16th Jul 2014 12:11
LONDON (Alliance News) - US stocks are set to follow Europe higher Wednesday following the supportive Chinese data released overnight and as second-quarter US earnings continue to come in ahead of expectations, with the second part of Janet Yellen's testimony to Congress still to come.
The Fed Chair dragged the US markets back from their earlier highs on Tuesday, and gave a particular knock to technology stocks, and therefore to the technology-heavy Nasdaq, when she said that valuations in the sector appeared stretched. Even so, better than expected earnings from some of the big banks Tuesday helped support the DJIA, which managed to close fractionally higher.
Since the US markets closed on Tuesday, the world's biggest micro-chip maker, Intel said its second quarter earnings are 40% ahead of the previous year, a statement which has been providing a boost to the UK-listed chip-makers ARM Holdings and Imagination Technologies Wednesday and looks set to lead to a strong open for the Nasdaq Wednesday.
Meanwhile sentiment across the board has been boosted by some better-than-expected Chinese data released overnight.
Futures trading indicates the DJIA and the S&P 500 both will open about 0.3% higher, while the Nasdaq Composite will open about 0.6% higher.
The Chinese economy grew at an annual rate of 7.5% in the second-quarter, accelerating from 7.4% in the first-quarter and matching the government's stated target, according to official data released overnight.
"Today's Chinese data has been a real boost for investors who have been looking for any reason to buy the dips recently," said Alpari market analyst Craig Erlam. "Given the concerns about Chinese growth earlier this year, it is a big relief to see the country growing at 7.5% in the second quarter, even if this is largely due to the targeted stimulus efforts of the government and central bank. As long as this continues, investors will be happy."
Merger and acquisition activity in the media sector also is providing a boost ahead of the US open following a report that Time Warner rejected a formal takeover offer of USD80 billion from 21st Century Fox. With markets speculating that Fox's owner Rupert Murdoch is unlikely to walk away, Time Warner shares are up by almost 20% in the pre-market.
There's still plenty to come Wednesday, with US PPI inflation data at 1330 BST, followed by industrial production data at 1415 BST. Industrial production growth is expected to have moderated to 0.4% in June from 0.6% in May.
Given the effect Yellen managed to have on equity markets on Tuesday, it would not be surprising to see some caution as the Fed chair steps back into Congress to deliver the second part of her semi-annual testimony, this time to the House Financial Services Committee at 1500 BST.
Ahead of the Wall Street opening bell, UK stocks are holding on to their morning gains, with the FTSE 100 up 1.1% at 6,781.09, the FTSE 250 up 0.9% at 15,583.32, and the AIM All-Share is up 0.3% at 775.81.
By Jon Darby; [email protected]; @jondarby100
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