News Column

MARKET COMMENT: UK Stocks To Add To Gains With Inflation Data In Focus

August 18, 2014

Jon Darby

LONDON (Alliance News) - UK stocks are set to open a little firmer Tuesday, continuing higher from the strong gains seen on Monday, as geopolitical tensions continue to ease and with the latest UK inflation data in focus for the session ahead.

Futures indicate that the FTSE 100 will open 20 points higher at 6,762.00.

UK stocks made significant gains on Monday, with major European markets performing even better, as investors started the week more relaxed about the situation in Ukraine after concerns at the end of last week failed to materialise into an escalation of tensions over the weekend.

US stocks also went on to record strong gains Monday, with the DJIA closing up 1.1%, the S&P 500 gaining 0.9%, and the Nasdaq Composite adding 1.0% to close at its highest level since the dotcom bubble burst fourteen years ago.

A slightly more mixed Asian session Tuesday has seen the Nikkei gain 0.9%, while the Hang Seng continues broadly flat, and the Shanghai Composite continues down 0.3%.

The price of oil also continued lower overnight as investors became increasingly relaxed about the situation in both Ukraine and the Middle East. Brent oil slipped to USD101.09 in overnight trade, its cheapest in more than a year.

US President Barack Obama declared Monday that the air strikes in Iraq are working, as Kurdish forces re-took control from Islamic State militants of two villages located near the country's strategic Mosul Dam.

"Negotiations between foreign ministers from Ukraine and Russia in Berlin appear to have made some progress in bringing an end to the crisis, while a 24-hour extension to the truce in Gaza and Israel and the regaining of the Mosul Dam by the Iraqi and Kurdish troops are all helping lift investor sentiment this week," says Alpari market analyst Craig Erlam.

The UK domestic economy will be in focus later in the morning when the Office for National Statistics releases the latest UK inflation data at 0930 BST. Economists expect consumer prices to have risen by 1.8% year-on-year on July, which would represent a slight easing from the 1.9% recorded in June. On a monthly basis, prices are expected to have fallen by 0.2%.

If the expectations are correct, the data will mark the seventh month in a row that inflation has come in below the Bank of England's 2.0% target.

"Now that the CPI numbers are consistently coming in below the bank's inflation target, the pressure for any tightening of policy will decrease the weaker the numbers become," says CMC Markets market analyst Michael Hewson. "And with oil prices starting to fall inflation could fall further."

Following an impressive set of interim results from Bovis Homes on Monday, fellow housebuilder Persimmon has released its own numbers Tuesday, showing a 28% jump in legal completions and a 4.3% rise in the average selling price of its houses over the first half of the year.

Interim results have also been released from Cairn Energy, John Wood Group, TT Electronics and John Menzies, while Imperial Tobacco Group has put out an interim management statement.

Anglo-Australian miner BHP Billiton also is slated to release its preliminary full-year results Tuesday.

Later in the session Tuesday, US July inflation data will be released at 1330 BST, along with the latest US building permits and housing starts data.

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Source: Alliance News

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