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LONDON (Alliance News) - UK stocks are set to start the week with a firm open Monday, reversing some of the losses posted on Friday.
However, with the vast majority of global top-tier macroeconomic data scheduled to be released in the second-half of the week, investors may chose to remain on the sidelines.
UK, European and US equities closed firmly lower on Friday as investors looked to shed traditionally risky assets, such as equities, ahead of the weekend, amid reports that European Union diplomats had come to a preliminary agreement on increased sanctions against Russia for its role in the Ukraine crisis and the downing of a Malaysian Airlines passenger jet.
"Friday?s declines largely stemmed from reports that EU leaders were finally starting to realise that their cautious response to Russia?s policy towards Ukraine could well store more problems up for the future, unless they started to deliver some real pain to Russia?s economy," says Michael Hewson, chief market analyst at CMC Markets.
This negative sentiment did not roll into the Asian session on Monday, however. Ahead of the UK equity market open, the Hang Seng is up 1.1%, the Shanghai Composite index is up 2.3%, while the Nikkei in Tokyo has closed up 0.5%.
In London, the FTSE 100 is expected to open modestly higher Monday, having closed at 6,791.55 on Friday. IG indicates the blue-chip index to open up at approximately 6,796, while CMC Markets and Alpari expect it to open even higher at 6,800 and 6,804, respectively.
"A week that is widely focused on the US is expected to start in much the same way," says Craig Erlam, a market analyst at Alpari. "In fact, things don?t really pick up in Europe until Wednesday and even then the releases aren?t exactly game changers," he says.
In the only scheduled European data release still to come Monday, Italian business confidence data for July is due at 0900 BST. Economists' expectations are for the reading to come in at 100.9, fractionally higher than the 100.0 posted in June, according to FXStreet.com.
Earlier, a survey from mortgage lender Halifax showed that British homebuyers' confidence deteriorated in the second quarter. The balance of people who believe now is a good time to buy fell to 5 percentage points from 34 in the previous quarter, marking the the largest fall since April 2011. Meanwhile, about 57% felt it would be a good time to sell and 32% think it is a bad time, giving a balance of 25 percentage points.
However, focus will be on a raft of releases from the world's largest economy later. The preliminary release of the US Markit services and composite purchasing managers' index readings are due at 1445 BST, shortly before US home sales data at 1500 BST and the Federal Reserve bank of Dallas' manufacturing business index at 1530 BST.
Nevertheless, "with so much to come later this week, we could see a little bit of risk aversion and fence sitting from traders in the early part of the week," says Erlam, referring to top-tier data releases such as the preliminary reading of US GDP and the Federal Reserve's interest rate decision on Wednesday, eurozone consumer price inflation data on Thursday, and US employment figures on Friday, among others.
"Although, with so many companies from the US, UK and eurozone still releasing earnings, we may not see the kind of paralysis in the markets which we could at other times expect," he adds.
In the UK corporate calendar, FTSE 100-listed Reckitt Benckiser Group and FTSE 250-listed Hiscox have released half-year results Monday, while blue-chips National Grid and Aberdeen Asset Management have been joined by mid-caps Cranswick and Great Portland Estates in providing trading updates.
Meanwhile, GlaxoSmithKline's Chief Executive Andrew Witty has opened up the possibility of the company being broken up, The Financial Times reported Sunday. Witty said Glaxo had the option to spin-off its consumer healthcare business if a time came when it offered more value as a standalone company. However, he made it clear there were no plans to do this in the near term.
The possibility follows FTSE 100-listed Glaxo lowering its earnings guidance with its interim results last Wednesday, and new allegations of malpractice by Glaxo employees in Syria.
By James Kemp; jameskemp@alliancenews.com; @jamespkemp
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