10th Feb 2014 07:37
LONDON (Alliance News) - UK stocks are set to extend their gains Monday, continuing the global equities rally seen at the back-end of last week, as investors continue to digest the much softer-than-expected US jobs data released on Friday.
The US Labor department's non-farm payrolls data revealed that 113,000 private sector jobs outside of the agricultural industry were added in January, coming in significantly below the 185,000 that economists had forecast.
Despite this, there was an encouraging and unexpected decrease in the unemployment rate, edging down to 6.6% from 6.7%, while the participation rate edged up to 63.0% from 62.8%.
However, "more interesting was the markets response to the numbers, given that despite the weakness the markets finished strongly higher, when the obvious reaction would probably have been for greater uncertainty surrounding the health of the US economy," says Michael Hewson, chief market analyst at CMC Markets.
After stock indices in Europe and the UK closed higher Friday, Wall Street followed suit. The DJIA, NASDAQ Composite, and S&P 500 all closed up more than 1%. In Asia, the Nikkei trades up 1.8% ahead of the UK market open Monday, with the Shanghai Composite up 2%.
"For markets, the key issue will now be any hints the Fed is looking to pause tapering, only 8 weeks since we saw the start of the process," says Rabobank analyst Michael Every.
"For now, concerns over possible distortions from bad weather and the few bright spots in the January payrolls report are likely to mean no ?tapering tapering?. However, if we see more bad data then that assumption might rapidly be brought into question," he adds.
After recent weakness, UK stocks rallied towards the end of last week, with the FTSE 100 recording its first weekly gain for three weeks. This strength is expected to continue Monday with both CMC Markets and IG indicating the FTSE 100 to open up at approximately 6,597 points, having closed at 6,571.68 on Friday.
Meanwhile, "adding to market volatility is the People's Bank of China's indication they are serious about reducing the pace of debt growth," says Every.
In a quarterly monetary policy report, released Saturday, the PBoC said it will strengthen oversight of local government debt and monitor credit default dangers in local-government financing vehicles. The central bank also said it will keep a close eye on industries facing overcapacity and risky lending to the property sector.
In the data calendar Monday, French and Italian industrial output data is released at 0745 GMT and 0900 GMT respectively. "These are often of only limited interest, but this time they provide final clues before preliminary fourth quarter GDP reports on Friday," says David Page, senior UK macroeconomist at Lloyds Bank.
The EU Sentix investor confidence survey is released at 0930 GMT.
In the corporate calendar, FTSE 250-listed Catlin Group has released 2013 full-year results ahead of the London equity market open. AIM All-Share-constituent Renewable Energy Generation has released interim results.
Also in corporate news, Barclays has launched an investigation in response to a media report saying thousands of confidential files belonging to the bank's customers had been stolen and sold, a spokeswoman said Sunday.
A report in the British tabloid Mail on Sunday said up to 27,000 files containing sensitive information, including health and financial information as well as passport and national insurance numbers, had been sold to City traders.
By James Kemp; [email protected]; @jamespkemp
Copyright 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
BarclaysCastelnau Group