11th Jul 2014 12:23
LONDON (Alliance News) - US stocks are set to follow their UK and European counterparts higher Friday, having followed them firmly lower on Thursday amid growing concerns about the financial situation in Europe.
Equity markets fell sharply in Europe and the US on Thursday on the back of some disappointing global macroeconomic data releases and after concerns about the financial stability of Portugal's largest listed bank, Banco Espirito Santo, increased fears that the fragile European banking system could again be under threat.
However, markets in Europe have reversed some of these losses and are trading higher Friday, with some analysts saying Thursday's sell-off was overdone. "The naysayers and doom-mongers look to have finally run out of steam this week, but only after they were able to knock over 200 points off the markets first," says Alastair McCaig, a market analyst at IG.
Ahead of the US equity market open, major UK and European stock indices are modestly higher. In the UK, the FTSE 100 is up 0.2% at 6,682.27, and the FTSE 250 is up 0.2% at 15,468.92. The CAC 40 in Paris is up 0.5%, while the DAX 30 in Frankfurt is up 0.1%.
This positive sentiment is set to roll into the US session Friday. Prior to the New York bell, the DJIA and S&P 500 both are expected to open up 0.1%, while the NASDAQ Composite is called to open up 0.3%.
There is a full slate of US Federal Reserve speakers Friday. Philadelphia Federal Reserve Bank President Charles Plosser is scheduled to give a speech at the Rocky Mountain Economic Summit at 1615 BST, while Chicago Fed President Charles Evans and Atlanta Fed President Dennis Lockhart are due to participate in a panel at the summit at 1900 BST.
Meanwhile, the US monthly budget statement is due at 1900 BST.
However, "early trading is likely to be dominated by this morning?s story that US tobacco giants Reynolds American and Lorillard are in the final stages of agreeing a USD56 billion merger," says Michael Hewson, chief market analyst at CMC Markets.
Reynolds American Inc has confirmed that it is in discussions to buy smaller rival Lorillard Inc, with a deal reportedly set to be announced as early as next week.
A deal would combine Reynolds cigarette brands such as Camel, Pall Mall and Kool, with Lorillard's top-selling Newport menthol cigarettes. It also would enable Reynolds to gain a commanding position in the fast-growing market for electronic cigarettes that represents a growing alternative to traditional cigarettes.
FTSE 100-listed British American Tobacco, which owns 42% of Reynolds, is supporting the deal. If the transaction proceeds, BAT said Friday it plans to support the transaction by subscribing for additional shares in Reynolds in order to maintain its existing 42% equity stake in Reynolds.
Reynolds is up 2.8% in pre-market trading, while Lorillard is up 6.2%.
The US reporting season continues Friday, with the release of second-quarter results from US banking giant Wells Fargo & Co. Wells Fargo posted higher net income of USD5.7 billion in the second quarter of 2014, up from the USD5.5 billion posted in the same period of last year. It posted total revenue of USD21.07 billion in the recent quarter, compared with the USD21.38 billion reported last year. Analysts' revenue consensus for the quarter was USD20.82 billion.
"Despite some recent weakness stemming from a general bearish attitude towards financials, the bank has seen an astonishing seventeen straight quarters of rising profits," CMC's Hewson said prior to the results announcement. "This is particularly noteworthy when you compare it to the performance of some of its peers, JP Morgan, Bank of America and Citigroup who have all been stung with huge fines by regulators," he added.
Wells Fargo shares are flat to lower in pre-market trading.
By James Kemp; [email protected]; @jamespkemp
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