9th Sep 2014 06:38
LONDON (Alliance News) - UK stocks are set to open start lower for the second day in a row Tuesday as investors continue to weigh the potential effects of a possible "Yes" vote to Scottish independence from the rest of the UK in the September 18 referendum.
The strength of the UK economy as a whole also will be in focus Tuesday morning, when the latest UK trade and production data is released at 0930 BST, ahead of an appearance by Bank of England Governor Mark Carney at a Trades Union Congress later in the session.
Futures indicate that the FTSE 100 will open 17 points lower at 6,818.
Equities and currency markets in the UK made an unsettled start to the week on Monday following a weekend YouGov poll that put those in favour of an independent Scotland ahead of those in favour of maintaining the union for the first time since the debate began.
The effect on the markets was dramatic, with the pound suffering its worst one-day fall against the dollar in more than a year. Sterling has continued to slide overnight, reaching a near ten-month low of USD1.6062. Meanwhile most of the worst performing stocks in the FTSE 100 were those most exposed to Scotland, including Royal Bank of Scotland, Standard Life, and SSE.
US markets went on to to put in a mixed performance Monday, struggling to push past recent all-time highs. The DJIA dropping 0.2% and the S&P 500 0.3%, while the Nasdaq Composite gained 0.2%.
Asian markets are slightly higher Tuesday. The Shanghai Composite is up 0.1%, while Hong Kong is closed. In Japan, the minutes of the latest central bank meeting showed that its monetary policy makers said the country's economy is likely to continue its moderate recovery. The Japanese Nikkei closed up 0.4%.
Meanwhile, back in the UK, another Scottish poll, released Tuesday morning, has shown a narrowing of opinion. A poll of 990 people by TNS showed a swing to Scotland's pro-independence camp, leaving it tied with the pro-unionists at 41%. The poll showed support for independence among those certain to vote was up by 3 percentage points from 38% last month, while support for the union was down from 46%.
"Any increase in political or economic uncertainty is always likely to make investors nervous, and a Scottish ?Yes? vote would create this in spades, which suggests we will continue to see further market weakness, due to the numerous unknowns, if the polls continue to move in the "Yes" camp's favour," says CMC Markets chief market analyst Michael Hewson.
A new round of sanctions against Russia from the EU may further weigh on sentiment Tuesday and as the week goes on. As it stands, the new sanctions have not been implemented, but rather are waiting in the wings, ready to be used if the current ceasefire in eastern Ukraine fails.
The domestic data focus Tuesday morning is the latest UK industrial and manufacturing production data, due for release at 0930 BST. Economists are expecting a small acceleration in both elements of production. Manufacturing production is expected to have grown by 2.2% year-on-year in July, up from 1.9% in June. Industrial production is expected to be ahead by 1.3% in July, from 1.2% in June.
Later in the morning, the BoE's Carney is speaking at the Trades Union Congress in Liverpool. The central bank chief is expected to use the occasion to address the issue of the lack of real wage growth in the UK economy. That is exactly the issue that is currently holding back the BoE from raising interest rates, so close attention will be paid by investors to Carney's remarks.
In the UK corporate calendar Tuesday, a trading statement has been released by Dixons Carphone - its first since the recent merger. The electronics retailer said its Dixons arm saw a 4% increase in like-for-like sales in the first quarter, while the Carphone Warehouse arm say a 6% drop.
Whitbread also has eleased a quarterly update, and full-year numbers have been published from AIM-listed biotechnology group Abcam.
When attention turns to US markets in the afternoon, Apple will be in focus, as the technology giant is rumoured to be ready to unveil its latest iPhone offering. The usual rumours have been doing the rounds, with one of the hottest topics being whether the new handset will come loaded with a mobile payment system.
A particularly strong reception to new Apple products has the potential to boost its business partners at the same time. The most notable of these is FTSE 100 constituent ARM Holdings, which provides microchips to Apple.
By Jon Darby; [email protected]; @jondarby100
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