LONDON MARKET EARLY-CALL: Stocks Seen Lower With Greece Talks In Focus

Tue, 11th Aug 2015 06:00

LONDON (Alliance News) - UK shares are set to open lower Tuesday, with economic data from Europe in focus during the morning and as Greece and its creditors look close to concluding talks for a new debt bailout.

IG says futures indicate the FTSE 100 to open 8 points lower at 6,728.30. The index closed down 0.3% on Monday.

Greece and its European creditors may be able to find an agreement in their talks over a EUR86 billion debt bailout deal for the country as early as Tuesday, news reports said Monday. The process is being hastened so that any deal can go to national parliaments in the euro area for approval. The Greek parliament is expected to pass any possible deal by the middle of the week, the reports said citing sources.

Once approved by national parliaments, euro area finance ministers are expected to meet towards the end of the week to finalize the process. Afterwards, funds will be released to Greece to allow it to honour a payment to the European Central Bank due August 20.

Outside Greece, Germany and eurozone ZEW surveys of economic sentiment are due at 1000 BST.

"The August German ZEW survey is set to dominate the news flow this morning," says Lloyds Bank. "After a sharp pick-up between the fourth quarter of 2014 and the first quarter of 2015, the forward-looking expectations measure, which tends to lead euro-area GDP by around three quarters, has subsequently retraced a little on the back of accumulating Grexit worries."

"However, with such concerns fading somewhat over the last month, we anticipate a small rebound from 29.7 in July to 32.0."

In Asia on Tuesday, the Japanese Nikkei 225 trades down 0.5%. In China, the Hang Seng in Hong Kong is up 0.9% and the Shanghai Composite is up 0.4%.

In an unexpected move seen as a step to counter the domestic economic slowdown, the People's Bank of China lowered the value of the yuan. In a statement released on Tuesday, the bank set the value of yuan at 6.2298 a dollar, 1.9% lower than Monday's official fixing rate. The bank termed it as an one-time adjustment as it strives to keep the yuan stable at a reasonable level.

This in contrast to the PBoC's practice of setting a mid-point for the yuan's exchange rate each morning, which could be 2% higher or lower from the previous session's closing value. The Chinese currency seldom fluctuates over the range. The devaluation is seen as step towards making the exchange rate of the yuan more market determined. A weaker currency makes the exports of a nation competitive and boosts export earnings.

Wall Street ended higher Monday. The DJIA closed up 1.4%, the S&P 500 ended up 1.3% and the Nasdaq Composite finished up 1.2%.

Federal Reserve Bank of Atlanta President Dennis Lockhart said on Monday the US central bank is close to raising short-term interest rates, potentially sooner than September, as he said the economy is "approaching an acceptable normal", The Wall Street Journal reported.

Lockhart, during a speech at the Atlanta Press Club, said the "point of liftoff is close". He added that "September remains a live possibility" for a first rate rise in the US for nine years.

"I remain predisposed to September being a possible date for liftoff," Lockhart said. "At the same time, in the greater scheme of things, I don't think [waiting] a meeting or two is going to be decisive for the US economy."

Also in the economic calendar Tuesday, in the US, unit labor costs and nonfarm productivity are expected at 1330 BST. The Redbook index is expected at 1355 BST, while wholesale inventories are at 1500 BST.

In the UK corporate calendar, SIG, Synthomer, Ladbrokes, Serco Group, Partnership Assurance, Hargreaves Services and Johnston Press publish half-year results. Meanwhile, Game Digital issues a trading statement, and life insurer Prudential releases half-year results at 0915 BST.

By Daniel Ruiz; danielruiz@alliancenews.com