LONDON (Alliance News) - London's main stock indices are continuing higher Tuesday and US markets look likely to follow suit, with the exception of the Nasdaq Composite which looks set to open lower in the aftermath of a weak outlook by US technology giant Apple.
"All major European benchmarks have made gains this morning as buyers step in to find value after three sessions of pretty heavy losses," said CMC Markets senior sales trader Toby Morris.
Ahead of the US market open, London's FTSE 100 is up 0.3% at 6,565.70. In Paris the CAC40 is up 0.7% and in Frankfurt the DAX is up 0.4%.
Smaller UK stocks are performing even better, with the FTSE 250 up 1.0% at 15,685.40 and the AIM All-Share up 0.7% at 855.85.
Strong UK GDP figures gave London's equity markets a boost. Fourth-quarter growth came in at 0.7%, in line with expectations for slightly moderated growth compared with the 0.8% seen in the third-quarter. The figure for 2013 as a whole was 1.9%, the highest since 2007.
Sterling traders appeared to be disappointed with the reading, however, and sent the pound down to a low of the day against the dollar of USD1.6533. The pound has since recovered slightly and currently trades at USD1.6570.
It's worth remembering that this is only the initial fourth-quarter reading, says Forex.com research director Kathleen Brookes. The pound's initial weakness would mean that "the market is concerned that growth may be revised lower if December's bad weather disrupted construction activity more than thought in the first reading", she says.
"Taken as a whole the advanced GDP print should keep market betting on early removal of monetary stimulus by the BoE. This should keep sterling supported for now,? said Citi Strategist Valentin Marinov.
We may hear more on Bank of England policy on Wednesday when Mark Carney speaks in Scotland. However, he is more likely to use the speech to focus on the fiscal challenges faced by a potentially independent Scotland, not least whether it would be able to use the pound.
The DJIA is pointing 0.4% higher in pre-market trading, while the S&P500 is indicated to open 0.3% higher. The Nasdaq Composite, however, is indicated to open 0.4% lower following Apple's report late Monday.
Apple's quarterly revenues and earnings per share came in above analysts' expectations, but the company forecast second quarter revenue that is 4% to 8% below analysts' current consensus estimates. The subsequent after hours movement in Apple shares suggests the stock is in for a rough day when the opening bell rings, haven falling in the pre-market by about 8%.
The disappointment has also fed through to the UK market, with FTSE 100 listed ARM Holdings and FTSE 250 listed Imagination Technologies, both suppliers of parts to Apple, falling the most in their respective index, down 2.6% and 4.5% respectively.
The January FOMC meeting, Ben Beranke's last, starts Tuesday. The Federal Reserve policy makers are expected to announce a further cut to the central bank's asset purchase program when the meeting ends Wednesday.
"On balance, it appears that most expect the tapering announced last month will continue in February. The emerging market turmoil and drop in the US equity market does not seem to be sufficient to get the Fed to alter its course outlined just a few weeks ago," says Marc Chandler, head of strategy at Brown Brothers Harrimen.
Next up in the economic calendar Tuesday, US Durable Goods Orders at 1330 GMT. The amount of orders received by manufacturers for goods planned to last for three-years or more, an indication of industry confidence, is expected to have risen by 1.8% in December, a slowdown from the 3.4% rise seen in November. Economists will use the report to fine tune their US fourth-quarter GDP forecasts, due on Thursday, which are now coming in at around 3% or a little more, says Chandler.
At 1500 GMT, we get the US Consumer Confidence survey and the Richmond Fed Manufacturing index. Consumer confidence is expected to have increased slightly to 78.9 in January, from 78.1 in December, while the manufacturing index is expected to have remained stable.
President Obama will also give a State of the Union address later in the US day. According to many reports, the president will use the speech to announce an increase the the minimum wage for workers taking on new federal contracts, to USD10.10 per hour, from USD7.25 per hour. The President does not need congressional support to change the wages of Federal workers, but Obama is also expected to call on Congress to increase the national minimum wage to the same level, and tie increases to inflation.
By Jon Darby; jondarby@alliancenews.com; @jondarby100
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