LONDON MARKET COMMENT: Stocks Seen Lower After Doveish Fed Minutes

LONDON (Alliance News) - UK shares are set to open lower Thursday, with investors digesting Wednesday's minutes from the Federal Reserve, in which the central bank downplayed the possibility of a US rate hike in June.

Only a "few" Federal Reserve members anticipate raising interest rates in June, the minutes said. Back in March, "several" members said the Fed was on track to raise rates in June, but policy makers appear more reluctant to tighten given the fragile nature of the US economic recovery.

April's dismal US retail sales report came out days after the meeting and was therefore not factored in. US retail sales were flat despite warm weather and pent up demand following a brutal winter, prompting a number of analyst to downwardly revise second quarter GDP estimates.

Wall Street ended mixed Wednesday, after the minutes were issued, with the DJIA down 0.2% and the Nasdaq Composite flat. Meanwhile, the S&P 500 closed down 0.1% at 2,125.85, but having reached a new record intraday high at 2,134.72.

"Last night?s market reaction to the latest Fed minutes can only be described as undecided, with US markets initially rallying strongly with the S&P 500 setting another new record, before closing more or less unchanged, as investors tried to establish whether the minutes could be construed as hawkish or doveish," says Michael Hewson, chief market analyst at CMC Markets.

IG says futures indicate the FTSE 100 to open 5 points lower at 7,002.9. The index closed up 0.2% at 7,007.26 Wednesday.

European investors will focus on PMI readings from the single currency region. France Markit manufacturing PMI is due at 0800 BST, while Germany Markit manufacturing PMI is at 0830 BST. Meanwhile, eurozone Markit manufacturing PMI is due at 0900 BST.

In Asia on Thursday, the Japanese Nikkei 225 trades up 0.1%, and the Hang Seng is down 0.3%. Meanwhile, the Shanghai Composite is trading up 1.1%.

The manufacturing sector in China remained in contraction in May, albeit at a slower pace, the latest survey from HSBC revealed on Thursday with a two-month high PMI score of 49.1. That was shy of expectations for a score of 49.3, although it was up from 48.9 in April. It also remained beneath the boom-or-bust line of 50 that separates expansion from contraction.

Also in the economic calendar Thursday, UK retail sales are set for 0930 BST. In the US, initial jobless claims are due at 1330 BST, while the Philadelphia Fed manufacturing survey is at 1500 BST.

In the corporate calendar, United Utilities Group, National Grid, Royal Mail Group, Caledonia Investments, Qinetiq Group and Lombard Risk Management release full-year results. Meanwhile, Shaftesbury and Daily Mail and General Trust publish half-year results. Bwin.Party Digital Entertainment and Inchcape issue first-quarter interim management statements, while Henry Boot and Rank Group provide trading updates.

By Daniel Ruiz; danielruiz@alliancenews.com

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