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LONDON (Alliance News) - Indices are set to open lower Monday at the start of potentially the most important week of the year for the UK stock market, because of the Scottish independence referendum on Thursday, after Chinese data on the weekend came in lower than expected.
Futures indicate that the FTSE 100 will open 25 points lower at 6,781.9. The index closed at 6,806.96 on Friday.
On Friday, US markets finished a poor trading session with the DJIA down 0.4%, the S&P 500 0.6% lower, and the Nasdaq Composite ending 0.5% down.
Poor data from China on Saturday is likely to depress share prices in the UK Monday morning. Both industrial production and retail sales increased at slower than expected rates in August, data from the National Bureau of Statistics showed. The data has served to accentuate growth fears and expectations of additional government stimulus as the world's second largest economy struggles to achieve the 7.5% growth target set for 2014.
Chinese industrial production rose 6.9% year-over-year in August, following the 9% rise in July, with growth slowing for the second straight month and hitting its slowest pace in more than five years. This was slower than the 8.8% growth estimated by economists.
A separate report showed that Chinese retail sales expanded 11.9% year-over-year in August, which was slower than the 12.2% increase in July. This was slower than the 12.1% increase expected by economists. In the January to August period, retail sales grew 12.1%.
"With the new switch in emphasis towards a consumer-based economy, the retail sales figure is absolutely key to determine that there is enough domestic consumption to drive demand. With retail sales at the lowest level since April, things are not exactly going to plan in China and that is why we are seeing markets open in such a negative fashion today," says Joshua Mahony, a research analyst at Alpari.
Markets in China have had a mixed reaction to the Chinese economic data with the SSE in Shanghai currently trading up 0.2%, while the Hang Seng in Hong Kong is trading 0.6% lower. Markets in Japan are closed for the Respect-for-the-Aged Day holiday.
Opinion polls on Scottish independence have showed that the vote is too close to call. On Friday, an ICM poll for the Guardian put support for independence at 49%, and support for the union at 51%, excluding those who were undecided ahead of the vote on September 18. Hours earlier a poll by YouGov for the Times and the Sun newspapers found 48% of Scots were set to vote for independence while 52% said they would vote against.
The narrowing of opinion polls appear to have shaken British political leaders in Westminster, with party leaders including Prime Minister David Cameron making a last-minute trip to Scotland to campaign for the union. In addition, the Queen broke her silence on the issue, with reports in the Sunday newspapers stating that she urged voters to think ?very carefully about the future?.
"The stance of the papers and the comments from the Monarch should strengthen the ?No? campaign and as such could ease the downward pressure on the British pound," says Jasper Lawler, market analyst at CMC Markets.
Phones 4U, the British mobile phone retailer founded by entrepreneur John Caudwell that is currently owned by London buyout house BC Partners and employs 5,596 people, has gone into administration. The company said on Sunday that it had been forced to seek protection from its creditors after two of the UK?s largest mobile phone operators, EE and Vodafone Group PLC, decided to withdraw their products from its stores next year.
On a week full of important economic events, headlined by the Scottish independence referendum on Thursday, Monday is a relatively quiet day with the only significant data coming from US capacity utilization and industrial production both at 1415 BST.
The US Federal Reserve will meet Wednesday for its monthly interest rate decision, after the Bank of England releases the minutes from its own meeting on the same day.
By Neil Thakrar; neilthakrar@alliancenews.com
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