LONDON (Alliance News) - UK stocks are set to open flat to slightly higher Thursday, following a modestly higher close on Wall Street on Wednesday, as investors continue to digest a much weaker-than-expected US gross domestic product report that was followed by the decision by the Federal Reserve to continue to pare back its quantitative easing programme.
"US markets looked past a shocker of a first quarter GDP number yesterday which showed that the US economy didn't just catch a chill in the first quarter, it actually seized up from the cold," says Michael Hewson, chief market analyst at CMC Markets.
Gross domestic product in the US grew at an annualized rate of 0.1% in the first quarter of 2014, according to a preliminary estimate by the US Commerce Department on Wednesday, down from the 2.6% posted in the previous quarter and short of economists' 1.2% forecast. The slowdown was attributed to the unusually severe winter in the eastern US and to slowdowns in business investment, exports and inventory growth.
"Investors instead chose to focus on more recent positive economic data, and an upbeat Fed statement, which appeared to show a confidence that the US economy would enjoy a strong bounce back in the second quarter," says Hewson.
Just hours after the GDP report, the Federal Open Market Committee said it would keep its benchmark interest rate at a 0.25% and cut its monthly asset purchases by another USD10 billion dollars. The Fed's quantitative easing, which was worth USD85 billion-a-month last year, has now been cut by USD10 billion at four consecutive Fed meetings since December to USD45 billion per month.
In a statement, the US central bank moved to allay fears about the disappointing first quarter GDP report.
"Growth in economic activity has picked up recently, after having slowed sharply during the winter in part because of adverse weather conditions," the Fed said in a statement.
It noted that "there is sufficient underlying strength in the broader economy to support ongoing improvement in labour market conditions."
The S&P 500, NASDAQ Composite, and DJIA all ended the day up 0.3%, with the DJIA ending the day at a record closing high.
In the UK, both IG and CMC Markets call the FTSE 100 to open up at approximately 6,785 points, having closed at 6,780.03 on Wednesday.
In data just released, UK house prices recorded a faster-than-expected double-digit growth in April. House prices increased 10.9% year-on-year in April, faster than the 9.5% rise seen in March, mortgage lender Nationwide reported. The rate was forecast to rise to 9.8%.
Month-on-month, house price growth more than doubled to 1.2% from 0.5%.
Still to come in the data calendar Thursday, April's reading of the UK Markit manufacturing purchasing managers' index is released at 0830 GMT.
"Following the preliminary first quarter UK GDP estimate earlier this week, today's manufacturing PMI will provide some colour to the outlook for the second quarter," says Nikesh Sawjani, UK macroeconomist at Lloyds Bank. Consensus expectations are for the reading to rise to 55.4 in April, up from the 55.3 posted in March, having declined in the previous four readings.
UK consumer credit and mortgage approvals data for March also are released at 0830 GMT.
Later in the day, US Federal Reserve Chair Janet Yellen gives a speech at 1230 GMT. Weekly US jobless claims data are released at the same time, alongside US personal consumption and income information. US Markit manufacturing PMI is released at 1345 GMT, ahead of the ISM manufacturing PMI at 1400 GMT.
In corporate news, blue-chips BG Group, British Sky Broadcasting, and Smith & Nephew have been joined by mid-caps Millennium & Copthorne Hotels and Lancashire Holdings in releasing quarterly results. FTSE 100-listed Lloyds Banking Group, Weir Group, Schroders, and Rolls-Royce Holdings, and FTSE 250-listed RPS Group, Phoenix Group Holdings, Synthomer, Go-Ahead Group, and Howden Joinery Group have released trading updates.
FTSE 250-constituent N Brown Group has published full-year results.
Shire is due to release first-quarter results at 1100 GMT.
By James Kemp; jameskemp@alliancenews.com; @jamespkemp
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