MARKET COMMENT: UK Stocks Set To Open Lower Taking Lead From US

Thu, 26th Mar 2015 07:37

LONDON (Alliance News) - UK stocks are signalled to open sharply lower Thursday following a heavy sell off in the US on Wednesday.

IG futures indicate the FTSE 100 to open 48 points lower at 6,943.0. The index closed down 0.4% to 6,990.97 on Wednesday.

On Wall Street Wednesday, the DJIA closed down 1.6%, the S&P 500 ended off 1.5% and the Nasdaq Composite closed down 2.4%. The sell-off on Wall Street was led by technology stocks, as reflected by the particularly steep loss posted by the tech-heavy Nasdaq index.

"People have spent the last week trying to explain why US indices in particular have suffered over the last week, with some pointing to growing expectations of a summer rate hike and others highlighting the weakness in the dollar during the same period," says Craig Erlam, senior market analyst at Oanda.

"What we?ve actually seen over the last week is a decoupling in the relationship between the dollar and US indices, and I think this has more to do with quarter and month end rebalancing ahead of what is expected to be a disappointing earnings season, than anything else. The weakness in the dollar has persisted simply because it was overbought beforehand and rate hike expectations have been pushed back," Erlam adds.

The pound trades at USD1.4911, while the euro is quoted at USD1.0994, ahead of the open of European stock markets.

In Asia Thursday, the Japanese Nikkei closed down 1.4%, while the Hang Seng trades down 0.1% and the Shanghai Composite is up 0.6%.

Oil prices have recovered their losses after taking a hit on Wednesday when US EIA crude oil stocks for the week ending March 20 came in higher than expected. Prices of the commodity have risen amid concerns about the political situation in Yemen. Saudi Arabia and its allies began airstrikes against Houthi fighters who have tightened their grip on the nearby port city of Aden, where the country's president Abdu Rabu Mansour Hadi had taken refuge.

Ahead of the London equity market open Brent oil trades at USD58.76 a barrel, while West Texas Intermediate trades at USD51.41 a barrel.

The German Gfk consumer confidence index rose to a new 13 year high for April. The index came in at 10.0, slightly higher than the 9.8 forecast and March's reading of 9.7.

Etihad Airways said it will sell its stake in Aer Lingus Group should the Irish government back the EUR1.35 billion takeover bid for the carrier from International Consolidated Airlines Group, the Financial Times reported. Etihad is the third largest shareholder in Aer Lingus with a 4.9% stake.

EasyJet raised its profit guidance for the first half of its financial year, thanks mainly to favourable exchange rate movements, with raised revenue per seat guidance offset by an increase in its cost per seat expectation as it was forced to do more de-icing and due to disruptions.

The low-cost airline said it now expects to report between a pretax loss of GBP5 million and a pretax profit of GBP10 million for the six months to end-March, compared with the forecast for a loss of between GBP10 million and GBP30 million it gave in January. This is mainly because it now expects a GBP20 million boost from favourable exchange rate movements, compared with the GBP10 million favourable impact it had previously expected.

International Public Partnerships and AMEC Foster Wheeler reported full-year results, while newly listed DFS Furniture reported half-year results. Euromoney Institutional Investor and majority-owner Daily Mail and General Trust both issued a trading statement.

In the economic calendar French fourth quarter GDP is at 0745 GMT and UK retail sales is at 0930 GMT. In the afternoon, US initial and continuing jobless claims is at 1230 GMT, ahead of Markit services and composite Purchasing Managers' index at 1345 GMT. European Central Bank President Mario Draghi will be speaking in Rome at 1300 GMT.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1