson, senior market analyst at CMC Markets.
The DJIA, S&P, and Nasdaq indices all closed 2% higher on the day.
As the widely-anticipated October 17 debt ceiling deadline looms, US President Barack Obama and top Republican leaders were locked in discussion for one and a half hours late Thursday. In the immediate aftermath, the White House issued a statement calling it a "good meeting." The statement said Obama, a Democrat, looked forward to making continued progress with both Republicans and Democrats.
Although no deal emerged after the 90-minute meeting at the White House, it is generally believed that House Republicans and Obama will back a short-term proposal "which would extend the debt ceiling until November 22, easing concerns of an imminent default," says Aerin Williams, a commentator at CitiFX.
Asian stocks have rallied across the board Friday as the US lawmakers continue to seek a "path forward" to avoid the first US government default in history. Ahead of the UK market open, the Nikkei is up 1.5% and the Hang Seng is up 1.3%.
The FTSE 100 is called to open higher by both IG and CMC Markets.
During a speech at the joint annual meetings of the World Bank and the International Monetary Fund in Washington, World Bank President Jim Yong Kim said that he believes developing countries must rapidly get their budgets in order ahead of looming monetary tightening in the US. Kim said that a short "window" - perhaps two to three months - remains for developing countries to get their balance sheets in order for higher interest rates and reduced investment flows. "Now is the time to make those reforms that you need to make, making sure you are focusing on fiscal policy and fiscal policy reforms," he said.
Royal Mail will be worth an initial GBP3.3 billion when conditional trading in its shares start Friday. The initial public offering was priced at 330 pence a share, right at the top end of the range set by the UK government after huge demand for the shares. The Department for Business, Innovation & Skills said the institutional tranche of the offer was more than 20 times oversubscribed, while the retail tranche was about seven times oversubscribed. Retail investors will have their allocation capped, with those applying for shares worth more than GBP10,000 through the retail tranche receiving no shares at all.
In Friday's data calendar, Italian CPI data is scheduled for 0900 and 1000 BST, followed by US PPI at 1330 BST.
By James Kemp; [email protected]; @jamespkemp
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