22nd May 2014 06:38
LONDON (Alliance News) - UK stocks are set to follow their US and Asian counterparts higher Thursday, following the publication of the latest Federal Open Market Committee meeting minutes late on Wednesday and some better-than-expected Chinese data released overnight.
In the minutes from the FOMC's two day meeting on April 29 and 30, the Federal Reserve discussed plans to exit monetary stimulus but gave no indication that a rate hike is imminent.
At the meeting, the Fed kept its benchmark interest rate unchanged at historic low levels near zero and tapered quantitative easing by another USD10 billion per month.
However, before voting on that action, policy makers examined "several approaches" for tightening but have not decided on the appropriate mix of tools to wind down its unprecedented support for the US economy.
"This could well have been viewed as a sign that the FOMC is considering hiking rates sooner than is currently priced in," says Craig Erlam, a market analyst at Alpari. However, "the absence of even a rough date in the minutes, along with the statement that the discussion shouldn?t suggest that any rate action is in the pipeline was not only enough to ease any concerns, it gave investors confidence that a rate hike is still a long way off," he says.
On Wall Street, the DJIA, NASDAQ Composite, and S&P 500 all closed up between 0.8% and 1%.
After the US equity market close, the preliminary release of the Chinese HSBC manufacturing purchasing managers index for May came in at an unexpectedly high reading of 49.7, up sharply from the 48.1 posted in April. Furthermore, while it does remain below the line of 50 that separates expansion from contraction, the May reading represents a five-month high, and beat economists' expectations for a reading of 48.1.
"The optimist in me looks at this figure as a sign that we could be seeing a turnaround in the sector and that the mini stimulus programmes are working, following a difficult start to the year," says Alpari's Erlam. "The pessimist on the other hand sees a fifth contraction figure on the bounce and wonders how the country can possibly hit its 7.5% growth target when such a key sector has been contracting all year," he adds.
In Asia, ahead of the UK equity market open, the Hang Seng is up 0.7%, the Shanghai Composite index is up 0.2%, and the Nikkei in Tokyo has closed up 2.1%.
This positivity is set to see UK stocks open higher Thursday. IG indicates the FTSE 100 to open up at approximately 6,832, having closed at 6,821.04 on Wednesday, while CMC Markets and Alpari expected it to open even higher at 6,838 and 6,840, respectively.
In the major UK data release of the day, the second estimate of UK gross domestic product for the first quarter of 2014 is released at 0930 BST. This is expected to remain unchanged from the first reading, which showed a quarter-on-quarter increase of 0.8%.
The British Bankers' Association releases mortgage approvals data for April at the same time.
Also in the data calendar Thursday, "May flash PMI data for the euro area will provide a further insight on the strength activity in the second quarter," says Rhys Herbert, senior economist at Lloyds Bank.
The preliminary readings of the French Markit manufacturing and services purchasing managers' index are released at 0800 BST, with the German equivalents released at 0830 BST. Shortly after, Markit manufacturing, services, and composite PMIs for the eurozone are released at 0900 BST.
France's Markit manufacturing PMI reading is forecast to come in at 51.0 in May, down from the 51.2 posted in April, while its services PMI is expected to come in at 50.2 from 50.4. The German economy also is expected to show signs that it is slowing down, with its Markit manufacturing PMI expected to come in at 54.0 from 54.1, and its services reading expected to drop to 54.5 from 54.7.
In the US, weekly jobless claims data are released at 1330 BST, with the Federal Reserve Bank of Chicago's monthly national activity index released at the same time. The preliminary reading of Markit manufacturing PMI is released at 1445 BST, with home sales data and the US Conference Board's leading indicator data published at 1500 BST. The Federal Reserve Bank of Kansas City releases manufacturing activity data at 1600 BST.
In corporate news, FTSE 100-listed Royal Mail Group, SABMiller, and United Utilities have been joined by FTSE 250-listed Halfords Group, QinetiQ Group, Dairy Crest Group, Electrocomponents, and Investec in releasing full-year results.
Mid-cap Amlin has released an interim management statement, while Mitchells and Butlers has provided half-year results.
A raft of companies, including property site Zoopla, have announced plans to IPO.
By James Kemp; [email protected]; @jamespkemp
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