MARKET COMMENT: UK Stocks Set To Open Flat To Marginally Higher

Mon, 19th May 2014 06:36

LONDON (Alliance News) - UK stocks are set to open flat to fractionally higher Monday, following a modestly higher close on Wall Street Friday, but with a dearth of macro-economic data scheduled to be released, investors may focus on an early-morning flurry of UK corporate news.

US stocks ended the day in the black on Friday after they staged a late rally, having displayed a lack of direction throughout much of the session.

The late-day strength partly offset the sharp pull-back seen over the two previous sessions.

The DJIA, S&P 500, and NASDAQ Composite all closed up between 0.3% and 0.5% on Friday.

Similar strength has not been replicated in the Asian session overnight, however, as the Nikkei has closed down 0.6% Monday, and the Hang Seng and Shanghai Composite index are down 0.5% and 1.3%, respectively.

Nevertheless, ahead of the UK equity market open, the FTSE 100 is called to open flat to slightly higher. Alpari, CMC Markets, and IG all call the blue-chip index to open up at approximately 6,858 points, having closed at 6,855.81 on Friday.

In a quiet day in the data calendar Monday, eurozone construction output data is released at 0900 GMT. However, "even this is a low level piece of data, meaning the market reaction is likely to be minimal or non-existent," says Craig Erlam, a market analyst at Alpari UK.

Overnight, property website Rightmove revealed that the average price for a house in the UK jumped 3.6% month-on-month in May, following a 2.6% increase in April. On a yearly basis, house prices spiked 8.9%, having climbed 7.3% in the previous month, marking the highest annual jump since October 2007.

However, the UK government's Help to Buy scheme could distort the entire mortgage market and may have to be curbed, The Times has reported the governor of the Bank of England as warning.

The Times said Mark Carney said that the programme to help new home owners to secure a mortgage with a deposit of as little as 5% may be encouraging a return to risky home loans, adding that the remarks represent the most explicit sign that the Bank of England may formally request a policy change in September.

In corporate news, UK drug maker AstraZeneca has to rejected an improved GBP55-per-share takeover bid by US pharmaceutical giant Pfizer Inc shortly after its US suitor said it would walk away if its latest offer was rebuffed, rather than going hostile with its bid.

The offer, raised from GBP50 per share two weeks ago, is viewed by AstraZeneca as undervaluing the company, bringing uncertainty and risks for shareholders.

Elsewhere, FTSE 100-listed Babcock International Group has been joined by FTSE 250-listed MITIE Group and Cranswick in releasing full-year results. Mid-caps Shaftesbury and ITE Group have provided half-year results.

Meanwhile, UBS has raised its price target on oil and gas companies BP and Royal Dutch Shell. It has increased its price target on Shell to 2,250.00 pence from 2,100.00p, and BP's to 525.00p from 515.00p. UBS has a Neutral recommendation on both of the companies.

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