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MARKET COMMENT: UK Stocks Called Higher Ahead Of UK GDP Data

Tue, 29th Apr 2014 06:33

LONDON (Alliance News) - UK stocks are set to open slightly higher Tuesday, adding to the modest gains posted on Monday, as investors await the latest reading of UK gross domestic product.

The FTSE 100 closed modestly higher on Monday after it received a boost from pharmaceutical companies, and AstraZeneca in particular. The pharmaceutical giant, which is the sixth largest company in the blue-chip index, ended the day up 14% following the confirmation of recent speculation that it is a target of a takeover by US drugs giant Pfizer Inc.

"This M&A story gave investors a reason to buy into the market on what was otherwise a fairly quiet day on Monday," says Craig Erlam, market analyst at Alpari.

"After a choppy US session yesterday, European markets look set to start the day in positive territory as investors once again look past concerns about Ukraine and focus their attentions on defensive big cap stocks as M&A speculation contrives to boost these particular sectors," says Michael Hewson, chief market analyst at CMC Markets.

On Wall Street, the DJIA closed up 0.5% on Monday, the S&P 500 closed up 0.3%, while the NASDAQ Composite closed marginally lower.

It is a similar story in Asia Tuesday, where, ahead of the UK equity market open, the Shanghai Composite index is up 0.7%, and the Hang Seng is up 0.3%. The Nikkei in Tokyo is closed for the Showa Day bank holiday.

In the UK, stocks are called to open slightly higher Tuesday, having closed at 6,700.16 points on Monday. CMC Markets indicates the FTSE 100 to open up at approximately 6,710 points, while IG and Alpari both expect it to open even higher around 6,714.

Early focus will be on the preliminary release of first quarter UK GDP at 0830 GMT. Economists' expectations are for a quarter-on-quarter rise of 0.9%, up from the 0.7% posted in the fourth quarter of last year.

This would imply annual growth of 3.2%, "which is far better than many of the other western economies and something that is looking like a pipe dream for the US right now," says Erlam.

However, "with recent surveys pointing to a softening in service sector output growth during February, the risks are tilted to the downside," says Jonathan Thomas, senior economist at Lloyds Bank.

Ahead of the release, sterling trades at USD1.6811, EUR1.2121, CHF1.4780, and JPY172.381.

Also in the data calendar Tuesday, the latest reading of French consumer confidence is released at 0645 GMT, ahead of euro area M3 money supply information for March at 0800 GMT. In Italy, retail sales data for February and April's business confidence data are released at 0800 GMT and 0900 GMT, respectively. The preliminary reading of German consumer price inflation and harmonised index of consumer prices for April is scheduled at 1200 GMT.

"In light of the current debate on the risks of euro area deflation and ahead of tomorrow?s preliminary estimate of April?s HICP inflation, the M3 figures for March and German HICP (April) will be keenly watched. The former will be particularly scrutinised for signs of a pickup from February?s 1.3% year-on-year," says Thomas

In the US, Standard & Poor's publishes S&P/Case-Shiller home price data for February at 1300 GMT, with the latest reading of US consumer confidence at 1400 GMT.

In corporate news, after the UK equity market close on Monday, FTSE 250-listed Serco Group revealed that, after a more challenging 2014 so far, it is reviewing its performance and may have to revise its expectations lower.

The outsourcing company said that, ahead of its upcoming annual general meeting on May 8 and the arrival of its new chief executive, Rupert Soames, on May 1, it is reviewing its performance so far this year, noting that performance has been more challenging than previously expected. Serco said it will now consult with its shareholders regarding the possibility of strengthening its balance sheet through an equity placing.

Soames, who Serco poached from Aggreko in February, is tasked with the revival of the business.

Meanwhile, FTSE 100-constituent St. James's Place has been joined by FTSE 250-listed UBM, Essentra, Carphone Warehouse Group, Telecity Group, Redrow, and Stagecoach Group, amongst others, in releasing trading updates.

FTSE 100-listed BP has released first-quarter results, while Whitbread has released full financial year results.

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