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Pre-market: UK public sector borrowing rose less than expected in May


UK Market Snapshot 

UK markets finished lower on Friday, extending its previous sessions losses, marred by fears of a possible scaling back of US Federal Reserve’s bond buying program and amid political unrest in Greece. Royal Bank of Scotland Group tumbled 7.2%, after the UK Chancellor, George Osborne indicated that the government is looking to split the bank into a “good” and “bad” bank. Polymetal International retreated 2.9%, after a broker cut its price target on the stock. Marks & Spencer Group dropped 2.7%, after a broker reiterated its ‘Underperform’ rating on the stock. Talktalk Telecom Group declined 6.0%, after a broker downgraded the stock to ‘Sell’ from ‘Neutral’. On the flipside, BT Group gained 1.0%, following a broker upgrade to ‘Buy’ from ‘Neutral’. The FTSE 100 shed 0.7%, to close at 6,116.2, while the FTSE 250 slid 0.9%, to settle at 13,544.9. 

US Market Snapshot 

US markets closed mostly higher on Friday. rallied 4.2%, amid news that the company has reached an agreement with Oracle for a business alliance allowing their products to share data. Facebook jumped 2.6%, following a broker upgrade to ‘Buy’ from ‘Neutral’. Bucking the trend, Oracle plunged 9.3%, after the company’s fourth quarter revenue fell short of market expectations. Zynga tumbled 5.1%, following a broker downgrade to ‘Underweight’ from ‘Equal weight’. Darden Restaurants dropped 2.2%, after the company indicated that its earnings for 2014 would be about 5% below its 2013 profits. The DJIA rose 0.3%, to settle at 14,799.4, while the NASDAQ slid 0.2%, to close at 3,357.3. The S&P 500 gained 0.3%, to settle at 1,592.4. 

Europe Market Snapshot 

Other European markets finished lower on Friday, as fears of US Federal Reserve scaling back its bond buying program continued to dent investor sentiment and following political unrest in Greece. SAP declined 2.7%, after its US peer, Oracle reported downbeat fourth quarter revenue. Volkswagen fell 2.1%, following news that the company has sacked the R&D chief of its Audi division. Peers, Bayerische Motoren Werke and Daimler slipped 2.0% and 1.8%, respectively. On the flipside, Danone jumped 2.0%, following a broker upgrade to ‘Overweight’ from ‘Neutral’. The FTSEurofirst 300 index declined 1.0%, to close at 1,132.7. Among other European markets, the German DAX Xetra 30 slid 1.8%, to close at 7,789.2, while the French CAC-40 shed 1.1%, to settle at 3,658.0. 

Asia Market Snapshot 

Markets in Asia are trading lower this morning, amid economic uncertainties in the Chinese economy due to increased interbank interest rates. In Japan, Acom is trading 6.3% higher, after the company announced a stock split. Softbank is trading 3.2% higher, after rival bidder, Dish Network gave up the race to acquire Sprint Nextel. In Hong Kong, Belle International Holdings is trading 5.9% lower, after a broker slashed the price target on the stock. Agricultural Bank of China and Industrial & Commercial Bank of China are trading 2.6% and 2.0% lower, respectively. In South Korea, LG Uplus and SK Telecom are trading 4.3% and 3.8% lower, respectively. The Nikkei 225 index is trading 3 points lower at 13,227.0. Hang Seng index is trading 1.6% down, at 19,949.5, while the Kospi index is trading 0.7% lower, at 1,810.5. 

Key Economic News 

UK public sector borrowing rose less than expected in May 

The Public Sector Net Borrowing (PSNB) in the UK rose to a seasonally adjusted £10.5 billion in April, from a revised £6.6 billion reported in April. Market had expected the net borrowings to rise to £13.5 billion in May. Meanwhile, PSNB excluding financial interventions stood at £8.8 billion in May, compared to a revised £4.9 billion recorded in April. Market had expected the figure to stand at £12.6 billion in May. 

Euro-zone current account surplus narrowed sharply in April 

The European Central Bank (ECB) reported that, on a seasonally adjusted basis, the current account surplus in the Euro-zone narrowed to €19.5 billion in April from €25.9 billion in the prior month. On an unadjusted basis, current account surplus came in at €15.3 billion in April, following a revised €24.9 billion surplus recorded in March. 

Switzerland’s M3 money supply growth slowed in May 

According to a report from the Swiss National Bank, on a year-on-year basis, M3 money supply in Switzerland rose 9.7% in May, compared to a revised 10.3% rise reported in April. 

Canadian consumer prices rose less than expected in May 

On a monthly basis, the consumer price inflation in Canada rose to a seasonally adjusted 0.2% in May, from minus 0.2% recorded in the previous month. Market had expected inflation to come in at 0.4% in May. On an annual basis, the Consumer Price Index (CPI) rose 0.7% in May, compared to a 0.4% rise recorded in the previous month. Meanwhile, on a monthly basis the Bank of Canada’s (BoC) core CPI rose 0.2% in May, following a 0.1% rise recorded in the previous month. On an annual basis, BoC’s core CPI rose 1.1% in May, after a rise of the same magnitude in the previous month. Market had expected the CPI to rise 1.2% in May. 

Canadian retail sales rose less than expected in April 

On a monthly basis, retail sales in Canada rose 0.1% in April to C$39.5 billion, from an unrevised flat reading in the previous month. Market had expected retail sales to rise 0.2% in April. Meanwhile, retail sales excluding autos fell unexpectedly by 0.3% in April, compared to a revised drop of 0.3% recorded in the previous month. 

China’s central bank sees overall liquidity as 'reasonable' 

The People’ Bank of China (PBOC) stated that “The overall liquidity in China's financial system is at a reasonable level”. The comments from the bank came following the spike in interest rates for short-term funds in China to extraordinary levels last week after big commercial banks restrained from lending in the interbank market. Further PBOC added that “it has asked commercial banks to improve the ways they manage liquidity”.

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