30th Jan 2014 07:37
LONDON (Alliance News) - Shares are set to open flat Thursday, amid a busy day of corporate earnings and economic data. London is looking to perform better than US and Asian markets, which fell heavily overnight after the US Federal Reserve made a second taper to the size of its monthly bond buying program.
As widely expected, the US central bank's policy-setting Federal Open Market Committee continued to wind down its monetary stimulus program by cutting monthly fixed-income asset purchases by USD10 billion per month to USD65 billion.
The Fed reiterated its guidance that the pace of future cuts to stimulus is not guaranteed but will be dependent on the US domestic economy. There was no mention of the recent financial turmoil in emerging markets or suggestion that growth concerns outside of the US will be taken into consideration with regard to future cuts.
The decision was unanimous among the FOMC members, which "suggests that the bar is likely to be very high for the Fed to even consider slowing down the program", says CMC Markets chief market analyst Market Hewson.
Although not stopping the Fed from tapering, emerging market growth is likely to remain in focus for investors, with data from China overnight confirming a slowdown of the world's second biggest economy. The final China HSBC PMI fell to a new six-month low of 49.5 in January, from last week's preliminary reading of 49.6.
The combination of slowing Chinese growth and further reduction of stimulus in the US has sent stocks lower overnight, with the DJIA and S&P 500 both closing more than 1% lower in the US, and the Shanghai Composite index down about 0.7% in China.
UK stock indices are expected to fair slightly better ahead, with spreadbetters calling the FTSE 100 to open flat at 6,545.00. The index closed Wednesday at 6,544.28.
Gold has reversed some of the gains made in the run up to the Fed announcement. The precious metal trades at USD1,259.30 per ounce, down from a high of USD1,270.08 per ounce overnight.
Major currency pairs have remained fairly stable while those in some emerging markets continue to struggle. Ahead of the European equity market open, the pound trades at USD1.6540 and the euro at USD1.3638.
A busy day in both the corporate and economic calendar lies ahead. UK consumer credit and mortgage approvals numbers are the main UK release of the morning, out at 0930 GMT.
German unemployment numbers are released at 0855 GMT and are expected to show a drop of 5,000, slowing from the 15,000 seen in December. The headline rate is expected to remain at 6.9%. At 1000 GMT we also get eurozone consumer confidence and economic sentiment surveys.
In the afternoon, the US will be back in focus, with the release of fourth-quarter GDP at 1330 GMT. The expectation is for an annualised reading of 3.2%, down from 4.1% in the third-quarter. Initial jobless claims, released at the same time, are expected to have risen by 320,000 for the week ended January 24.
Half-year results from Diageo already have been released, with the drinks maker reporting net sales up 1.8%. Full-year results from Shell also are out, showing a fall in net profits, while BSkyB has seen an increase in first-half revenues.
Also out this morning, interim management statements from National Grid, Johnson Matthey, United Utilities and 888 Holdings.
By Jon Darby; [email protected]; @jondarby100
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