LONDON MARKET COMMENT: Stocks Seen Up As M&S Profit Misses Estimates

Wed, 20th May 2015 06:35

LONDON (Alliance News) - UK stocks are set to open higher Wednesday as markets turn their focus to the minutes from the Bank of England's last policy meeting before the release of US Federal Reserve meeting minutes as well after the London equity market close.

In its last policy meeting earlier in May, the Bank of England's Monetary Policy Committee maintained its key interest rate at record low level of 0.5% and the size of the quantitative easing at GBP375 billion. However, analysts are expecting few surprises from the minutes, which show the actual vote at the meeting, after last week's inflation report in which Bank of England Governor Mark Carney said he expects interest rates to remain low until next year.

"Following last week's publication of the May Inflation Report, today's release of the minutes of this month's MPC policy meeting is unlikely to shed any additional insight into the collective position," says Jonathan Thomas, senior economist at Lloyds Bank.

However, Thomas says the minutes are often informative about the range of views among MPC members and possible shifts in the centre of gravity.

"There will be particular interest in potential departures from the central forecast that the amount of slack in the economy stands at 0.5% of GDP, the likelihood of a pickup in productivity growth over the forecast horizon, and underlying price pressures from the partial recovery in oil prices and strengthened wage growth," Thomas adds.

IG says futures indicate the FTSE 100 to open 5.4 points higher at 7,000.5, having initially pointed lower. The index closed up 0.4% at 6,995.10 on Tuesday after European Central Bank Executive Board member Benoît C?uré said the central bank will accelerate its quantitative easing plan in the short-term, "moderately" front-loading May and June in order to prevent any summer economic slump.

On Wall Street Tuesday, the DJIA closed up 0.1%, the S&P 500 ended down 0.1% and the Nasdaq Composite ended down 0.2%.

In Asia on Wednesday, the Nikkei 225 in Tokyo closed up 0.9% having hit its highest intraday level since April 2000, after an upbeat preliminary GDP reading.

Japan's gross domestic product climbed 0.6% on quarter in the first quarter of 2015, the Cabinet Office said. The preliminary number beat expectations for an increase of 0.4%, and it was up from the downwardly revised 0.3% rate of growth in the fourth quarter. The previous fourth quarter reading was growth of 0.4%.

The Hang Seng in Hong Kong trades down 0.1% and the Shanghai Composite is up 2.2%.

Marks & Spencer Group reported growth in profit in its recently-ended financial year, although it was lower than the market consensus figures the retailer provided, as UK sales increased but international sales declined. The clothing and food retailer reported a pretax profit for the year ended March 28 of GBP600.0 million, up 3.4% from the GBP580.4 million reported the year before.

According to consensus figures provided by M&S, analysts expected pretax profit for the year ending March 28 to be between GBP625 million and GBP664 million, giving a mid-point of GBP648 million.

Hargreaves Lansdown reported an increase in assets under administration in the opening four months of 2015, bolstered by net inflows of GBP2.75 billion in a period including the crucial end of the tax year in the UK. In a statement, the retail fund supermarket said assets under administration amounted to GBP55.3 billion at the end of April, an increase from the GBP49.1 billion recorded at the end of 2014.

In the rest of the UK corporate calendar, there are full-year results from FTSE 100 constituents Burberry Group, and SSE. In the FTSE 250, there are full-year results from Intermediate Capital Goods, Cable & Wireless Communications and Pennon Group. Zoopla Property Group, Thomas Cook Group, and Britvic will report half-year results.

In the economic calendar, there is the German producer price index at 0700 BST, before the release of the Bank of England minutes at 0930 BST. There is eurozone construction output at 1000 BST, US MBA mortgage applications at 1200 BST and US EIA crude oil stocks at 1530 BST. After the London close, the Fed minutes will be released at 1900 BST.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1