News Column

MARKET COMMENT: UK Stocks Set For Higher Open Following Sell-Off

July 13, 2014

Jon Darby

LONDON (Alliance News) - UK stocks are set to open higher Monday, following the heavy sell-off last week that saw the FTSE 100 fall from a near all-time high to its lowest level in over ten weeks, amid disappointing economic data, warnings over global growth, and the return of debt concerns within the eurozone.

The panic caused by the suspension in trading of shares in Portugal's largest listed bank, Espirito Santo, last week has subsided over the weekend, and despite the start of the week being fairly quiet on the economic front, stocks across Europe look set for a bounce Monday, also following a strong session in Asia.

The Japanese Nikkei has closed 0.9% higher Monday, while the Hang Seng continues up 0.3%, and the Shanghai Composite continues up 0.7%.

The FTSE 100 closed Friday at 6,690.17. Futures trading indicates that the UK's leading index will open 8 to 10 points higher Monday.

As well as the specific concerns in the Portuguese banking sector, last week's equity sell-off was fuelled by general concern over the eurozone economic recovery, given the release of disappointing May industrial production data across Europe, which missed expectations almost everywhere, including in the UK, German and Italy.

The main economic focus for investors Monday morning is therefore the release of eurozone-wide industrial production data at 1000 BST. Economists are expecting production to have fallen by 1.2% month-on-month in May, reversing the 0.8% growth recorded in April. On a yearly basis industrial production is forecasts to be 0.5% ahead, slowing from the 1.4% annual growth in April.

Otherwise the economic calendar is relatively quiet Monday, with the afternoon focus likely to be a speech from European Central Bank President Mario Draghi. Draghi faces questions over his current monetary policy from the European Parliament later in the day, although not until after the UK market close, at 1800 BST.

"Given that the meeting centres around monetary policy, it is likely that we will see significant questioning around both the measures Draghi recently implemented, along with the one he didnít," says Alpari research analyst Joshua Mahony, referring to full quantitative easing.

US corporate earnings will be a major focus of the week, with anticipation running high given that expectations of a strong second-quarter bounce back have been a little dented by last week's market volatility, and numbers from mortgage giant Wells Fargo that were merely in line. The big banking names release numbers this week, beginning with Citigroup on Monday, and followed by Bank of America and JP Morgan later in the week.

"The concern is that lower trading volumes, as well as a fairly muted economic bounce back in the second quarter will have had a significant effect on the companies turnover and trading revenues.

In the UK corporate calendar Monday, Aveva Group has released an interim management statement, while SThree has released interim results.

Shire will also be in focus once again. Following its late surge on Friday to the top of the FTSE 100, as the pharmaceutical company confirmed it was holding talks with potential US suitor AbbVie, the UK company has said prior to the open Monday that is is willing to recommend the latest, increased takeover offer from AbbVie to shareholders.

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Source: Alliance News

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