LONDON (Alliance News) - US stock futures are indicated to follow UK equities higher Wednesday as investors remain optimistic that the US Federal Reserve will not curtail its quantitative easing when it releases its monetary policy statement at 1800 GMT.
"European bourses opened positively today and continued to push all-time highs as investors betted that the FOMC will reaffirm their commitment to its USD85 billion monthly bond purchasing amidst a series of data which has indicated that the US economy is still stumbling," says Spreadex's Shavaz Dhalla.
A disappointing US ADP employment report just released added to a long list of below-par US data releases in the run-up to the Federal Reserve's monetary policy statement. The report showed that the private sector added 130,000 jobs in October, following a downwardly revised increase of 145,000 jobs in September. This badly missed expectations of an addition of 150,000 new jobs, which had already been revised down this week, from an initially anticipated 160,000 new jobs added.
Retail sales and consumer confidence figures released Tuesday had already increased the likelihood that Federal Reserve would delay its USD85 billion-per-month bond buying programme, according to Michael Hewson, chief market analyst at CMC Markets.
US consumer price data, also just released, showed a rise of 0.2% in September, from 0.1% in the previous month, in line with expectations.
In the wake of Wednesday's employment and consumer price figures, the dollar has come under pressure. The euro is currently trading at USD1.3763, and the pound is trading at USD1.6063.
Ahead of the New York bell, the FTSE 100 is up 0.4% at 6,801.38, the FTSE 250 is up 0.3% at 15,580.17, and the AIM All-Share was up 0.2% at 807.03. On the continent, the French CAC is up 0.4%, while the German DAX is up 0.3%.
Similar bullish sentiment is expected to be shared in the US. The DJIA is called to open up 0.3%, the Nasdaq Composite up 0.4%, and the S&P 500 is called to open up 0.2%.
Kathleen Brooks, research director at FOREX.com, however, warns against attempting to second guess the Federal Reserve. "Assuming what the Fed will do and the reality of what the Fed actually does are two different things. While the market is expecting a dovish statement from the FOMC meeting later today, we believe the bigger risk right now is the Fed is not as dovish as the market wants. Thus, even a subtle shift of rhetoric or the merest hint that the Fed could consider tapering in the 'next few' months could trigger a dollar rally and may cause the markets to sell off."
At an individual UK stock level, Next is up 5% after it raised its full-year trading expectations. The company now expects to see sales growth from both its stores and online business of between 2% and 3.75% in the year to January 2014, up from a previous guidance of 1.5% to 3.5%. The retailer also increases its forecasts for pretax profit, expecting it to be between GBP650 million and GBP680 million, up from its previous guidance of between GBP635 million and GBP675 million. Next expects to see earnings-per-share growth of between 15% and 21%, boosted by a share buyback of at least GBP300 million. Next shares have soared to another record high, "now up 450% since the lows of 2008," notes Matt Basi, head of UK sales trading at CMC Markets.
In the FTSE 250, African Barrick Gold, up 9.4%, is the biggest riser. The company said it is on track to deliver on its production targets. Gold production was up 11% at 164,719 ounces and copper production up 11% to 2.8 million pounds. The company said it now expects to exceed the upper-end of its gold production guidance range of 600,000 ounces for 2013. The company also said that due to a significant cost-reduction programme, the company's cost of sales fell 23% to USD158.7 million from USD205.2 million, and it said it remains on target to achieve its planned 30%, or USD100 million, in cost reductions by the end of 2013.
Pearson, down 2.3%, is amongst the biggest fallers in the FTSE 100. The company warned that its full-year operating profit before restructuring charges would be lower than in 2012, due to weak market conditions for college textbooks in North America and the impact of the Penguin Random House merger. Jefferies maintains its Hold recommendation, but "retains some lingering concerns with regard to profitability in the new digitally focused world," says David Reynolds, analyst at the investment bank. Figures from North America are a little disappointing, says Gareth Davies, analyst at Numis. While lower-margin US school sales remain resilient, higher-margin college sales are having a tougher time, he adds. Despite this, Numis, buoyed by the news that Pearson has reiterated its full-year guidance for adjusted earnings per share, increases its price target to 1,297.00 pence from 1,225.00p.
Still to come in the Wednesday's data calendar, German CPI data is released shortly at 1300 GMT.
By James Kemp; jameskemp@alliancenews.com; @jamespkemp
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Pearson (PSON)
Next (NXT)