News Column

MARKET COMMENT: UK Stocks Set To Start The Week On Front Foot

June 29, 2014

James Kemp

LONDON (Alliance News) - UK stocks are set to start the week on the front foot Monday, opening marginally higher following modest gains posted on Wall Street on Friday and a broadly positive session in Asia overnight.

US equities benefited from a late rally on Friday, pushing them into positive territory after a shaky start. Uncertainty about whether the markets could build on recent highs led to renewed profit taking in the early going, but sentiment brightened later on, and all the major averages finished in positive territory.

The DJIA closed up 0.03%, while the S&P 500 closed up 0.2%, and the NASDAQ Composite closed up 0.4%.

It has been a broadly positive session in Asia Monday. Ahead of the UK equity market open, the Nikkei in Tokyo has closed up 0.4%, while the Shanghai Composite index trades up 0.6%. The Hang Seng has just dipped fractionally into negative territory.

The UK'sFTSE 100 is indicated to open slightly higher Monday. IG and Alpari both expect the blue-chip index to open approximately 8 points higher at around 6,766.

"While there is a quite a lot of economic data to be released today, the key events happen later in the week," says Rhys Herbert, senior economist at Lloyds Bank.

Already released Monday, preliminary data from Japan has revealed that the nation's industrial production gained a seasonally adjusted 0.5% month-on-month in May, missing forecasts for an increase to 0.9%, following a 2.8% contraction in April. On a yearly basis, industrial production gained 0.8%, missing expectations for a gain of 1.5% and down from 3.8% in the previous month.

In Germany, retail sales fell unexpectedly in May, provisional results from Destatis have revealed. Retail sales were down 0.6% month-on-month in May, slightly slower than the 1.5% drop seen in April, but well short of the 0.7% rise economists had expected. Year-on-year, German retail sales rose 1.9% in May, down from the 3.2% increase seen in April, missing expectations of a 2.1% increase.

Still ahead in the data calendar, the Bank of England releases UK mortgage approvals, consumer credit, secured lending, and money supply data at 0930 BST, ahead of the preliminary readings of eurozone and Italian consumer price inflation at 1000 BST.

UK mortgage approvals are expected to drop to 61,600 in May from 62,918 thousand in April, while net UK consumer credit is estimated to rise to GBP0.70 billion in May from GBP0.67 billion in April. In April, M4 money supply fell 0.2% on month and by 0.6% on year.

Meanwhile, economists expect annual inflation in the eurozone to rise to 0.6% in June from 0.5% in May. "This step away from deflation will help the ECB (European Central Bank) to justify standing pat at this month’s policy meeting as it awaits signs of the impact of the measures announced in June," says Herbert.

In the US, the Chicago purchasing managers' index is released at 1445 BST, with home sales data shortly after at 1500 BST. The Dallas Fed manufacturing index is released at 1530 BST. Federal Reserve Bank of San Francisco John Williams gives a speech at 1810 BST.

In corporate news, US-based drugmaker AbbVie Inc's Chief Executive Richard Gonzalez is set to hold talks with investors of FTSE 100-listed British pharmaceutical company Shire when he flies to London this week, according a Financial Times report late Sunday.

Gonzalez will speak to shareholders in an effort to increase pressure on Shire's board to enter negotiations, after it rejected three indicative offers. AbbVie first approached Shire in early May with a GBP39.50 cash and shares offer, that would have valued Shire at GBP23.3 billion. Its third and latest offer was GBP46.26 a share in cash and shares, it said, valuing Shire's share capital at GBP27.2 billion.

Also in the FTSE 100, according to a report in the Sunday Times, Anglo American has put up some of its platinum mines in South Africa up for sale in an attempt to dispose of underperforming assets as part of a GBP2.35 billion clear-out. Earmarked for disposal are the company’s oldest and deepest shafts in the mining region of Rustenberg, South Africa, some of which have been in operation since the 1950s, in a move that demonstrates the CEO's willingness to break with legacy operations, said the Sunday Times.

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Source: Alliance News