FTSE preview: Shares rally as M&S reports

By Reuters
Updated: 02:47 EDT, 24 May 2011

The FTSE 100 is seen opening modestly higher thanks to a rally by commodity prices, although investors remained nervous on euro zone debt concerns.

New day: The Footsie will aim to recover losses.

Financial bookmakers expect the UK blue chip index to start up 5-13 points, or 0.2 points on Tuesday, having closed 112.60 points, or 1.9% lower at 5,835.89 in the previous session, its lowest closing level since March 23.

Commodity stocks led the decline on Monday as investors' risk appetite vanished on fears of further sovereign debt crises after ratings agency Fitch downgraded Greece's debt by three notches on Friday, and rival Standard & Poor's cut its outlook for Italy to 'negative' from 'stable' the following day.

Doubts about austerity measures in Spain added to the worries after the country's ruling Socialist party was defeated in regional elections.

US stocks closed at their lowest levels in a month on Monday in a sign of increasing doubt that equity markets can weather recent weakness in global manufacturing and demand. But Asian equities managed to post modest gains on Tuesday, steadying as commodity prices rallied, with copper up 0.9%, and Brent crude futures ahead 0.7%.

Technical analysis of the FTSE 100 index, however, remained cautious.

'After showing several signs of weakness over the past two weeks, the FTSE 100 finally broke through support at 5,858.00, confirming the downtrend and signaling the possible start of a move to much lower levels,' said Enis Mehmet, analyst at Autochartist.

'The quick nature of the break suggests possible short-term oversold conditions. With the market trading inside of a potential support zone and after reaching oversold levels, traders shouldn't be surprised by a fast short-covering rally to set up the next shorting opportunity,' Mehmet added.

On the macroeconomic front, British government finances will come under scrutiny on Tuesday, with April PSNCR and PSNB due.

May's CBI distributive trades survery will also be released.

Across the Atlantic, April US new homes sales will be the main focus, due for release.

Marks & Spencer delivers full-year results today.

Unconditional trading begins in commodity trader Glencore's stock following last Thursday's London debut after its record £11bn IPO, with the shares set to join the FTSE 100 index from the start of trading on Wednesday, replacing Invensys.

The Independent Commission on Banking, chaired by John Vickers, is planning to set a minimum amount of bond-funded capital that banks should hold in addition to equity, with a number of 4% or 5% looking likely, The Financial Times said.

There will be results today from Pennon Group, C&W Worldwide, De La Rue, Great Portland Estates, Homeserve, Victrex, Holidaybreak, Paragon Group, Endace, Big Yellow Group and Strategic Thought Group.