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LONDON (Alliance News) - US stocks are expected to open flat to slightly lower Thursday, having closed firmly higher on Wednesday, with few catalysts to drive stocks.
US equities closed higher for the first time in three days Wednesday, as investors shrugged off a disappointing final reading of US first quarter gross domestic product, instead focusing on a better-than-expected Markit PMI reading for June, which raised hopes of a strong bounce back in the second-quarter.
"Services data prompted a couple of banks to revise their second quarter forecasts for GDP up to 4%, but given that at least one of these banks had first quarter GDP tracking at 2.8% earlier this year, one has to question how much more accurate these new assessments will be," says Michael Hewson, chief market analyst at CMC Markets.
In data just released, US initial jobless claims edged down to 312,000 in the week ended June 20, down from the previous week's revised level of 314,000. Economists had been expecting jobless claims to dip to 310,000 from the 312,000 originally reported for the previous week.
Meanwhile, personal income in the US increased in line with economist estimates in May, while personal spending rose less than forecast. The report released by the US Commerce Department said personal income rose by 0.4% in May after climbing by 0.3% in April, matching consensus forecasts. It showed that personal spending edged up by 0.2% in May after coming in unchanged in April. Economists had expected spending to increase by 0.4%.
Ahead of the New York bell, the DJIA and S&P 500 are both called to open fractionally lower, while the NASDAQ Composite is indicated to open flat.
In the UK, stocks continue to trade mixed, with the FTSE 100 underperforming its smaller peers. Ahead of the US equity market open, the FTSE 100 is fractionally lower at 6,733.42, while the FTSE 250 is up 1.3% at 15,648.1, and the AIM All-Share index is up 0.4% at 781.38.
Housebuilding stocks have jumped following the release of the financial stability report from the Bank of England.
The central bank said that it does not believe that household indebtedness poses an imminent threat to the UK's economic stability, but recommended that mortgage lenders should limit the proportion of mortgages at loan-to-income multiples of 4.5 and above to no more than 15% of their new mortgages.
Further, the Financial Policy Committee said mortgage lenders should apply an interest rate stress test that assesses whether borrowers could still afford their mortgages if the bank rate were to be 3 percentage points higher than the prevailing rate during the first five years of the loan.
However, BoE said that the measures are not expected to have a "material impact" on mortgage lending and housing transactions in the short term.
"The Bank of England is gently stepping on the brakes to prevent the housing market from going into dangerous overdrive," said Christian Schulz, senior economist at Berenberg. "The steps announced by the Financial Policy Committee today... are likely to slow down modestly the housing market, without derailing it," he added.
In the FTSE 100, housebuilders Persimmon and Barratt Developments immediately shot higher on the report. The former currently trades up 5.8%, while the latter is up 5.6%. British builders' merchant and home improvement retailer Travis Perkins also jumped and is currently quoted up 3.4%. In the mid-cap index, Redrow, up 6.9%, Taylor Wimpey, up 6.9%, Countrywide, up 5.4%, Foxtons Group, up 5.4%, Bellway, up 5.3%, Galliford Try, up 5%, Bovis Homes Group, up 4.4%, and Berkeley Group Holdings, up 3.9%, are all big risers following the report.
The pound also jumped in the aftermath of the FPC's report, continuing its strength against other major currencies. Ahead of the US equity market open, sterling trades at USD1.7038, EUR1.2515, CHF1.5225, and JPY173.260.
In Europe, stocks trade mixed. the CAC 40 in Paris is fractionally higher, while the DAX 30 in Frankfurt is marginally lower.
Still to come in the data calendar Thursday, June's reading of the Kansas Fed manufacturing activity is due at 1600 BST, while President of the Federal Reserve Bank of St. Louis gives a speech at 1805 BST.
By James Kemp; jameskemp@alliancenews.com; @jamespkemp
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