News Column

MARKET COMMENT: London Set To Open Higher, Carney Testimony In Focus

June 23, 2014

Jon Darby



LONDON (Alliance News) - UK stocks are set to open fractionally higher Tuesday, with German business confidence in early focus before market attention turns Bank of England Governor Mark Carney who is due to appear in front of the UK Parliament's Treasury Select Committee at 0930 BST.


Worse-than-expected eurozone purchasing managers' index data turned equity sentiment negative on Monday, despite support for the mining sector from similar, but better, data from China. Stock markets across Europe broadly lost ground, with the FTSE 100 closing down 0.4% at 6,800.56.


In the US Monday, both the DJIA and the S&P 500 ended a six-day winning streak to close just fractionally lower, despite US PMI data being much more positive than that of Europe. The Asian session has been more positive but muted, with the Nikkei, Hang Seng, and Shanghei Composite all between 0.1% to 0.4% higher.


Futures trading Tuesday indicated that the UK's leading index will open fractionally higher. CMC Markets and Alpari both indicate that the FTSE 100 will open 5 points higher at 6,805 points.


Monday's disappointing eurozone PMI data, and the negative effect it had on equity markets, puts extra focus on the German IFO business climate survey at 0900 BST. Economists are expecting the reading to moderate slightly to 110.2 in June from the print of 110.4 registered last month.


Carney, together with BoE colleagues Charlie Bean, David Miles, and Ian McCafferty, will then be in front of the Treasury Select Committee to face a grilling over the central bank's latest inflation report. Given recent comments from a number of the central bankers, investors will be listening for any further clues about the timing of a rise in UK interest rates, as well as hints about what to expect in Thursday's Financial Stability Review.


"Today’s European session looks to focus upon the BoE’s UK inflation report hearings which have shown the markets time and time again that they can be the source of significant volatility," says Alpari research analyst Joshua Mahony.


Market speculation over the timing of a UK interest rate rate hike has intensified significantly, sending the pound to a multi-year high against the dollar, after the most recent BoE minutes showed that the rate setters were "surprised" that the market was only pricing in a small probability of in interest rate rise before the end of the year.


With this in mind it is hoped that MP's will ask the question that everyone in the markets wants to know the answer to, says CMC Markets chief market analyst Michael Hewson: "Why the sudden chameleon like change from dove to hawk about the prospect of rate hikes?"


Full-year results have have already been released Tuesday from Imagination Technologies, Carpetright, and Immunodiagnostic Systems Holdings. Petrofac has also released a trading update.


News flow from Iraq seems likely to continue to weigh on equity sentiment and prop up oil prices Tuesday. Following days of fighting with government security forces, Sunni rebels have said Tuesday that they have fully captured the country's main oil refinery in Baiji. The news comes as US Secretary of State John Kerry continues to meet with key figures in the dispute.


Ahead of the UK equity market open, Brent oil trades at USD114.00 per barrel.







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Source: Alliance News


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