News Column

MARKET COMMENT: Strong PMI Readings In Asia Set UK For Higher Open

September 2, 2014



LONDON (Alliance News) - UK stocks are set to open higher Wednesday following a strong session in Asia, where markets have been boosted by promising Chinese and Japanese economic data.


Futures indicate the FTSE 100 will open 11 points higher at 6,839.7. On Tuesday, the index ended at 6,829.17.


US stocks ended a poor trading session lower, with the DJIA down 0.2%, the S&P 500 down 0.1%, but with the NASDAQ Composite ending up 0.1%.


Meanwhile, Asian stocks are performing strongly Wednesday, with the Nikkei ending up 0.4%, while the Hang Seng trades up 1.9% and the SSE Composite trades up 0.9%.


Trading in Asia was boosted by strong services-sector purchasing managers' index data from the region. Chinese HSBC services PMI for August came in at 54.1, ahead of July's figure of 50.0, while Japanese services PMI for August came in at 50.8, just outstripping July's figure of 50.4.


"The most notable of these was probably the Chinese HSBC services PMI, which rose to a 17-month high of 54.1 in August," says Alpari analyst Craig Erlam. "Given that the sector narrowly avoided contraction the month before, it's no surprise that this provided such a boost. Especially when it comes from a sector that is going to be of extreme importance for the Chinese economy in the years to come as it transitions from an export led economy to a consumer driven one."


After a strong start to Tuesday's trading, UK shares dropped to end only slightly higher as investors became reluctant to over-acquire ahead of further economic data from the US and UK this week and Thursday's European Central Bank and Bank of England meetings.


Wednesday's economic data will be dominated by August services PMI figures for a host of European countries and the UK, the latter being released at 0930 BST.


"This caution over better economic data and the end of [US] stimulus next month, is probably starting to concentrate minds as the prospect of higher rates gets ever closer. It is certainly getting reflected in the performance of the US dollar and the rise in US bond yields, and it is probably this new dynamic that is starting to come into view, with every significant improvement in the economy," says CMC Markets chief market analyst Michael Hewson, referring to the expected end to the US Federal Reserve's quantitative easing programme in October.


FTSE 100-listed stockbroker Hargreaves Lansdown, in its full-year results, reported a rise in pretax profit to GBP209.8 million from GBP195.2 million last year. The company also posted a net revenue rise of 8% to GBP208 million.


Equipment rental company Ashtead Group reported its first-quarter results Wednesday morning. The company said first-quarter year-on-year profit rose to GBP117.5 million from GBP99.5 million. The company's revenue also rose in the period to GBP457.9 million from GBP410.5 million last year.


Ahead on Wednesday, aside from the services PMI figures, the US Beige Book report on the current US economic situation will be released at 1900 BST, while at the close of London trade, FTSE will announce the results of its quarterly index review.


By Neil Thakrar; neilthakrar@alliancenews.com




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Source: Alliance News


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