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LONDON (Alliance News) - UK equities are set to follow Asian and US stocks higher Thursday, buoyed by the publication of incoming Federal Open Market Committee Chairwoman Janet Yellen's remarks for Thursday's confirmation hearing.
"Perhaps not too surprisingly, Yellen appears to have maintained her dovish tilt," says CitiFX's Lee Oliver. Yellen is expected to tell Congress she supports the US Fed's on-going bond-buying programme in her confirmation speech at 1500 GMT.
"We have made good progress, but we have farther to go to regain the ground lost in the crisis and the recession," said Yellen. While gains in manufacturing and housing have helped drive modest economic growth this year, Yellen warned that unemployment remains too high for the Fed to consider significantly scaling back its USD85 billion-a-month in asset purchases.
"Her comments that ?unemployment ? is still too high, reflecting a labour market and economy performing far short of their potential? would appear to suggest that the Fed remains some way from looking at a December taper," says Michael Hewson, chief market analyst at CMC Markets.
US stocks jumped on the news Wednesday. The DJIA closed up 0.5%, the S&P 500 closed up 0.8%, while the Nasdaq Composite index jumped 1.2%. Similar sentiment was shared in Asia, where the Hang Seng trades 0.8% higher ahead of the London open.
The start of so-called tapering is deemed bad for equities because the flow of cheap money has been lifting the economy and companies.
However, "the positive European tone is likely to be tested early on with the publication of preliminary third quarter GDP numbers for France, Germany, Italy and the wider euro area," says CMC's Hewson.
Preliminary French GDP results released by the statistical office Insee early Thursday has revealed a surprise contraction in the third quarter. The French economy shrank 0.1% from a quarter ago. Economists were expecting gross domestic product to remain flat, following the second quarter's 0.5% rebound.
The German economy grew 0.3% quarter-on-quarter in the third quarter, matching economists' expectation, official data has revealed. However, economic growth decelerated from the 0.7% expansion seen in the second quarter, Destatis said.
Preliminary Italian GDP data is released at 0900 GMT, before the EU equivalent is reported at 1000 GMT. Italy is likely to remain in the negative zone in the third quarter, with GDP forecast to drop 0.1%. The currency bloc is expected to grow marginally by 0.2% sequentially in the third quarter after rising 0.3% a quarter ago.
Both CMC Markets and IG indicate the FTSE to open higher Thursday at approximately 6,680 points.
Still to come in the data calendar Thursday, UK retail sales are scheduled for 0930 GMT. In the US, initial and continuing jobless claims data is expected at 1330 GMT.
In the corporate calendar, blue-chips Centrica and Rexam have been joined by FTSE 250-listed WH Smith, Taylor Wimpey, Ted Baker and Serco Group, amongst others, in releasing interim management statements, while Prudential's is expected at 0815 GMT. Burberry has released interim results, while Antofagasta has released third quarter results.
By James Kemp; jameskemp@alliancenews.com; @jamespkemp
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