1st Nov 2013 07:42
LONDON (Alliance News) - UK equities are set to open marginally higher Friday after strong Chinese manufacturing data, released overnight, added to the signs that the world's second largest economy is stabilizing after a slowdown in the first half of this year.
China's manufacturing growth hit an 18-month high in October as firms stepped up production, in a sign that the economy is gradually stabilizing, a survey by the China Federation of Logistics and Purchasing and the National Bureau of Statistics reported. "The PMI continued to increase in October, indicating a stabilization in growth momentum," said Zhange Liqun, an economist with the government think-tank Development Research Center.
The purchasing managers' index, a measure of factory sector performance, rose to 51.4 in October from 51.1 in September. Economists expected a more modest rise to 51.2.
The final HSBC/Markit Purchasing Managers' Index came in at 50.9, up from 50.2 in September, once again ahead of the preliminary flash estimate of 50.7, according to FXstreet.com.
The strong data suggests that "the recent softness in Chinese data may well have bottomed out," says Michael Hewson, chief market analyst at CMC Markets.
Both IG and CMC Markets indicate the FTSE 100 to open fractionally higher Friday at approximately 6,740 points.
"The spectre of Fed tapering has spread gloom across global forex so far today, with risk-sensitive currencies struggling while the old fashioned safe havens, like the Japanese Yen, prosper," says CitiFX Wire's Nishtha Asthana.
The euro remains under pressure as an unexpected slow-down in the eurozone inflation and a record high jobless rate increased the pressure on the European Central Bank to cut rates again.
Ahead of the UK open, the Euro trades at USD1.3555 or GBP0.8454.
In the a relatively light data calendar Friday, UK Markit manufacturing PMI is released at 0928 GMT. In the US, Markit manufacturing PMI is expected at 1358 GMT, ahead of ISM manufacturing PMI data at 1400 GMT.
Equities were put under pressure Thursday after the outside prospect of a Fed taper in December received a boost from a strong Chicago PMI number for October, says Hewson. However, he warns that, "we should discover how much of an outlier the Chicago number was later today with the release of the October manufacturing ISM numbers." The figure is expected to come in at 55.0 from 56.2 in September.
In the corporate calendar, blue-chips Royal Bank of Scotland and Meggitt have been joined by FTSE 250-listed Berendsen, Direct Line Insurance Group, and F&C Asset Management in reporting interim management statements prior to the London open. Smith (DS) has released a trading statement.
By James Kemp; [email protected]; @jamespkemp
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