MARKET COMMENT: UK Stocks Called Higher Ahead Of Data

LONDON (Alliance News) - UK stocks are set to open slightly higher Tuesday, shrugging off a negative close on Wall Street on Monday and a soft trading session in Asia overnight, as investors await the latest UK inflation and housing market data.

UK equities are expected to edge higher Tuesday despite a weak trading session in Asia and the US. Ahead of the UK equity market open, the Hang Seng is down 0.4%, the Shanghai Composite index is almost perfectly flat, and the Nikkei in Tokyo has closed down 0.4%.

Meanwhile, in the US, the DJIA, NASDAQ Composite and S&P 500 all closed firmly lower on Monday.

"Investor sentiment is being pulled all over the place as markets wrestle with a prospective improvement in European economic data against a backdrop of geopolitical uncertainty in Ukraine, Russia and Turkey, as well as fears of a slowdown in China, at the same time as the US Federal Reserve continues to dial back its stimulus dial," says Michael Hewson, chief market analyst at CMC Markets.

Having underperformed their Asian peers on Monday, UK stocks are set to once again ignore cues from Asia Tuesday, but this time in the positive direction. Both IG and CMC Markets indicate the FTSE 100 to open modestly higher at approximately 6,536 points, having closed at 6,520.39 on Monday.

"Concerns about a growth plateau in Germany were reinforced Monday after manufacturing and services PMI data came in below expectations for March," says Hewson. "With ZEW investor sentiment nose-diving last week, we could see further weakness if the latest IFO survey comes in similarly weak this morning," he adds.

Given the country's exposure to both China and Russia, economists expect the IFO business climate index, which is released at 0900 GMT, to edge lower to 111.0 in March, down from the 111.3 recorded in February.

In the UK, following January's dip to below 2%, consumer price inflation is set to ease further Tuesday. The latest CPI reading, which is scheduled for 0930 GMT, is expected to decline to 1.7% from the 1.9% recorded in January, marking the lowest level since the 1.5% seen in October 2009.

On a monthly basis, CPI is forecast to rise 0.5%, "but another decline in inflation could well exert further downward pressure on the pound, which has been struggling to rally in recent sessions," says Hewson.

Released at the same time, retail price inflation is expected to fall to 2.6% year-on-year in February, down from 2.8% in January. Economists forecast output price inflation to fall to 0.7% in February from 0.9% in January, while input prices are expected to drop 5.3% annually.

Also at 0930 GMT, the UK house price index is expected to show that house prices rose 5.7% in February, up from a 5.5% increase in the previous month. The British Bankers' Association is estimated to show another 50,000 mortgages were approved in February, the same as was seen in January.

Also in the data calendar, the UK CBI distributive trades survey is released at 1100 GMT. In the US, the Redbook index is scheduled for 1255 GMT, ahead of housing data at 1300 GMT. US consumer confidence and new home sales information are released at 1400 GMT, at the same time as the Richmond Federal Reserve manufacturing index.

European Central Bank President Mario Draghi gives a speech at 1600 GMT, while Atlanta Federal Reserve President Dennis Lockhart and Philadelphia Fed Chief Charles Plosser speak at 2000 GMT and 2300 GMT, respectively.

In the corporate calendar, blue-chips Kingfisher and Wolseley have been joined by FTSE 250-listed 888 Holdings and AG Barr, amongst others, in releasing their full-year results for 2013.

Meanwhile, easyJet has released a trading statement. The airline has reported that it now expects its first-half performance to be ahead of guidance. It now estimates that its first-half pretax loss will come in between GBP55 million and GBP65 million, lower than the GBP70 million to GBP90 million range predicted in January.

By James Kemp; jameskemp@alliancenews.com; @jamespkemp

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