LONDON MARKET PRE-OPEN: UK Stocks Seen Higher With PMIs In Focus

LONDON (Alliance News) - UK shares are set to open higher Wednesday, with investors focusing on a flurry of Purchasing Manager's Index readings from European countries and the UK, which analysts expect to be positive.

IG says futures indicate the FTSE 100 to open 9 points higher at 6,695.90. The index closed Tuesday flat at 6,686.57.

Services and Composite PMI readings from France, Germany and the eurozone are expected at 0850 BST, 0855 BST and 0900 BST, respectively. Meanwhile, the Services PMI reading for the UK is due at 0930 BST.

"The services sector, in general, hasn?t fared as badly as manufacturing so the figures should be much more positive and point to strong growth expectations in most cases," says Oanda analyst Craig Erlam.

"The UK figure in particular is expected to remain very high at 58.1 which is important given both the country?s dependency on the sector to provide more than two thirds of economic output and because other sectors are not pulling their weight," writes Erlam.

Meanwhile, Lloyds Bank notes that the eurozone's preliminary services PMI reading for July signalled a further moderate gain in output on the month.

"Although the final estimate is expected to be unchanged at 53.8, the risks are tilted to the upside following an upward revision to the July manufacturing index, possibly reflecting the last-minute agreement on the Greece bailout programme," says the bank.

In Asia on Wednesday, the Japanese Nikkei 225 closed up 0.5%. In China, the Hang Seng is up 0.3% and the Shanghai Composite is down 1.2%.

The services sector in China continued to expand in July, and at an accelerated pace, the latest survey from Caixin showed on Wednesday with a PMI score of 53.8. That is up from 51.8 in June, and it moves further above the level of 50 that separates expansion from contraction.

Meanwhile, Japan's services sector expanded at a slower pace in July, as the latest survey from Nikkei revealed a PMI score of 51.2, below the 51.8 reading seen in June.

In the US, as the earnings season comes to an end, the possibility of a US rate hike by the US Federal Reserve in September is starting to become the centre of the market's attention.

President of the Federal Reserve Bank of Atlanta Dennis Lockhart has said the economy is ready for its first increase in short-term rates. He added it would take a significant deterioration in economic data to convince him not to push for a rate hike in September, The Wall Street Journal reported.

Lockhart, speaking in an interview with the WSJ, said: "I think there is a high bar right now to not acting, speaking for myself."

Lockhart is among the first officials from the Federal Reserve to speak publicly since the US central bank's policy meeting last week, when it dropped new hints that a rate increase is moving closer on the horizon.

Wall Street ended lower Tuesday. The DJIA closed down 0.3%, while the S&P 500 and the Nasdaq Composite finished down 0.2%.

In the US economic calendar, Markit Services and Composite PMI readings are due at 1445 BST. The US Institute for Supply Management Non-manufacturing PMI is due at 1500 BST, while EIA crude oil stocks are expected at 1530 BST

On the UK corporate front, Legal & General Group reported an 18% increase in first-half operating profit, driven by growth in four of the FTSE 100 insurance and investment company's six divisions.

In a statement, Legal & General said it made a GBP750 million operating profit in the six months to the end of June, compared with GBP636 million in the corresponding half of the prior year. Operational cash generation increased to GBP624 million from GBP578 million. The company increased its interim dividend to 3.45 pence per share from 2.90p.

Deutsche Bank cuts Fresnillo price target to 715 pence from 750p, keeping a Hold stance, while Credit Suisse upgrades Rolls-Royce Holdings to Neutral from Underperform, lifting its price target to 845p from 784.3p. Bernstein raises Reckitt Benckiser Group price target to 6,600p from 6,100p, reiterating an Outperform rating, while Barclays lifts Travis Perkins price target to 2,150p from 1,970p, retaining an Equal Weight stance.

By Daniel Ruiz; danielruiz@alliancenews.com

Copyright 2015 Alliance News Limited. All Rights Reserved.