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LONDON (Alliance News) - UK stocks are expected to open slightly higher Thursday, following a late rally on Wall Street Wednesday and a strong Asian session, and ahead of interest rate decisions from the Bank of England and European Central Bank.
"A late recovery on Wall Street helped Asian markets overnight following upbeat views from (US Federal Reserve Chair) Janet Yellen during her testimony to Congress," said Lee Mumford, a financial sales trader at Spreadex.
Speaking at her semi-annual testimony before the Joint Economic Committee on Wednesday, Yellen said that slack in the labour market and low inflation will keep interest rates near zero, even as the broader economy gradually improves.
Despite noting that the labour market was "far from satisfactory", Yellen said that "with the harsh winter behind us, many recent indicators suggest that a rebound in spending and production is already under way, putting the overall economy on track for solid growth in the current quarter."
Yellen added that she expects growth will expand at a "somewhat faster pace" this year than the 1.9% growth rate seen in 2013.
A more conciliatory tone from Russian President Vladimir Putin on Wednesday also is likely to boost sentiment Thursday. Putin said that a referendum on independence for eastern Ukrainian independence needs to be delayed and peace restored in the region.
However, "with no evidence that Mr Putin has, or is in the process of, withdrawing his troops from Ukraine?s eastern border, this brief uplift in markets could prove to be very transitory, and the end result could be that Putin?s strategy in Ukraine could well end up blowing up in his face, as the country degenerates into anarchy," says Michael Hewson, chief market analyst at CMC Markets.
Chinese trade data released overnight were positive. The country saw a merchandise trade surplus of USD18.45 billion in April, the Customs Office said. That topped forecasts for a surplus of USD13.90 billion, following the USD7.71 billion surplus in March. Exports were up 0.9% on year, while imports added 0.8% annually.
Ahead of the UK equity market open, Asian markets are higher. The Hang Seng is up 0.4%, the Shanghai Composite index is up 0.6%, and the Nikkei is up 0.9%.
The FTSE is called to open marginally higher Thursday. CMC Markets indicates that the blue-chip index will open 8 points higher at 6,804, having closed at 6,796.44. IG expects it to open up at a slightly more modest 6,801.
In data just released, German industrial production decreased unexpectedly in March. Industrial production fell 0.5% in March from February, to post the first decrease in five months. Production advanced 0.6% in February and 0.4% in January, and economists expected March's figure to come in at an increase of 0.2%.
On a yearly basis, industrial production grew 3% in March, but slower than the 4.4% rise forecast by economists.
The euro edged lower against the dollar in the immediate aftermath of the release, before quickly paring some if its losses. Ahead of the UK equity market open, the single currency trades at USD1.3913, while the pound trades at EUR1.2185.
However, "today will be dominated by the ECB and BoE monetary policy decisions," says Jonathan Thomas, senior economist at Lloyds Bank.
Despite lingering fears about the risk of deflation in the eurozone, the consensus view is that the ECB will leave its interest rate unchanged at a record low of 0.25%. However, "President (Mario) Draghi?s press conference will be closely scrutinised for signs of possible action over the coming months," says Thomas.
The BoE also is expected to stand pat, keeping its interest rate at a record low 0.5%. It is also expected to maintain its stock of GBP375 billion purchased assets.
The Bank of England is due to release its decisions at 1100 GMT, with the European Central Bank's coming at 1145 GMT. Draghi's monetary policy statement and press conference are scheduled for 1230 GMT.
Also ahead in the data calendar, weekly US jobless claims data are published at 1230 GMT.
There are a host of speeches due from US fiscal policy makers. President of the Federal Reserve Bank of Chicago Charles Evans speaks at 1125 GMT, ahead of Daniel Tarullo, member of the Board of Governors of the Federal Reserve, at 1130 GMT. Yellen gives another speech at 1330 GMT, having testified in front of the Joint Economic Committee of Congress on Wednesday, with President of the Federal Reserve Bank of St. Louis James Bullard speaking at 1800 GMT.
In corporate news, FTSE 100-listed Standard Chartered, RSA Insurance Group, Barratt Developments, IMI, and WM Morrison Supermarkets all have released trading updates ahead of the UK equity market open Thursday, as have FTSE 250-constituents Perform Group, Supergroup, Beazley, and Intu Properties.
Blue-chips BT Group and Sage Group have released full-year results, with Randgold Resources providing first-quarter results. Barclays has published its keenly-awaited group strategy update.
By James Kemp; jameskemp@alliancenews.com; @jamespkemp
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