LONDON (Alliance News) - UK stocks are set to open cautiously Wednesday, following an afternoon surge on Tuesday and ahead of a busy day for UK economy watchers that includes the latest unemployment numbers and the Treasury's 2014 budget statement.
Stocks closed higher on Wednesday after Russian President Vladimir Putin reassured markets that Russia doesn't want to extend its reach further into Ukraine than Crimea, while signing the accession of Crimea as a member of the Russian Federation.
"While markets may be naïve enough to take this comment at face value it's hardly likely to sit well elsewhere in the region, and his words might carry more weight if there weren?t thousands of troops sitting on Ukraine?s eastern border," said CMC Markets chief market analyst Michael Hewson.
Spread betters are indicating the FTSE 100 to open broadly flat Wednesday at 6,606.00.
The UK economy will be in sharp focus Wednesday as Chancellor George Osborne delivers his 2014 budget to Parliament at 1230 GMT. Osborne is expected to draw attention to the improving economy but reiterate the Treasury's mantra that "the job is not yet done".
While the fiscal deficit should fall faster than the government had forecast due to the snowballing recovery, this mainly reflects a cyclical upturn, rather than a structural improvement in the finances, says Berenberg chief UK economist Rob Wood. "Hence we do not expect Chancellor George Osborne to have any room to ease austerity in the March Budget," Wood says.
Some measures have already been pre-announced, such as the extension of the Help to Buy housing scheme that has been credited with, and criticised for, boosting the housing market and the UK economy.
The all-new Monetary Policy Committee unveiled by Bank of England Governor Mark Carney on Tuesday will continue to have the power to intervene in the government's controversial housing scheme if it believes an asset bubble is forming, where Carney warned that risks are building.
The minutes from the latest MPC meeting will be released at 0930 GMT Wednesday, along with the latest unemployment numbers.
The BoE's move away from its single policy target of at 7.0% unemployment rate to instead targeting spare capacity means that the unemployment numbers may have less market impact than they used to, but will be closely watched all the same. Economists expect a further fall in the number of unemployment claims by 25,000, while the headline unemployment rate is expected to remain stable at 7.2%.
"The latest Bank of England minutes are expected to highlight sharp divisions between policymakers about the amount of spare capacity in the UK economy, with Martin Weale in particular at odds with Mark Carney as to the amount of spare capacity in the economy," says CMC's Hewson.
In further UK monetary news, the Royal Mint has unveiled a new pound coin to combat counterfeiting.
Outside of the UK, eurozone construction output data is due at 1000 GMT and, after the European market close, the US Federal Reserve will announce its latest policy decision.
This is new Fed Chair Janet Yellen's first meeting, meaning the Q&A session that follows the announcement will be an "interesting getting-to-know-you exercise", says Rabobank analyst Michael Every.
The Fed is broadly expected to announce a further USD10 billion taper to its monthly asset purchase programme to USD55 billion. "More attention will be on any changes made to the Fed?s forward guidance with the 6.5% unemployment threshold likely to be breached in the coming months," says Lloyds UK macroeconomist Nikesh Sawjani.
Ahead of the busy day, the pound trades at USD1.6595, while the euro trades at USD1.3925.
The gold price continues to ease in the absence of any further escalation in Ukraine. The precious metal currently trades at USD1,352.70 per ounce.
In the UK corporate calendar Wednesday, Smiths Group has announced half-year figures, while full-year numbers are already out from Cape, Charles Taylor, and Partnership Assurance.
By Jon Darby; jondarby@alliancenews.com; @jondarby100
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