FTSE 100 preview: Index seen opening flat after deal on EU banking union

on Mar 21, 2014
Updated: Apr 9, 2020

iNVEZZ.com, Friday, March 21: The Footsie is set to open flat to slightly lower today, after the European Union yesterday agreed the final piece of its banking union.

According to data from IG markets, the UK’s blue-chip index will open four points down at 6,538.00, with no earning updates from FTSE 100 companies to provide direction. Data on public sector finances and UK banks external claims is expected at 09.30 UTC.
Yesterday, the Footsie closed 30.69 points or 0.47 percent lower at 6,542.44 points, after US Federal Reserve chair Janet Yellen suggested that interest rates could rise earlier than previously expected (FTSE 100 watch: Yellen’s comments hit UK stocks).

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Michael Hewson, chief market analyst at CMC Markets, described Yellen’s comment as a “curve ball”, unsettling markets with her suggestion about the course of interest rates. “Whether she intended to be taken so literally is open to debate but it was enough to prompt a sharp reversal,” he said in a note yesterday.

The impact of Yellen’s comments on the FTSE 100 is expected to remain today, while investor will also assess the EU banking union deal. After all-night negotiations ahead of a summit of EU leaders starting today in Brussels, lawmakers struck a deal on legislation to create a single agency to handle failing euro-area banks.
**US and Asian markets rebound**

US equity markets yesterday rebounded from the previous day’s sharp sell-off, after better-than-expected data restored confidence in the economic recovery.
The number of Americans filing for jobless benefits rose by 5,000 to 320,000 last week, below the 325,000 average forecast of analysts, data released yesterday showed. The four-week moving average for new claims, viewed as a better gauge overall of labour conditions, dropped to its lowest since November. The Dow Jones Industrial Average closed 108.88 points, or 0.7 percent, higher at 16,331.05. The S&P 500 gained 0.6 percent to end the session at 1,872.01.

“We’re getting back what we lost, now that people have had a chance to reflect; The Fed is in no hurry to normalize the Fed funds rate. That exercise is going to be very deliberate and glacial, and the market is perhaps settling into that recognition,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott, as quoted by CNBC.
Asian markets also found their footing today. After falling sharply on the Fed comments, stocks in the region regained some of the losses, with MSCI’s broadest index of Asia-Pacific shares outside Japan adding 0.4 percent. The Nikkei 225 was unable to participate in the rally as markets in Japan were shut for a public holiday.


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