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LONDON (Alliance News) - UK stocks are expected to open higher Tuesday, continuing to make small gains in the absence of any top-tier economic data or other overall market drivers to change sentiment so far this week.
That could be set to change with two central bank events ahead. The clear focus Tuesday will be on new Federal Reserve Chair Janet Yellen as she delivers the Federal Reserve's Monetary Policy Report to the US House of Representatives at 1500 GMT. On Wednesday, Bank of England Governor Mark Carney will deliver the UK central bank's Inflation Report.
US stocks closed modestly higher overnight, with the DJIA and the S&P 500 both gaining about 0.1%. Stocks in Asia have been making slightly bigger gains, with the Nikkei up 1.7%, the Hang Seng up 1.8% and the Shanghai Composite up 0.7%.
Spread betters are indicating that the FTSE 100 will open up 0.4% Tuesday at 6,611.00 points.
UK retail sales rose by 3.9% year-on-year in January, according to the British Retail Consortium retail sales monitor released overnight. The measure of sales from major high street chains showed much stronger-than-expected growth. Economists had forecast sales to rise by 0.8%, from 0.4% in December.
"That may be a third-tier data series but it will further increase the pressure on Band of England Governor Carney ahead of the Bank?s Inflation Report later this week," said Rabobank analyst Michael Every.
Carney has been under increasing pressure to provide further guidance to temper the market expectation of an interest rate rise as the UK economy recovers more quickly than expected.
With no other economic releases due from the UK or Europe Tuesday, UK investors will be focused on earnings this morning before Yellen speaks in the afternoon.
In the UK corporate calendar Tuesday, Barclays has released full-year results for which it provided a surprise preview on Monday. Barclays says it is now just fractionally below the 3.0% leverage ratio set by the Prudential Regulation Authority for UK banks, suggesting it will easily meet the June 2014 deadline.
Dunelm Group and McBride PLC have announced interim results, and statements are out from Babcock International, Bellway PLC, and Glencore Xstrata.
The US NFBI business optimism index is released at 1230 GMT. However, this will not take account of the news overnight that President Obama has delayed implementation of Obamacare for small companies until 2016. The move that Rabobank calls "quite a political climb-down for the White House", will likely make small US companies more optimistic in the short term.
The US Redbook of retail sales follows at 1355 GMT, and there is also a speech from Philadelphia Federal Reserve Chief Charles Plosser at 1430 GMT. However, the clear focus of the day remains Yellen's appearance in Congress at 1500 GMT.
The markets want to know two things from Yellen, says Forex.com Research Director Kathleen Brooks: her view on the pace of tapering in the light of two consecutive months of disappointing employment data, and any change to the Fed's forward guidance as the unemployment rate is now just 0.1% away from the 6.5% threshold.
Rabobank's Every points out: "For many of us this will be the first time to observe Mrs Yellen in the media spotlight. Moreover, the new Chair takes the floor of the House against a backdrop of disappointingly weak headline payrolls growth over the past few months".
Currency majors have remained stable overnight. Against the dollar, the pound trades at USD1.6410 and the euro trades at USD1.3660.
Gold has continued to push higher in the run up to Yellen's speech. The precious metal now trades at levels last seen in mid-November, currently at USD1,282.20 per ounce.
By Jon Darby; jondarby@alliancenews.com; @jondarby100
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