Stocks to edge lower; Australia hikes rates

(Alliance News) - Stocks in London were set to open slightly lower on Tuesday, following a weaker finish on Wall Street.

IG says futures indicate the FTSE 100 index of large-caps to open down 6.5 points, 0.1%, at 7,593.49 on Tuesday. The index closed down 7.29 points, or 0.1% at 7,599.99 on Monday.

New York ended in the red on Monday, with the Dow Jones Industrial Average down 0.6%, the S&P 500 down 0.2% and the Nasdaq Composite down 0.1%.

"US markets initially got off to a reasonably positive start but the disappointment over the May ISM services report tempered gains, as well as prompting a sharp reversal in yields which had been higher in the lead-up to yesterday's 3pm data drop," said CMC Markets' Michael Hewson.

The ISM services PMI registered 50.3 in May, its fifth consecutive month of growth. But this was down from 51.9 in April.

"The weak nature of the ISM services report was in sharp contrast to other service sector numbers, raising more questions, than answers about the strength of the US economy, ahead of next week's [Federal Reserve] meeting," Hewson continued.

Also out on Monday, the seasonally adjusted final S&P Global US services purchasing managers index posted 54.9 points in May, up from 53.6 in April, though slightly below an earlier flash estimate of 55.1.

The dollar was slightly lower early Tuesday in London.

Sterling was quoted at USD1.2449, higher than USD1.2415 at the London equities close on Monday. The euro traded at USD1.0726, higher than USD1.0711. Against the yen, the dollar was quoted at JPY139.42, edging down versus JPY139.60.

In Asia on Tuesday, the Nikkei 225 index was up 0.8% in Tokyo. The Shanghai Composite was down 0.3%, while the Hang Seng index in Hong Kong was up 0.6%.

The S&P/ASX 200 in Sydney fell 0.9%.

The Reserve Bank of Australia enacted another unexpected interest rate hike of 25 basis points, bringing the cash rate target to 4.10%. The interest rate paid on exchange settlement balances was also increased by 25bp to 4.00%.

This follows a surprise 25bp hike in May.

RBA Governor Philip Lowe explained that upside risks to the outlook for inflation have increased, noting "very high" services price inflation.

Gold was quoted at USD1,960.29 an ounce early Tuesday in London, slightly higher than USD1,959.00 late Monday.

Oil returned some of the price gains made after the production cut announced by Saudi Arabia over the weekend. Brent was trading at USD76.61 a barrel, lower than USD77.37.

In Tuesday's UK corporate calendar, there is a trading statement from cigarette maker British American Tobacco and third-quarter results from plumbing and heating products distributor Ferguson.

The economic calendar has a UK construction PMI print at 0930 BST and US retail sales at 1500 BST.

By Elizabeth Winter, Alliance News senior markets reporter

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