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LONDON MARKET EARLY CALL: FTSE 100 To Build On Wednesday's Gains

LONDON (Alliance News) - Stocks in London are set to open higher on Thursday, extending the ...

Alliance News 7 December, 2017 | 6:59AM
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LONDON (Alliance News) - Stocks in London are set to open higher on Thursday, extending the gains seen on Wednesday, benefiting from strong commodity prices and a Brexit-stricken pound.

IG says futures indicate the FTSE 100 index of large-caps to open 10.77 points higher at 7,358.80 on Thursday. The FTSE 100 index closed up 0.3%, or 20.53 points, at 7,348.03 on Wednesday.

"The FTSE is pointing to a positive start, building on the gains from the previous session. Stronger commodity prices such as copper and oil, which are rebounding in the Asian session after a recent rout, are expected to support the FTSE on the open," said Jasper Lawler at London Capital Group.

Sterling was quoted at USD1.3367 early Thursday, down from USD1.3379 at the London equities close on Wednesday.

"A softer pound could also prop up the FTSE on Thursday. Fears growing over a Brexit deal not being reached before next week's deadline are weighing on sentiment for sterling," Lawler said.

UK Prime Minister Theresa May spoke to her Irish counterpart, Leo Varadkar, and to the leader of Northern Ireland's Democratic Unionist Party on Wednesday following this week's collapse of a deal on the post-Brexit Irish border.

May discussed the border issue by phone with Varadkar and DUP leader Arlene Foster, with DUP sources saying afterwards that there was "still work to be done" to reach agreement, The Belfast Telegraph reported.

The DUP objected at the last minute to Monday's draft deal on the Irish border, which would have given Northern Ireland a special status in relation to the EU, saying it had no prior chance to view the text.

In the US on Wednesday, Wall Street ended mixed, with the Dow Jones Industrial Average ending 0.2% lower, the S&P 500 flat, and the Nasdaq Composite 0.2% higher.

The choppy trading on Wall Street came as traders expressed uncertainty about the economic impact of the Republican tax reform plan. While the Senate passed a USD1.5 trillion tax reform bill early Saturday, this must now be reconciled with the version passed through the House of Representatives.

Concerns about the possibility of violence in the Middle East also weighed on the markets as US President Donald Trump announced he is officially recognizing Jerusalem as the capital of Israel.

"Today we finally acknowledge the obvious - that Jerusalem is Israel's capital," he said in Washington, adding that he still supported a two-state solution to the Israeli-Palestinian conflict.

Palestinian Authority President Mahmoud Abbas said Trump's Wednesday announcement, which overturns decades of US policy and will see the US embassy move from Tel Aviv to Jerusalem, was "reprehensible".

Theresa May in response to Trump's decision said: "We disagree with the US decision to move its embassy to Jerusalem and recognize Jerusalem as the Israeli capital before a final status agreement. We believe it is unhelpful in terms of prospects for peace in the region."

In Asia on Thursday, the Japanese Nikkei 225 index closed up 1.5%. In China, the Shanghai Composite is down 0.7%, while the Hang Seng index in Hong Kong is up 0.5%.

Japan's leading index decreased for the second straight month in October, in line with expectations, preliminary figures from the Cabinet Office showed Thursday. The leading index, which measures the future economic activity, dropped to 106.1 in October from 106.5 in September. The figure also matched consensus estimate.

Meanwhile, the International Monetary Fund said in a report Thursday China's soaring levels of corporate, government and household debt are threatening the country's financial stability, and urged the government to move away from credit-fuelled economic growth.

China's credit-to-GDP ratio now stands at around 25%, which is "very high by international standards" and "consistent with a high probability of financial distress," the report said.

Corporate debt has reached 165% of gross domestic product while household debt has also risen quickly over the past few years, the IMF said.

The Chinese government is prioritizing "social stability" in the near-term, appearing "to rely on credit expansion to continue financing firms even when they are not viable," the report said.

The economic events calendar on Thursday has German industrial production figures at 0700 GMT, UK Halifax house prices data at 0830 GMT, and the third quarter reading of eurozone GDP at 1000 GMT. In the afternoon there is US initial jobless claims at 1330 GMT, which prelude nonfarm payrolls for November on Friday.

The UK corporate calendar on Thursday has half-year results from recycled packaging firm DS Smith. There are also full -year results from social care services provider CareTech Holdings, and a strategy update from equipment rentals firm HSS Hire Group.

By Lucy Heming; lucyheming@alliancenews.com

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