21st Mar 2014 07:45
LONDON (Alliance News) - UK stocks are set to open flat to slightly higher Friday, following positive sessions in the US and Asia, as investors turn cautious amid a lack of fresh macro-economic data and the continued posturing and tit-for-tat sanctions by the US, Europe and Russia.
In the latest development in the Ukrainian crisis, just hours after Russia and Western states traded sanctions over Russia's actions in Crimea, Ukraine's interim Prime Minister Arseniy Yatsenyuk is expected to sign parts of a highly symbolic deal on closer political ties with the EU
The signing of the political chapters of the association agreement is a "concrete sign of the EU's solidarity with Ukraine," EU President Herman Van Rompuy said, adding that it would give Ukrainians "a prospect of a European way of life they deserve."
In a further show of support, the EU is paving the way to unilaterally lift import duties on Ukrainian goods, in an attempt to bolster the country's faltering economy. It has also outlined economic aid measures that could total EUR11 billion.
Meanwhile, Standard and Poor's Ratings Services both have downgraded the outlook for Russia's economy to Negative.
Heightened geopolitical risk and the prospect of US and EU economic sanctions following Russia's incorporation of Crimea, which the international community currently considers legally to be a part of Ukraine, could reduce the flow of potential investment, S&P said.
This could trigger rising capital outflows, and further weaken Russia's already deteriorating economic performance, the ratings agency said.
Nevertheless, S&P affirmed its 'BBB/A-2' foreign currency and 'BBB+/A-2' local currency ratings on the economy.
Fitch Ratings lowered its outlook on the Russia economy to 'Negative' from 'Stable', and confirmed the 'BBB' rating.
Looking elsewhere, "even allowing for a potential normalisation (in the Ukraine situation), which seems unlikely, concerns remain about what is going on in China, which is being reflected in the decline in the copper price, as well as the yuan, with both continuing to come under pressure as markets fret about a series of minor loan default," says Michael Hewson, chief market analyst at CMC Markets.
Following a strong positive close on Wall Street Thursday, and a broadly positive Asian session, both IG and CMC Markets call the FTSE 100 to open fractionally higher at approximately 6,545 points, having closed at 6,542.44 on Thursday.
On Wall Street, the DJIA, NASDAQ Composite, and S&P 500 all closed up between 0.3% and 0.7%. Meanwhile, in Asia, although the Nikkei in Tokyo closed down 1.7%, ahead of the UK equity market open, the Hang Seng and Shanghai Composite index are up 1.1% and 2.7%, respectively.
It is a quiet day in the data calendar Friday. Italian industrial sales, industrial orders and wage inflation data are released at the same time as EU current account figures at 0900 GMT. Public sector finance data from the UK are scheduled to be released at 0930 GMT.
There is no fresh US data scheduled to be released Friday, but there are several Federal Reserve speakers.
"They may try to clarify the message on interest rates after the confusion caused by Fed Chair (Janet) Yellen's press conference," says Rhys Herbert, senior international macroeconomist at Lloyds Bank. However, "as they have significantly differing views, any comments may add to the confusion," he warns.
As the only member of the Federal Open Market Committee to dissent from the central bank's move away from the 6.5% unemployment rate target as a prompt to raise interest rates, Minneapolis Fed President Narayana Kocherlakota's speech at 2030 GMT is likely to be in focus.
President of the St. Louis Federal Reserve James Bullard, Dallas Fed President Richard Fisher and FOMC Member Jeremy Stein also are due to give speeches Friday.
In corporate news, FTSE 250-listed Balfour Beatty has announced that its Dubai-based joint venture, Dutco Balfour Beatty, has won a GBP214 million contract in downtown Dubai for the expansion of the world's largest shopping centre, the Dubai Mall.
FTSE 100-constituent BG Group and Maersk Oil UK have announced that changes set out in the UK Budget have allowed them to develop two new high pressure high temperature projects in the North Sea. According to a report from the HM Treasury, the projects will lead to an investment of GBP6 billion across the new fields and both Maersk and BG estimate that the sites will create more than 700 jobs, with 8,000 more jobs being supported along the supply chain.
Meanwhile, The Times newspaper Friday reported that BG Group is set to cut almost 300 jobs in Britain, following the profit warning confirmed in the company's full-year results February 4.
By James Kemp; [email protected]; @jamespkemp
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