MARKET COMMENT: UK Stocks Seen Fractionally Lower Ahead Of Data

LONDON (Alliance News) - UK stocks are expected to open marginally lower Thursday, following a mixed session on Wall Street Wednesday and in Asia overnight, and as investors take their positions ahead of a raft of macroeconomic data from Europe and the US.

It was a record-breaking session in the US, with investors continuing to focus on US corporate earnings reports rather than geopolitical tensions. The S&P 500 ended the day up 0.2% at a record high closing level of 1,987.01, while the NASDAQ Composite closed up 0.4%. The DJIA, however, closed down 0.2%.

It has been a similarly mixed session in Asia overnight. Ahead of the UK equity market open, the Hang Seng is up 0.5%, and the Shanghai Composite index is up 1.4%, while the Nikkei in Tokyo has closed down 0.3%.

"European indices are expected to open marginally lower following a fairly mixed session in Asia overnight," says Craig Erlam, a market analyst at Alpari. "A strong Chinese HSBC manufacturing PMI reading was offset somewhat by disappointing trade data for Japan," he adds.

China's manufacturing activity grew at the quickest pace in eighteen months in July, exceeding economists' expectations, results of a preliminary survey by Markit Economics and HSBC Bank showed Thursday. The HSBC flash China manufacturing purchasing managers' index climbed to 52.0 in July from 50.7 in June, beating the score of 51.0 expected by economists.

Meanwhile, Japan posted a merchandise trade deficit of JPY822.2 billion in June. That missed forecasts for a shortfall of JPY642.9 billion following the JPY910.8 billion deficit in May. Exports were down 2.0% on year, missing forecasts for an increase of 1.0% following the 2.7% decline in the previous month. Imports jumped 8.4% on year, in line with forecasts following the revised 3.5% contraction a month earlier.

In other data released from Japan overnight, the preliminary reading of the nation's Nomura/JMMA manufacturing PMI came in with a score of 50.8. That was shy of forecasts for 52.0, and was down from 51.5 in June.

London's FTSE 100 is called to open fractionally lower Thursday, having closed at 6,798.15 on Wednesday. CMC Markets indicates the blue-chip index to open down 6 points at 6,792, while Alpari expects it to open down 5 points at around 6,793.

Still to come in the data calendar, preliminary Markit manufacturing and services data for France are released at 0800 BST, with the equivalent German data due at 0830 BST.

"A lot has been said about the slowdown in the eurozone recently, particularly in Germany which has been the most concerning thing as many don?t believe we can see a strong recovery in the region without its strongest member leading the way," says Alpari's Erlam.

Germany's preliminary Markit manufacturing PMI reading is forecast to come in at 52, unchanged from the figure recorded in May, while its services PMI is expected to come in at 54.5, a touch lower than last month's 54.6.

The flash reading of French manufacturing PMI is expected to remain firmly within contraction territory, coming in at 48.1 in July, fractionally lower than the 48.2 posted in May. France's Markit services PMI reading is expected to rise slightly to 48.4 in July, compared with May's reading of 48.2.

Meanwhile, the preliminary readings of Markit manufacturing, services, and composite PMI for the eurozone are scheduled for 0900 BST, while Italian retail sales data are released at 0900 BST, ahead of Italian consumer confidence information at 1000 BST.

"While the economic recovery in Europe continues to remain weak the inevitable side effect of that is likely to trickle through to the UK?s recovery, which still nevertheless remains fairly robust, though it has started to plateau a little, if recent data has been any guide," says Michael Hewson, chief market analyst at CMC Markets.

UK retail sales data are due to be released at 0930 BST. "Some, though not all, anecdotal evidence points to relatively soft retail activity in June, despite the possibility of some support from the World Cup," says Jann-Ju Ho, director of proprietary data analytics at Lloyds Bank.

Economists' expectation are for UK retail sales to have risen by 0.3% month-on-month in June, following a 0.5% decline in May. On an annual basis, retail sales are expected to have risen 3.9% in June.

In the US, jobless claims information is released at 1330 BST. The preliminary reading of US Markit manufacturing PMI is expected at 1445 BST, shortly before home sales data at 1500 BST. The Federal Reserve Bank of Kansas' manufacturing activity reading is published at 1600 BST.

In the forex market, ahead of the data and the UK equity market open, sterling trades at USD1.7028, EUR1.2662, CHF1.5381, and JPY172.829. The euro trades at USD1.3444.

In a very busy day in the UK corporate calendar, FTSE 100-listed Reed Elsevier, Unilever and Hammerson have been joined by FTSE 250-listed Rathbone Brothers, Howden Joinery and CSR in releasing half-year results Thursday. Blue-chips SABMiller and easyJet have provided trading updates, as have mid-caps Close Brothers Group, Electrocomponents, Shaftesbury, Kingfisher Group, Tate & Lyle, Britvic, De La Rue, Halma, Lancashire Holdings, Marston's, and Paragon Group of Companies.

FTSE 250-listed Polymetal International has released production results.

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

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