LONDON (Alliance News) - London share prices are set to open lower Thursday, following declines in Wall Street and Asia overnight and as uncertainty about the UK General Election weighs on investor sentiment.
IG says futures indicate the FTSE 100 to open 26 points lower at 6,907.2. The index closed up 0.1% at 6,933.74, buoyed by better-than-expected Purchasing Managers' Index scores from the eurozone and the UK.
"We have now approached the business end of the week in the markets, and I?m expecting investors to start getting a little anxious," says Oanda senior market analyst Craig Erlam.
The final polls ahead of the election continued to show the Conservatives and Labour almost tied, suggesting that neither will win enough seats to form a majority government, and there may then follow days of horse trading as the parties try to form a coalition or a minority government that's supported by other parties in key matters such as the budget.
Analysts are concerned about potential policies put forward by both parties, including a Conservative pledge to hold a referendum on whether the UK stays in the EU, and Labour pledges to cap energy prices and break up energy companies, amongst other policies seen as anti-business.
"This creates a lot of uncertainty that could weigh on the markets today. This is particularly true for the pound, as today?s result will have an impact on growth expectations, interest rate forecasts and whether we?ll get a referendum on EU membership. The FTSE will be less impacted due to the global nature of many of the stocks in the index making it less sensitive to political changes at home," writes Erlam.
The pound rose against the dollar Wednesday, after payroll processor ADP released a report showing that US private sector employment increased by much less than expected in the month of April. The sterling trades at USD1.5224 Thursday morning.
"While the pound has held up fairly well in recent months, it is well above the lows this year on a trade weighted basis, anything other than a fairly speedy and decisive outcome to events today could well see some significant volatility swings in either direction," says Michael Hewson, senior market analyst at CMC Markets UK.
Wall Street ended lower Wednesday. The DJIA and S&P 500 both ended down 0.5%, while the Nasdaq Composite closed down 0.4%.
In Asia on Thursday, the Tokyo market returned to trading after a holiday, and the Nikkei 225 index closed down 1.2%. In Hong Kong, the Hang Seng trades down 0.8%, and the Shanghai Composite is trading down 1.7%.
Investors are also keeping an eye on Greece, which will meet its European creditors in the eurozone ministers' meeting scheduled for Monday.
"Greece may have managed to repay EUR200 million to the IMF yesterday and stay afloat for now, but the country is fast running out of money and there are serious doubts that it will be able to repay another EUR763 million when it comes due on Tuesday, the day after the next eurogroup meeting," says Oanda's Erlam.
"Negotiations are not progressing as hoped despite the daily talks between the different parties. It?s not even clear at this stage whether the IMF and EU are on the same page after it was reported that the IMF wants the EU to accept writedowns on the debt owed by Greece as its debt levels are unsustainable. This could slow negotiations further which really isn?t helping matters," writes Erlam.
In the corporate front, Wm Morrison Supermarkets reported a drop in sales in its first quarter but said the company's financial position remains "strong" as it predicted higher profit in the second half of its financial year than in the first. The grocer said total sales in the 13 weeks to May 3 were down 5.1% on the same period a year earlier, while like-for-like sales were down 6.6%. It said more stores were closed in the period than opened, as part of its restructuring plans, leading to a net reduction in selling space of over 50,000 square feet.
BT Group posted results in line with expectations for its recently ended financial year, and said it expects to achieve "modest" growth in earnings for the current year, despite some additional costs from the launch of its UEFA Champions League and UEFA Europa League content in the year. It reported pretax profit of GBP2.65 billion for the year to the end of March, up from GBP2.31 billion a year before, as a decline in revenue to GBP17.98 billion from GBP18.29 billion was offset by a reduction in operating costs of 7%.
Outside earning reports, four big banks are expected to plead guilty to rigging foreign-currency exchange rates and pay billions in combined penalties as part of settlement agreements expected to be announced as early as next week, the Wall Street Journal reported citing people familiar with the matter.
The report indicated that US prosecutors are preparing to announce separate settlements simultaneously with Citigroup, Barclays, JPMorgan Chase & Co and The Royal Bank of Scotland Group. The banks are expected to plead guilty to criminal antitrust charges for alleged collusion by traders in foreign-currency markets.
Still in the economic calendar Thursday, in the US, initial jobless claims are due at 1330 BST.
By Daniel Ruiz; danielruiz@alliancenews.com
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