MARKET COMMENT: UK Stocks Seen Stable Following Sharp Falls

LONDON (Alliance News) - UK stocks are set to open flat Thursday, following the sharp falls seen across European and the US equities on Wednesday, and ahead of a session with only a handful of mid-tier economic data.

A downgrade to the global growth forecast from the World Bank prompted sharp falls in equity markets across Europe on Wednesday. The World Bank said that tensions in Ukraine, as well as a harsh winter in the US, meant that the world economy got off to a worse start to the year than expected.

"Even though none of the factors cited by the bank was anything not already known to investors, it does appear to have prompted some light profit taking," says CMC Markets chief market analyst Michael Hewson.

Concerns over Iraq can now be added to investors' watch list. The Iraqi army has now given up control to Islamist insurgents in four cities, a developing situation that weighed on oil companies operating in the region on Wednesday and will be closely watched for impact on the supply of oil, analysts say, although the oil price has remained stable so far.

The DJIA and the S&P 500 both saw their first negative session in more than a week Wednesday, losing 0.6% and 0.4% respectively. In Asia Thursday, the Nikkei has closed down 0.7% Thursday, while the Hang Seng is down 0.4%, and the Shanghai Composite is also fractionally lower. The FTSE 100 ended Wednesday down 0.5% at 6,838.87.

"Many of the Asian indices simply tracked the US indices lower after traders took a little profit following a decent few weeks for the indices," says Alpari market analyst Craig Erlam.

Airlines led stocks in Europe lower Wednesday after a profit warning from Germany's flag-carrier Lufthansa. The airlines may well be in focus once again Thursday after Irish flag-carrier Aer Lingus has Thursday followed suit with its own profit warning.

Full year results have been released Thursday from Volex PLC, Atkins PLC, Halma PLC, Mulberry Group PLC, PZ Cussons PLC, Hardy Oil & Gas PLC, boohoo.com PLC, and Pets At Home Group.

There's no UK data scheduled in the economic calendar Thursday, leaving the morning focus on Europe, where eurozone industrial production data is due at 1000 BST. Production in the single currency block is expected to have bounced back in April, with economists expecting 0.4% growth month-on-month after the 0.3% fall recorded in March. On an annual basis, economists are expecting growth of 0.9%, after the 0.1% fall in March.

Ahead of the market open, French consumer price inflation data are due at 0745 BST, with economists expecting a minimal 0.1% rise in prices in the month of May, up from the flat growth recorded in April.

From the US Thursday, weekly initial jobless claims and retail sales data at 1330 BST, will provide the main afternoon economic focus. The data comes as investors are increasingly looking for improved numbers from the US following the heavily weather effected first-quarter. Economists expect retail sales to have risen by 0.6% month-on-month in May, up from just 0.1% growth in April.

After the market close on Thursday, Bank of England Governor Mark Carney and Chancellor of the Exchequer George Osborne are expected to announce stricter punishments for individual traders involved with the rate-rigging scandals in the UK at a Mansion House dinner. Osborne is expected to politicise the issue somewhat by "opting-out" of the EU's criminal sanctions legislation.

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

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