12th May 2014 06:44
LONDON (Alliance News) - Markets are likely to start the week cautiously higher, with little new information scheduled in the economic data calendar Monday and following weekend votes in Ukraine for two eastern cities to leave the country in an unauthorised referendum.
Asian stocks have had a mixed session, with China's Shanghai Composite gaining more than 2.0% while Japan's Nikkei 225 has lost about 0.2% after an economic watchers survey of current conditions there recorded a big drop to 41.6 in April from 57.9 in March.
"Recent guidelines for the healthy development of capital markets issued by the State Council of China over the weekend are most likely the driving force behind today?s gains in China," said IG analyst Stan Shamu. "China is looking to open up capital markets further which would ultimately see an increase in both inward and outward investment."
While the domestic Chinese market received a boost, international investors continue to receive warnings that the Chinese growth is likely to be slower than has been normal in previous years. "This week has begun with China?s president Xi Jinping saying it needs to adapt to a ?new normal? in its pace of economic growth," notes Rabobank analyst Michael Every.
Residents of eastern Ukraine cast an overwhelming vote for independence Sunday in an unauthorized referendum organized by pro-Russian separatists and rejected by the government in Kiev. Pro-Russian separatists said that nearly 90% of voters in the Donetsk region had backed independence.
However, the vote is not recognised by the international community and the next steps will continue to be watched closely, with the fall-out from them, including further sanctions against Russia expected to be announced by the EU this week, likely to hang over investor sentiment.
"It is becoming increasingly difficult to establish a clear directional of travel for equity markets, not only in the US, but in Europe as well, against a back drop of continued unrest in Ukraine, as well as concerns about a slowdown in the Chinese economic growth model," said CMC Markets chief market analyst Michael Hewson.
After closing lower Friday at 6,814.57, spread betters are indicating that the FTSE 100 will open 15 points higher Monday at 6,830.
In the UK corporate calendar Monday, interim results along with a quarterly production report have been released from Lonmin. Interim results are out from Diploma, along with interim management statements from London Mining and Just Retirement Group.
There's very little data to watch for Monday, with the UK and European calendars completely empty, and just a speech from Philadelphia Fed President Charles Plosser at 1600 GMT from the UK.
Data releases ramp up as the week goes on, however, with German CPI on Wednesday, followed by the same numbers from the eurozone on Thursday. These are likely to be of particular interest given the comments from European Central Bank President Mario Draghi last week, when he hinted that the ECB was comfortable with easing policy next month if it was warranted by the latest inflation numbers. The latest German and Eurozone GDP numbers are also due on Thursday.
Wednesday brings the latest UK unemployment data, which is likely to show a continued improvement and therefore add more pressure on Mark Carney to bring forward his schedule for an interest-rate rise.
By Jon Darby; [email protected]; @jondarby100
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