MARKET COMMENT: UK Stocks Set For Soft Open Amid M&A In Focus

Fri, 25th Jul 2014 06:31

LONDON (Alliance News) - UK stocks are set to open a little lower Friday, with merger and acquisition activity in focus ahead of growth data that is expected to show the UK has emerged from a lengthy economic depression.

A very busy day of economic data and corporate earnings releases from both the UK and elsewhere on Thursday left equities struggling for direction, up until the end of the day when the IMF once again upgraded its growth forecast for the UK, ensuring a positive close for the FTSE.

Despite Facebook announcing a surge in profits in reply to those, including Federal Reserve Chair Janet Yellen, that say social media stocks valuations look stretched, US stocks struggled to make any significant ground Thursday, and the DJIA closed just fractionally lower, as did the Nasdaq Composite, while the S&P 500 closed just fractionally higher.

A more positive night in Asia has seen the Nikkei gain 1.0%, while the Shanghai Composite is is down 0.6%, and the Hang Seng is just fractionally lower.

Futures trading indicates the FTSE 100 will open about 0.1% lower Friday at 6,805 points.

As widely expected, British Sky Broadcasting has announced a deal to buy 21st Century Fox Inc's interest in pay-television providers Sky Deutschland and Sky Italia, thought to be part of Rupert Murdoch's plan to increase his bid for Time Warner in the US. BSkyB also released its full year results.

FTSE 250-listed construction groups Carillion and Balfour Beatty also will be in focus Friday after announcing plans for a merger late Thursday. The deal would create a construction services powerhouse with a value in the region of GBP3 billion, putting it close to FTSE 100 territory.

RBS has unexpectedly released its results early Friday, while scheduled interim results are also out from Anglo American, African Barrick Gold, Pearson, and Spectris. Vodafone Group has released a first quarter management statement.

Following Thursday's strong German PMI data, the German Gfk Consumer Confidence Survey released ahead of the market open has risen to 9.0 in August from 8.9 in July.

"The German economy is showing surprising resilience given recent concerns that the situation in Russia might damage confidence within the country and weigh on investment and hiring," said CMC Markets chief market analyst Michael Hewson.

The German IFO survey is due at 0900 BST and is expected to show a small slip in the assessment of current business conditions to 109.4 in July from 109.7 in June. The expectations survey, which asks businesses how confident they feel about the next six months, is expected to slip to a nine-month low of 104.5.

The domestic data focus Friday comes at 0930 BST, when the initial estimate of UK second quarter GDP is expected to show a growth rate of 0.8%, unchanged from the first quarter. This would push year-on-year growth up to 3.1%, and put total economic output above the pre-recession peak.

Later in the afternoon, attention will switch back to the US, where Amazon announced disappointing results after the market close on Thursday, bringing back those technology sector valuation concerns and sending the stocks down 10% in after-hours trade.

Durable Goods orders for June provide the US data focus at 1330 BST.

By Jon Darby; jondarby@alliancenews.com; @jondarby100