LONDON (Alliance News) - UK stocks are set to make a cautious start Tuesday following some heavy global equity market falls on Monday, and as investors exercise caution ahead of the start of the second-quarter US earnings season.
Stocks market fell across the world Monday as investors returned from the weekend to a warning from the International Monetary Fund that it is likely to once again downgrade its global growth forecast later this month, as well as some disappointing economic data from the eurozone.
A 1.8% month-on-month fall in German industrial production in May followed some disappointing recent factory orders data, and a drop in both the ZEW and IFO confidence surveys, causing concern that Europe's largest economy may have taken its foot off the gas.
"It would appear that the German economy is suffering a bit of a slowdown, which doesn't bode well for the second half of this year," said CMC Market chief market analyst Michael Hewson.
More data from German already released Tuesday has shown a slowdown in both imports and exports in May, with exports dropping 3.4%. The German trade surplus remains strong, however, at EUR18.8 billion in May.
All the major European markets fell by more than 1% on Monday in the wake of the lower growth concerns, with the exception of the FTSE 100, which fell by 0.6% to close at 6,823.51. The falls continued into Asia overnight, where the Nikkei has closed down 0.3%, while the Hang Seng continues down about 0.1%, and the Shanghai Composite it just fractionally lower.
Futures trading indicates that the UK's leading index will open fractionally higher Tuesday, as investors await some UK data. The markets may remain cautious however as investors await the release of the first major second-quarter US corporate earnings after the market close on Tuesday, as well as the release of the minutes from the latest Federal Reserve policy meeting on Wednesday.
UK industrial and manufacturing production data for May will be the morning data focus in London Tuesday. Due at 0930 BST, industrial production is expected to be shown growing at 0.3% month-on-month, slowing from 0.4% recorded in April, while manufacturing production is expected to have accelerated to 0.5% from 0.4% previously.
Later in the session, at 1400 BST, the National Institute of Economic and Social research is due to release its estimate of UK GDP in the three months to June. In the three months to May, the NIESR estimated the UK economy to have grown by 0.9%.
Following the German trade balance data, the same numbers from France are due at 0745 BST and expected to show a deficit expansion to EUR4.1 billion expected in May.
The airlines are likely to be in focus at the open following the latest profit warning in the sector, this time from Air France. The airline said Tuesday that its 2014 profits could be as much as 12% lower due to overcapacity on its routes.
The UK retailers will also be in focus following the release of a first-quarter management statement from Marks & Spencer. M&S has recently been overtaken as the UK's biggest clothing retailer by Next, something that analysts have in-part attributed to Next's better on-line offering. M&S's online sales may therefore be in focus, with a huge 8.1% drop in sales year-on-year reported Tuesday, although M&S reported growth in its other areas including women's wear and food.
The housebuilders underperformed Monday despite Taylor Wimpey saying it remains on track to deliver half year results at the upper end of previous guidance. The latest housebuilder update has come from Bovis Homes early Tuesday, saying its average selling price increased by 11% in its first half.
Trading statements have also been release Tuesday from Dunelm Group, Young & Co's Brewery, and Synety Group.
By Jon Darby; jondarby@alliancenews.com; @jondarby100
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Marks & Spencer (MKS)
Dunelm (DNLM)
Taylor Wimpey (TW.)
Young & Co's Brewery (YNGA)