13th Feb 2014 07:36
LONDON (Alliance News) - UK stocks are set to open lower Thursday, ahead of a busy day of corporate earnings, as the recent rally loses momentum. The pound has continued higher against the dollar overnight, following Wednesday's upgrade to UK growth forecasts by the Bank of England.
The central bank raised its 2014 growth forecast to 3.4%, from 2.8%. The improving confidence sent the pound to a multi-day high against other currencies, and that strength has continued overnight, with sterling peaking against the dollar at USD1.6623, although struggling to push higher from there.
Governor Mark Carney's press conference that followed the bank's Inflation Report did little to alter the markets expectation for the first interest rate rise in the UK. Following the report "we remain comfortable with our forecast of a first-quarter 2015 hike", says Berenberg chief UK economist Rob Wood.
The pound's strength continues despite the only piece of UK data Thursday slightly missing economists forecasts. The January House Price Balance from the Royal Institute of Chartered Surveyors recorded 53%, slowing from 56% in December. Economists had expected an increase to 57%.
An disappointing drop in Australian employment overnight not only allowed the pound to also record multi-day high against the Australian dollar but also weighed on Asian stock markets, with the Shanghai Composite and the Hang Seng both down about 0.5%.
A poor start is expected to follow in the London market. Spreadbetters are indicating the FTSE 100 will open 0.25% lower at 6,655.00 points. The index ended Wednesday at 6,675.03.
German consumer price inflation has done little to change sentiment, coming in as expected at 1.2% year on year in January, unchanged from December. On a monthly basis, CPI slipped to negative 0.6%, down from a positive 0.4% in December, also in line with expectations.
With a relatively quiet day for data ahead, the key focus will be US retail sales released at 1330 GMT. The expectation is for flat growth month-on-month in January, slipping from 0.2% growth in December.
"Given that consumer credit saw an increase in December we might get a surprise to the upside", says Rabobank analyst Michael Every. "Although at the same time the extreme US weather in the month argue in the opposite direction".
Due to that bad weather in the US, the second part of Janet Yellen's testimony - the part in front of that Senate Banking Committee - which had been scheduled for Thursday has been postponed.
A busy day in the US corporate calendar Thursday has brought full-year results from Lloyds Banking Group, Rolls-Royce, AMEC and Rio-Tinto, as well as interim statements from Imperial Tobacco Group and Tate & Lyle.
Full year results from Shire are scheduled for midday.
By Jon Darby; [email protected]; @jondarby100
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