FTSE stalls with BoE set to dictate sentiment

A sharp rise in Next shares has helped retailers to a positive morning, yet with the BoE due up at lunchtime, there is a significant degree of hesitation evident in early trade

• FTSE hesitates, with BoE set to dictate the tone

• Australian jobs improve despite weak Chinese data

• Next outlook lifts high street names

The FTSE is trading marginally lower, as the index picks up where it left off after yesterday’s largely flat and indecisive day. It comes as no surprise that we are seeing such uncertainty and lack of direction for UK stocks in a week which has been dominated by UK data points. With rampant inflation coupled with stagnant wage growth, the BoE has its hands full today as it seeks to ease the diminishing real income growth before living standards and consumption begins to suffer. With real incomes falling, the BoE must decide whether it is preferable to raise rates in an effort to strengthen the pound (and reduce inflation), or whether to remain accommodative to help push up wages.

Despite strong showings for the Chinese manufacturing PMI surveys, we have started to see Chinese data take a turn of late, with overnight data highlighting weakness in both export led industrial production and domestic demand led retail sales numbers. Interestingly, despite the weak Chinese figures, the impressive Australian jobs numbers released overnight point towards a either a resurgence in exports to countries like China, or a pickup in domestic demand.

This morning has been dominated by the high street retailers, with M&S and ABF (Primark owner) piggybacking on an improved outlook from Next. Despite a fall in total sales and pre-tax profits, markets have jumped on the upward revision to their full-year sales and profit guidance to push the shares almost 12% higher.

Ahead of the open we expect the Dow Jones to open 18 points lower, at 22,140.