11th Jul 2014 06:41
LONDON (Alliance News) - UK stocks are expected Friday to take back some, but not all, of the heavy losses posted so-far this week.
London's major equity indices have closed significantly lower every day this week amid a host of disappointing data prints from around the world and the International Monetary Fund's warning that it is likely to downgrade its global growth forecast once again.
This was evident Thursday, with disappointing macroeconomic data releases from China, Italy, France and the UK.
As well as the underwhelming data, growing concerns about the financial situation in Europe also weighed on UK and European equity indices Thursday, after Portugal's largest listed bank, Banco Espirito Santo, suspended its shares due to problems over a bond payment by its parent company. Despite assurances that the bank is protected, the latest news from Portugal has heightened concerns about the strength of bank balance sheets within the eurozone.
"Yesterday's events in Portugal are a wakeup call to complacent investors who believed that Europe was starting to address its peripheral banking problems," says Michael Hewson, chief market analyst at CMC Markets. "While, on its own, events surrounding Espirito Santo could well be contained, the fact that these problems surrounding the solvency of peripheral banks has come at a time when the recovery in Europe shows signs of stalling is particularly concerning," he adds.
Still, following the sharp decline on Thursday and heavy losses seen throughout the week, the FTSE 100 is called to open marginally higher Friday, having closed at 6,672.37 Thursday. Ahead of the UK equity market open, IG calls the blue-chip index to open approximately 8 points higher at around 6,680 points, while CMC Markets expects it to open slightly higher at 6,685.
With the FTSE 100 down 2.8% for the week so far, the blue-chip index still looks set to post significant losses for the week as a whole.
In data released ahead of the open, German Statistical Office Destatis confirmed that consumer price inflation in Germany rose 0.3% month-on-month in June, in line with preliminary estimates released late last month, having fallen 0.1% in May. As expected, on an annual basis, CPI in Europe's largest economy increased 1.0% in June following a 0.9% increase in May.
However, German wholesale price data came in below expectations. Wholesale prices fell 0.1% month-on-month in June, following a decrease of 0.1% in May, coming in below economists' expectation for a 0.2% rise. Annually, wholesale prices fell 0.8% in June, after easing 0.9% a month ago and missing forecasts for a drop of 0.7%
French current account information is due to be released at 0745 BST.
Also of note, the US monthly budget statement is due after the UK equity market close at 1900 BST, while Federal Reserve Bank of Atlanta President Dennis Lockhart gives a speech at 1945 BST.
In the forex market, ahead of the releases, the pound trades at USD1.7127, EUR1.2591, CHF1.5294, and JPY173.430. The euro trades at USD1.3597.
In corporate news, FTSE 100-listed Experian has released a trading statement Friday.
By James Kemp; [email protected]; @jamespkemp
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