23rd Jan 2014 07:29
LONDON (Alliance News) - UK equities are set to follow Asian stocks lower Thursday as investors digest disappointing Chinese manufacturing PMI data, ahead of a raft of European PMI's.
An important indicator of China's factory sector performance dropped sharply in January, indicating a contraction in business activity, a survey by Markit Economics and HSBC revealed overnight.
The headline purchasing managers' index fell to a six-month low of 49.6, down from 50.5 in December, and well below expectations of a marginal rise to 50.6.
"The marginal contraction of January's headline HSBC Flash China Manufacturing PMI was mainly dragged by cooling domestic demand conditions," HSBC Chief Economist Hongbin Qu said. "This implies softening growth momentum for manufacturing sectors, which has already weighed on employment growth," he added.
The data raises the question as to whether the Chinese authorities will deem it necessary to ease back from their recent measures on reforms, says Michael Hewson, chief market analyst at CMC Markets.
"Equities across the board tanked after the China data," said CitiFX Wire's Nishtha Asthana.
Ahead of the London equity market open, the Nikkei is down 0.8%, the Shanghai Composite index is down 0.5%, and the Hang Seng is down 1.4%.
In the UK, both IG and CMC Markets indicate the FTSE 100 to open slightly lower at approximately 6,818 points.
With no major UK macro-economic releases Thursday, "the preliminary estimates of January?s European PMIs will likely prove to be today?s highlight," says David Page, Senior UK Macroeconomist at Lloyds Bank.
French services and manufacturing PMI data are released at 0758 GMT. The numbers are expected to improve slightly from December, but to continue to display a contraction in economic activity. The manufacturing number is expected to come in at 47.5, with services PMI coming in at 48.1.
Germany's readings, scheduled for 0828 GMT, are expected to improve, with the manufacturing number expected to come in at 54.6, from 54.3 in December, and services PMI forecast to come in at 54.0, from 53.5 in the previous month.
European manufacturing PMI in January is expected to rise to 53.0, from December's 52.7, while the services reading is called to increase to 51.4, from 51.0.
However, "with many still concerned about the prospect of further disinflation in the area, markets would be particularly sensitive to a weaker than expected out-turn," Page warns.
Also in the data calendar, US Markit manufacturing PMI data is released at 1358 GMT. The Chicago Federal Reserve releases its national activity index at 1330 GMT, at the same time as US jobless claims data. Consumer confidence for the eurozone is released at 1500 GMT.
In corporate news, FTSE 100-constituents London Stock Exchange and easyJet have released interim management statements. Meanwhile, Blue-chip Pearson has reported that its 2013 trading and financial performance was weaker than expected, especially in North America, with 2014 trading conditions continuing to be challenging.
In the FTSE 250, Kentz Corporation and Petra Diamonds have released trading updates. St James's Place, currently the index's largest company by market capitalization, has revealed that its net inflow in the fourth quarter increased to GBP1.3 billion from GBP1.09 billion in the same period of 2012. The wealth manager's funds under management rose 6% in the fourth quarter to GBP44.3 billion.
By James Kemp; [email protected]; @jamespkemp
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