LONDON MARKET COMMENT: Stocks Seen Lower Ahead Of BoE, Eurogroup

Mon, 11th May 2015 06:01

LONDON (Alliance News) - UK shares are set to open lower Monday, with the Bank Of England's rate decision in focus, while the eurogroup meeting regarding Greece's debt issues gets underway.

"Greece remains a big concern to European investors, with both the countries leaders and its creditors stalling on a deal as neither wants to make the big concessions needed to push a deal through," says Oanda analyst Craig Erlam.

"Today?s eurogroup meeting is unlikely to yield an agreement on the reforms needed to secure the funds so desperately needed by Greece in order to stay afloat. Given the lack of urgency coming from officials, we can only assume that Greece has managed to scrape enough cash together to make tomorrow?s EUR763 million payment to the IMF," Erlam writes.

The BoE rate decision is due at 1200 BST, an announcement rescheduled from late week due to the UK election.

IG says futures indicate the FTSE 100 to open 5 points lower at 7,041.0. The index closed Friday up 2.3% at 7,046.82 after the Conservative Party won an outright majority in the UK General Election, wiping away the uncertainty of a hung Parliament that had unnerved investors for weeks.

Meanwhile, Wall Street ended higher Friday. The DJIA closed up 1.5%, the S&P 500 ended up 1.4% and the Nasdaq Composite finished up 1.2%.

"While investors were digesting events in the UK and US on Friday, the small matter of another disappointing set of Chinese trade numbers, this time for April, almost got lost in the fog of euphoria," says Michael Hewson, senior markets analyst at CMC Markets UK.

China's producer price index plummeted 4.6% year-on-year in April, its 38th straight month of decline, state-run media reported on Saturday. It rose to 1.5% year-on-year in April from 1.4% in March. The value of China's foreign trade dropped more than 10% in April, according to official figures, state media reported.

"This weakness appears to have prompted the Chinese authorities to cut rates over the weekend, by 25 basis points, the third time in six months that rates have come down, with the likelihood of further easing measures in the coming months, unless things start to pick up quickly," writes Hewson.

China's central bank on Sunday cut interest rates for the third time in six months to reverse an economic slowdown. The People's Bank of China said on its website it would lower its benchmark lending rate by 25 basis points to 5.1%. The measure takes effect on Monday. The bank will also cut its one-year benchmark deposit rates by the same amount to 2.25%.

Asian stock markets are higher Monday, with the Japanese Nikkei 225 up 1.2%, the Hang Seng up 0.5%, and the Shanghai Composite up 1.7%.

In the corporate calendar Monday, Finsbury Growth & Income Trust, Diploma, Lonmin, ITE Group, GW Pharmaceuticals and Jelf Group release half-year results. Dignity publishes first-quarter results, while Spirax-Sarco Engineering issues an interim management statement.

By Daniel Ruiz; danielruiz@alliancenews.com