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LONDON EARLY CALL: Stocks To Open Lower Amid US, Iran Tensions

(Alliance News) - Stock prices in London are called start Friday a little lower, as tensions ...

Alliance News 21 June, 2019 | 7:14AM
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(Alliance News) - Stock prices in London are called start Friday a little lower, as tensions between the US and Iran continue to simmer, and the market pondered a dovish turn by the Bank of England.

IG says futures indicate the FTSE 100 index of large-caps to open 22.3 points, or 0.2%, lower at 7,412.90 on Friday. The FTSE 100 index closed up 20.90 points, or 0.3%, at 7,424.44 on Thursday.

The pound is quoted at USD1.2687 early Friday, down marginally from USD1.2693 at the London equities close on Thursday. The euro was trading at USD1.1289, up from USD1.1273 late Thursday.

The tension between the US and Iran continued to draw attention as US President Donald Trump appeared to keep his options open for retaliation following the shooting down of a US drone by Tehran.

Speaking from the White House, Trump answered a question on whether military retaliation was likely in response with "you're going to find out. They made a very big mistake."

Trump then, however, appeared to step back from escalating it further.

"Somebody under the command of that country made a mistake...I find it hard to believe it was intentional. Could have been someone who was loose and stupid," Trump said, expressing what he described as a "feeling". He added that "it was a very foolish move".

The New York Times also reported that Trump had initially approved military action of a handful of targets, before rowing back on the decision.

Citing officials, the newspaper stated Trump had approved the attack on some targets such as radar and missile batteries with planes in the air and ships in position. No missiles were fired, however, with the order delivered to stand down.

In the US on Wednesday, Wall Street ended higher, with the Dow Jones Industrial Average ending up 0.9%, the S&P 500 up 1.0% and Nasdaq Composite up 0.8%.

In Asia on Thursday, the Japanese Nikkei 225 index is down 1.0%. In China, the Shanghai Composite is up 0.3%, while the Hang Seng index in Hong Kong is down 0.6%.

Locally, sentiment will be driven by continued interpretations of the increasingly dovish stance taken by the BoE following its decision on Thursday to hold firm at its 0.75% interest rate.

"The Bank of England kept rates on hold, and downgraded their growth forecast for the second quarter to zero," CMC Markets UK Chief Market Analysts Michael Hewson said. "All the pre rate meeting hawkishness that we heard from the likes of external MPC member Michael Saunders and chief economist Andy Haldane was notable by its absence.

"The pre-Brexit pop for the first quarter appears to have given way to a pullback in economic activity while the political theatricals in Westminster distracts politicians from the business of assuaging business concerns about how events will play out between now and October," Hewson added. "Consumers also appear to have become more cautious, with retail sales declining for the second month in a row in May."

On Thursday, UK retail sales growth slowed sharper than expected in May.

On the year prior, May headline retail sales grew 2.3%. This was in contrast to the 5.1% growth in April and the 2.7% forecast by economists. Excluding fuel, retail sales growth slowed to 2.2% in May from 4.7% in April. Economists had anticipated it to slow to 2.5%.

"As expected, the strength of retail sales in the first quarter continued to unwind in May," Capital Economics UK Economist Andrew Wishart said.

"Small downward revisions to sales over the past few months left annual growth in sales a little weaker than expected at 2.3%, down from a peak of 6.7% in March," Wishart added. "That's the weakest since October 2018, and back in line with average annual growth in sales since the financial crisis following unusually strong sales growth over the past six months."

Still to come the economic calendar on Friday, flash purchasing managers' indices are due from France at 0815 BST, Germany at 0830 BST and the eurozone at 0900 BST. In the US, flash manufacturing and services PMI are also due at 1445 BST.

The US PMI prints are expected to be impacted by the trade tension between the US and China as well as neighbouring Mexico.

"This is expected to feed into a weak US flash manufacturing PMI later this afternoon," CMC's Hewson said. "Expectations are for an unchanged reading of 50.5 in May, however don’t be surprised if the indicator contracts below 50. The services sector is expected to improve modestly to 51, from 50.9."

By Ahren Lester; ahrenlester@alliancenews.com

Copyright 2019 Alliance News Limited. All Rights Reserved.

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