News Column

MARKET COMMENT: UK Stocks Set To Follow Wall Street, Asia Higher

May 12, 2014

James Kemp

LONDON (Alliance News) - UK stocks are expected to continue their push higher Tuesday, as investors take their cues from another strong close on Wall Street on Monday and a largely positive Asian session overnight.

Following a firmly positive close in Europe on Monday, US stocks pushed significantly higher.

"Its becoming hard to imagine a scenario that will shake the market out of its current upward momentum after US markets once again closed at record levels yesterday," says Michael Hewson, chief market analyst at CMC Markets.

The DJIA and S&P 500 both ended the day at record highs Monday, with the former closing up 0.7% at 16,695.47, and the latter closing up 1.0% at 1,896.65. The NASDAQ Composite closed up 1.8% at 4,143.859.

This positivity rolled into the Asian session, where, ahead of the UK stock market open Tuesday, the Hang Seng in Hong Kong trades up 0.3%, while the Nikkei in Tokyo has closed up around 2%.

In the UK, the FTSE 100 is called to open higher Tuesday. Both IG and CMC Markets indicate that the blue-chip index will open approximately 20 points higher at 6,871, having closed at 6,851.75 on Monday.

However, the "slow incremental gains which weve seen over the past few days appear to have all the traits of a steady climb up a set of stairs, but the big worry remains that any trip back down is more likely to take the form of a sharp move lower in a broken elevator," warns Hewson.

In data already released Tuesday, China's industrial production growth slowed unexpectedly in April, while retail sales also expanded at a slower pace in April. Industrial production grew 8.7% year-on-year in April, which was slightly slower than both the 8.8% rise seen in March and the 8.9% that economists had forecast.

Chinese retail sales advanced 11.9% in April from a year ago, while the growth was forecast to remain unchanged from March's reading of 12.2%.

Closer to home, UK retail sales rose sharply in April. Retail sales advanced 4.2% on a like-for-like basis in April, having fallen 1.7% last month, and by 2.2% in April 2013. Economists had been expecting a more modest rise of 1.8%.

Growth was positively distorted by the timing of Easter. Looking ahead, "after splashing out at Easter shoppers may be more restrained in the forthcoming months as they keep a keen eye on cash," says David McCorquodale, Head of Retail at KPMG. Nevertheless, "it is clear that the effects of the wider economic recovery are feeding through to the retail sector, as evidenced by the 3.3% rise in non-food sales in the last quarter," McCorquodale adds.

In Germany, wholesale price index data came in ahead of economists' expectations. Wholesale prices were down 1.3% in April from last year, following a 1.7% drop in March, coming in ahead of the 1.5% decline that had been expected. Month-on-month, wholesale prices gained 0.2% after staying flat in March.

Still ahead, Italian consumer price inflation information is due at 0800 GMT. The ZEW surveys for economic sentiment in Germany and the eurozone are both released at 0900 GMT.

In the US, the NFIB business optimism index is released at 1130 GMT, with import and export price index readings at 1230 GMT, at the same time as retail sales data. US business inventories data are released at 1400 GMT.

In corporate news, Royal Bank of Scotland Group's US-based Citizens Financial Group Inc, revealed late on Monday that it plans to raise up to USD100 million in an initial public offering of its common stock in the US. However, it did not reveal the stock exchange to be listed on, the number of shares it planned to sell, or the estimated price range for the offering.

In November 2013, RBS had announced that it would accelerate the divestment of Citizens with a partial IPO and that it planned to fully divest the business by the end of 2016.

Meanwhile, according to a Bloomberg report late on Monday, US pharmaceutical company Pfizer Inc is planning on raising its bid for British rival AstraZeneca for a second time, before it considers whether to make a hostile bid.

According to the report, Pfizer is now exploring a new offer for AstraZeneca that would increase the value modestly above its current bid of GBP50 per share, while increasing the cash portion of the offer. However, the company will probably wait until after the UK government hearings this week to raise its bid.

Blue-chip TUI Travel has released half-year results ahead of the UK equity market open Tuesday. FTSE 250-listed Enterprise Inns has released full-year results, while Interserve and National Express Group have provided trading updates.

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: Alliance News

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