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LONDON (Alliance News) - UK stocks are set to open slightly higher Friday but remain under pressure after oil prices fell to a fresh six and a half year low.
IG says futures indicate the FTSE 100 to open higher at 6,578.1. The index closed flat at 6,568.33 on Thursday getting an early boost after the Chinese central bank said it expects no further depreciation in the yuan, but the gains tailed off in late trade after a rise in the dollar pushed down commodities prices.
West Texas Intermediate fell to a new six and a half year low on Thursday at USD41.65 a barrel, while Brent oil hit a low of USD48.82 a barrel. Ahead of the open Friday WTI is at USD42.01 and Brent oil is at USD49.57.
The sharp plunge came after official data from the Energy Information Administration showed crude stockpiles in the US to have declined last week, but by less than expected. A weekly report from the US Energy Information Administration on Wednesday showed US crude oil inventories declined 1.7 million barrels in the week ended August 7, while analysts expected a decline of 1.9 million barrels.
On Wall Street Thursday, the DJIA closed flat, the S&P 500 ended down 0.1% and the Nasdaq Composite closed down 0.2%.
In Asia Friday, the Japanese Nikkei closed down 0.4%, the Hang Seng trades down 0.1% and the Shanghai Composite is down 0.1% as well.
After a three-day slide that sent shockwaves through global markets, China's yuan rose slightly against the US dollar Friday. China's central bank set its daily reference rate at 6.3975 to the dollar, compared to 6.4010 on Thursday, its third consecutive devaluation. On Tuesday the People's Bank of China cut the exchange rate by 1.9%, followed by a 1.6% drop on Wednesday and a further 1.1% drop on Thursday, prompting share price falls across the globe. Ahead of the London open the dollar trades at CNY6.3898.
On Thursday, the People's Bank of China Assistant Governor Zhang Xiaohui eased market concerns by saying the yuan depreciation is unlikely to continue, given strong economic fundamentals of the country. The market-oriented exchange rate formation mechanism is more conducive to long-term stability, Yi said, adding that the flexible exchange rate will increase the central bank's monetary policy independence.
Eurogroup will hold an extraordinary meeting at 1400 BST Friday to discuss Greece's new bailout. The meeting comes after Greece and its creditors struck a provisional deal on a new bailout worth between EUR82 billion to EUR86 billion for the near-bankrupt country on Tuesday. Meanwhile, the Greek Parliament has commenced its vote on the bail out package early Friday morning.
The Eurogroup meeting also comes after the Financial Times reported Thursday that both the European Commission and the European Central Bank argue in a new analysis that debt relief measures, including extending repayment periods, would allow Athens to achieve debt sustainability, a solution advocated by the International Monetary Fund. They say such moves would avoid the need for a full-scale debt haircut.
Michael Hewson, chief market analyst at CMC Markets, says the calls for debt restructuring for Greece backs Germany, which has been opposed to the idea, into a corner.
"Given Germany is opposed to debt relief the question of how any bailout can be agreed without IMF involvement is a significant concern," Hewson say.
Economic growth in Germany, the eurozone's largest economy, improved in the second quarter on robust exports, data from Destatis showed Friday morning. Gross domestic product rose 0.4% quarter-on-quarter, slightly faster than the 0.3% expansion seen in the first quarter. Nonetheless, it was slightly slower than the 0.5% growth forecast by economists. Year-on-year, GDP growth accelerated to price-adjusted 1.6% from 1.2% in the first quarter.
On the UK corporate front, BP faces the prospect of fresh regulatory fines after a US judge ruled that its energy traders rigged the natural gas market in Texas in the aftermath of a 2008 hurricane, the Financial Times reported late Thursday.
Citing the judge at the Federal Energy Regulatory Commission in the US, the FT said the FTSE 100-listed oil and gas giant's traders based at the company's Southeast Gulf Texas office plotted to lose some money on physical gas positions in order to boost the value of holdings of financial derivatives tracking gas.
Glencore said it has completed the sale of the Tampakan copper project and of its stake in the Falcondo nickel operation and Sipilou nickel project. The assets were inherited when the FTSE 100-listed multi-commodity miner acquired Xstrata in May 2013, and Glencore generated a total of USD290 million in proceeds from the sales.
UK telecoms regulator Ofcom has advised competition watchdogs that most of the concerns raised by BT Group's rivals over its takeover of EE do not merit intervention to curb the combined companies' power, the Telegraph reported.
Ofcom does not have the authority to approve the merger, but its advice to the UK Competition and Markets Authority is a boost to BT.
Still ahead in the economic calendar eurozone inflation and GDP data are at 1000 BST. In the afternoon, there is US producer price index at 1330 BST and capacity utilisation at 1415 BST, alongside US industrial production.
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
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