News Column

MARKET COMMENT: UK Stocks Set To Gain On Stronger Chinese PMI

June 1, 2014

Jon Darby

LONDON (Alliance News) - UK stocks are set to open firmer Monday following a positive Chinese manufacturing PMI report at the weekend and ahead of a raft of economic data that could have an impact on all-important central bank meetings later this week.

Last week, stock indices traded within fairly tight ranges due to some market holidays, a lack of top-tier economic data, and the European Central Bank meeting set for Thursday, which is likely to see a loosening of policy.

Stocks closed mixed around the world on Friday with the US's DJIA and S&P 500 up 0.1% and 0.2%, respectively, the Japanese Nikkei strongly higher, up 0.2%, but the Chinese Shanghai Composite marginally lower.

The FTSE 100 closed lower on Friday at 6,844.51, with the falls led by the miners due to concerns over a slowdown in Chinese manufacturing growth. The mining and industrial metal stocks may be back in focus Monday following the weekend release of the official Chinese manufacturing PMI that showed signs of a stabilising economy.

The index accelerated in May to its highest level this year, data from the National Bureau of Statistics and the China Federation of Logistics and Purchasing showed Sunday. The series improved to 50.8 from 50.4 in April.

With a round of European PMI data in focus, spreadbetters are indicating that the FTSE 100 will open higher Monday. CMC Markets calls the index up 19 points at 6,863 points.

The first trading day of the month brings the revised European Markit manufacturing PMI's for May. The initial readings showed that France slipped back into contraction over the month, and investors will be watching to see if this is confirmed or revised higher at the 0850 BST print. The German print follows at 0855 BST, with the eurozone-wide number at 0900 BST and the UK number released along with the lending data at 0930 BST.

The UK print is expected to moderate slightly to 57.0 in May from April's very strong 57.3, which was a high since last November.

"A recent softening of other business sentiment indices, along with rises in trade-weighted sterling and oil prices, point to some weakening in today’s release," said Lloyds bank senior economist Jonathan Thomas.

UK mortgage approval and consumer credit data are due at the same time as the PMI number. While some commentators are calling for further action from the Bank of England at its meeting this week to calm the UK housing market, others argue that action is unnecessary as mortgage approvals actually have been declining recently anyway. Economists are expecting 64,750 mortgages to have been approved in April, down from 67,135 in March.

German inflation data will be a key event to watch. Due at 1300 BST, German CPI will be one of the last key pieces of data for the ECB to take into account ahead of Thursday's all-important policy meeting. Economists expect consumer prices to have risen by 0.2% in May, reversing the 0.2% drop recorded in April.

From the US Monday there's both the Markit and ISM PMI's and construction spending data.

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Source: Alliance News

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