9th Apr 2014 06:35
LONDON (Alliance News) - UK stocks are set to open marginally higher Wednesday following a firm close on Wall Street and two days of heavy falls that has seen more than 1.5% wiped off the FTSE 100 so far this week.
Investors remain concerned that stocks, particularly technology stocks, may be overvalued, against a backdrop of rising geopolitical tension in Ukraine.
Rhetoric over Ukraine continues to step up, with the US warning Russia late Tuesday that an intervention in eastern Ukraine would be an "historic mistake". The warning comes after Ukrainian forces evicted pro-Russian demonstrators from a government building in the city of Kharkiv.
US stocks ended marginally higher Tuesday, stemming the heavy falls of previous sessions, most notably in the Nasdaq Composite index, that were caused by investor concern that so-called momentum stocks, such as many technology stocks that trade on high earnings ratios, may be overvalued.
"The overall narrative of this week continues to be one of concern about valuations that are starting to look a little pricey," says CMC Markets chief market analyst Michael Hewson.
A mixed night in Asia saw the Nikkei continue to fall after Japan introduced its increased sales tax earlier in the week and also stood pat on monetary policy. The index lost more than 2.0% Wednesday. However, the Hang Seng is up 0.7%, and the Shanghai Composite is up 0.1%.
UK stocks look set to follow slightly higher Wednesday, with spread betters indicating the FTSE 100 will open 0.2% higher at 6,600 points.
The pound has held onto its strength overnight after being boosted to a one-month high of USD1.6754 on Tuesday on the back of strong manufacturing data and an upgrade to growth forecasts from the International Monetary Fund. The global lender increased its 2014 projection for the UK to 2.9% from 2.5% predicted previously.
The pound remains at similar levels ahead of the equity market open despite a the British Retail Consortium shop price index posting its sharpest decline in seven years overnight. Shop prices fell 1.7% year-on-year on March, faster than the 1.5% fall expected by economists and following a 1.4% fall in February.
UK trade balance numbers are due at 0930 GMT, where a big deficit of GBP9.2 billion is expected. In a relatively light day in the data calendar, if this deficit is even worse than expected it may dent sterling slightly, says Rabobank analyst Michael Every.
Trade data already released from German showed exports from Europe's largest economy dropped by 1.3% in February, reversing a rise of 2.2% in January and faster than the expected fall of 0.5%. The euro trades fractionally lower against the dollar ahead of the equity market open at USD1.3790.
The light day in the economic calendar leaves the minutes from the March 18-19 Federal Reserve policy meeting, released at 1800 GMT, in focus. The minutes will be of particular interest as the meeting was new Fed Chair Janet Yellen's first at the helm.
Yellen's more-hawkish-than-expected comments at the press conference that followed the meeting sparked speculation of an US interest rate rise as soon as the second quarter of next year. Since then Yellen has struck a more dovish tone, which leaves the publication of the full meeting minutes of great market interest.
Evraz have released full-year results Wednesday, with the company saying it is comfortable with its expectations for 2014, having started "mildly positively" in most steel markets this year. The Russia-focused steel maker also has assets in Ukraine and has an eye on the rising tensions there, saying that "the geopolitical developments around Ukraine could have an impact on our operations".
Full-year results are also out from restaurant chain Prezzo, along with trading statements from Bwin.Party, UK Mail Group and Volex.
By Jon Darby; [email protected]; @jondarby100
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