LONDON (Alliance News) - The FTSE 100 is set to open lower Thursday, following disappointing manufacturing data from China, and after the US Federal Reserve indicated it will continue with the course of tapering its stimulus programme Wednesday evening.
The Chinese manufacturing sector contracted for the second straight month in February, with the activity indicator dropping to a seven-month low, as a renewed fall in new orders dragged production lower, suggesting that the economy is losing momentum, a closely-watched survey showed Thursday.
The seasonally adjusted flash Markit/HSBC Purchasing Mangers' Index, or PMI, which gauges manufacturing activity in factories and workshops, dropped to 48.3 in February from 49.5 in January, when the index declined for the fist time in six months. Economists had expected the index to only modestly contract to 49.4.
In Asian markets, although the Chinese Shanghai Composite index remains close to flat, the Hang Seng index is down more than 1% and the Nikkei is down more than 2% following the disappointing data.
UK stocks are expected to follow lower at the market open, with spread betters indicating the FTSE 100 will open down 0.6% at 6,750.00.
Further weighing on stocks, the minutes of the later US Federal Reserve policy meeting were released after the close of European equity markets Wednesday. The FOMC minutes recorded a broad discussion, with an overall message that it will take much more than the recent run of softer-than-expected US macro data to sway the FOMC members away from the current course of reducing its bond buying program, leading markets to expect another USD10 billion reduction in asset purchases at the next meeting in March.
"Both the FOMC and the Bank of England minutes carried the same underlying message: there?s a recovery; unemployment is falling faster than expected; but there?s still slack left in the economy and inflation is low - so don?t expect us to do anything on rates," said Rabobank analyst Michael Every in a morning note to clients.
Following the Chinese data, Thursday brings the latest round of European PMI's. French numbers for February are first out, just before the equity markets open, at 0758 GMT. Economists expect both the manufacturing and services PMI figures to have increased slightly but to both remain in contraction territory, just below 50.0.
The German numbers, out at 0828 GMT, are expected to continue to show strong growth, with the manufacturing and services numbers forecast by FXstreet.com to come in at 56.3 and 53.4 respectively, up from 54.3 and 53.1. The composite PMI for the eurozone as a whole, due at 0858 GMT, is expected to have increased to 53.1 in February, from 52.9 in January.
In the afternoon, US CPI inflation and initial jobless claims data is due at 1330 GMT, followed by the US Markit manufacturing PMI at 1358 GMT, and the Philadelphia Fed manufacturing survey at 1500 GMT.
US social media giant Facebook has been making headlines overnight by announcing the purchase of messaging service WhatsApp. The deal is Facebook's largest to date, costing USD19 billion. WhatsApp is reported to be expanding its user base by more than one million people each day. Facebook shares are more than 2% lower in after-hours trade.
In the UK corporate calendar Thursday, after being cut to Sell by UBS on Tuesday, due to increased political pressure to cap energy company profits, Centrica has announced a fall in its full-year profits, but raised its dividend by 4%. Full-year results have also been released from BAE Systems, Rexam PLC, Essentra PLC, Playtech PLC, and Go-Ahead Group.
By Jon Darby; jondarby@alliancenews.com; @jondarby100
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