7th Jul 2014 06:43
LONDON (Alliance News) - The FTSE 100 is expected to start the week on the back foot Monday, having posted its biggest weekly gain for nine weeks last week, with US markets returning after Friday's Independence Day holiday.
UK stocks closed marginally higher on Friday amid extremely thin trading volumes, but posted significant gains for the week as a whole, boosted by some upbeat data from the UK, some strong purchasing managers' index readings from China, and a much stronger-than-expected jobs report from the US.
However, this positivity is set to wane Monday, and the FTSE 100 is called to open marginally lower, having closed at 6,866.05 on Friday. CMC Markets and IG call the blue-chip index to open down approximately 1 point at around 6,865 points, while Alpari expects it to open down at 6,862.
"With the US returning today the question will be asked yet again as to when this bubble in equity markets is going to end," says James Hughes, chief market analyst at Alpari. "Major indices around the world have been relentlessly pushing higher. However the moves have been on the back of hardly any volume and even less volatility. This is always a worrying sign as it shows the gains are built on very weak foundations, and that any slight pull-back could well be greatly exaggerated," he says.
Comments made by International Monetary Fund chief Christine Lagarde over the weekend may weigh on investor sentiment Monday. Speaking at the Cercle des Economists conference in France on Sunday, Lagarde indicated a slight reduction to the institution's global growth outlook as investment remains subdued.
The IMF global economic outlook to be released later this month will be "slightly different" from previous forecasts, she said. Nonetheless, she added that global activity is expected to gain momentum in the second half of the year and to accelerate further in 2015 after an unexpectedly weak start to 2014.
"After a relatively busy week, dominated by last Thursday?s US employment report and ECB (European Central Bank) meeting, this week looks set to be a quieter one for global asset markets," says Adam Chester, head of UK macroeconomics at Lloyds Bank. "There is little in the way of key economic data, and with last Friday?s Independence Day marking the onset of the US driving season, there is a risk that markets become set into an even deeper summer lull," he adds.
In data just released, German statistical office Destatis has revealed that German industrial production increased 1.3% year-on-year in May, following a 1.8% rise in April. On a month-on-month basis, output unexpectedly fell 1.8%, following a 0.3% decline in April. Economists' expectations had been for a rise of 0.3%.
Still to come, Sentix's eurozone investor confidence index survey results are released at 0930 BST.
In corporate news, brewing giant SABMiller Monday said it could sell all its 39.6% stake in gaming, hotel and entertainment group Tsogo Sun Holdings Ltd, disposing of a business it no longer considers part of its main portfolio and using the funds to invest in its remaining businesses.
In a statement, SABMIller said it will sell up to the whole holding, valued at about ZAR11.7 billion, or about USD1.09 billion, by selling 305 million shares in a secondary placing into the market, and through a deal whereby Tsogo Sun will buy back about 130 million shares for ZAR2.8 billion or about USD260 million.
FTSE 250-listed Taylor Wimpey has released a trading statement ahead of the UK equity market open.
In the forex market, ahead of the UK equity market open, the pound trades at USD1.7145, EUR1.2621, CHF1.5356, and JPY175.049. The euro trades at USD1.3580.
By James Kemp; [email protected]; @jamespkemp
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