7th Feb 2014 07:34
LONDON (Alliance News) - UK stocks are set to open higher Friday, adding to strong gains made on Thursday, ahead of the week's key economic release - US non-farm payrolls.
With Friday's US employment report very much in focus, stocks rallied on Thursday after some strong US initial jobless claims data raised hopes of a strong print this afternoon. European Central Bank President Mario Draghi also assured markets Thursday that he saw no risk of deflation in the region, while keeping interest rates on hold.
Overnight, the HSBC China Services PMI for January slowed to 50.7 in January from 50.9 in December.
Amid recent concern a slowdown in China and other emerging markets, the lowest print for two-and-a-half years has had surprisingly little impact on markets, with Asian stocks pushing higher Friday, although with the Chinese market lagging others. The Shanghai Composite is up 0.4%, and the Hang Seng is up 1.2%, while in Japan the Nikkei is up 2.1%.
"The lack of reaction thus far could well be due to the belief that the recent Lunar New Year holiday break could well be a contributory factor the recent slowdown,", said CMC Markets chief market analyst Michael Hewson.
Spreadbetters indicate the FTSE 100 will follow Asian stocks higher, with the FTSE 100 called to open up 0.4% at 6,580.00.
A relatively quiet corporate calendar Friday has brought updates from support services group Acal PLC, defence group Qinetiq PLC and real estate investment trust Shaftesbury PLC.
The major data focus is the US jobs report, out at 1330 GMT. The expectation is for a 185,000 increase in jobs in January, after the unexpectedly weak 74,000 added in December. However, given Thursday's decent initial jobless claims print and the rally seen in stocks since, there may be some disappointment if the number doesn't come in even stronger. The headline rate of US unemployment of expected to be unchanged at 6.7%.
Continuation of the tapering of the US central bank's asset-buying program has been directly linked to strong domestic US economic data. Analysts suggest that a strong payrolls number may reignite volatility in the emerging market forex market, amid continued concern that emerging markets are not strong enough to support themselves in a tighter monetary environment.
"Even an in-line reading might see EM weakness as profits are taken after the recent rallies", said Rabobank analyst Michael Every.
Ahead of that, UK industrial and manufacturing production numbers are due at 0930 GMT. On a yearly basis, production growth is expected to have slowed to 2.3% in December from 2.8% in November. German industrial production numbers are due at 1100 GMT.
By Jon Darby; [email protected]; @jondarby100
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