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LONDON (Alliance News) - London share prices are set to open lower Wednesday, with the Greek debt negotiations again in focus, while bond market volatility is expected to continue to weigh on equities.
IG says futures indicate the FTSE 100 to open 10 points lower at 6,743.00. The index closed down 0.5% at 6,753.80 Tuesday.
Greece submitted on Tuesday new reform proposals, as Greek Prime Minister Alexis Tsipras is expected to hold key talks Wednesday with German Chancellor Angela Merkel and French President Francois Hollande, on the margins of a summit in Brussels of EU, Latin American and Caribbean leaders.
European officials appeared unconvinced Tuesday by Greece's new set of reform proposals, amid growing fears that the country could fail to win access to bailout funds it needs to avert bankruptcy.
"I hear a lot of optimism from the Greeks, but that is an underestimation of the complexity of what is expected of them," the president of the Eurogroup, Jeroen Dijsselbloem, said in a Dutch television interview. Dijsselbloem also said he is not sure that a decisive meeting will be held Wednesday.
It also is unclear whether European Commission President Jean-Claude Juncker will be willing to take part in the meeting. He had indicated at the weekend that he first wanted to see alternative Greek proposals.
"Bond market volatility is likely to continue to be a thorn in the side of the equity market for the foreseeable future as higher inflation expectations, low interest rates and low liquidity lead to occasional periods of excessive volatility," says Oanda analyst Craig Erlam. "As [European Central Bank President] Mario Draghi warned, it?s just something we must get used to."
Wall Street was flat to lower Tuesday. The DJIA and the S&P 500 both ended flat, while the Nasdaq Composite closed down 0.2%.
Meanwhile in Asia on Wednesday, the Japanese Nikkei 225 closed down 0.3%. The Hang Seng and the Shanghai Composite are trading up 0.4% and 0.6%, respectively.
In the UK, Chancellor George Osborne is expected to set out plans to phase out the GBP3.5 billion bank levy when he delivers his annual Mansion House speech on Wednesday evening, The Times reported.
According to the report, the UK's economic and finance ministry is expected to replace the bank levy with a new corporation tax surcharge. Unlike the bank levy, which is imposed on global balance sheets, the new tax would apply only to banks' assets in the UK.
Bank of England Governor Mark Carney's speech alongside Osborne also will be in focus after Wednesday's close. "We expect the speech to focus primarily on banking regulation issues, rather than monetary policy. He will want to avoid comments that lead to sharp market moves," says Hann-Ju Ho, senior economist at Lloyds Bank.
During early trading, UK investors will keep an eye on UK manufacturing and industrial production data, due at 0930 BST.
"Given that we saw a sharp fall in the equivalent PMI data in this month, there is a concern that this could well equally translate into a weak reading in the Office for National Statistics data as well," says Michael Hewson, chief markets analyst at CMC Markets UK.
"Expectations are certainly geared towards that sort of outcome with falls from the positive March readings of 0.5% and 0.4% to a fairly meagre 0.1% for both measures for the beginning of the second quarter," Hewson writes.
On the corporate front, Deutsche Bank, Barclays Bank and the Royal Bank of Scotland Group were among a handful of European banks downgraded on Tuesday by Standard & Poor's, amid concern that state support in a crisis is now 'uncertain', the FT reported.
Analysts with the rating agency warned that it was unclear what support even systematically important financial institutions in the UK and Germany would receive, following the recent implementation of the European Union's Bank Recovery and Resolution Directive, the newspaper said.
J Sainsbury reported early Wednesday a decline in retail sales in the first quarter of its financial year as it continues to be hit by food-price deflation amid a highly competitive UK grocery market.
J Sainsbury said that total retail sales in the 12 weeks to June 6 were down 0.6% excluding fuel, or 2.3% including fuel on the same period the year before, while like-for-like retail revenue was down 2.1% excluding fuel, or 3.7% including fuel. The big-four UK supermarket said that the pressures of food-price deflation, as well as its own targeted price investment, have continued to hit like-for-like sales.
Also in the economic calendar, the UK NIESR gross domestic product estimate is at 1500 BST, while in the US, EIA Crude Oil stocks are due at 1530 BST.
By Daniel Ruiz; danielruiz@alliancenews.com
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