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MARKET PREVIEW: FTSE 100 to extend losses

May 16 2012, 7:07am MARKET PREVIEW: FTSE 100 to extend losses

Financial bookmakers are expecting another sell-off in London. The FTSE 100 is set to open at 5,383, down 54 points (one percent) from Tuesday’s close.

The UK’s blue chip index shed 27 points yesterday after coalition talks between give parties called by president Karolos Populias failed, forcing the country to hold a new election.

Greek voters will head to polls in June, which means the markets are facing another month of the Greek political turmoil.

It has been reported that the anti-bailout Coalition of the Radical Left, also known as Syriza, has gained support since the last election on May 6 and is likely to win in June, which could put Greece’s membership in the euro zone in jeopardy.

“So for now, the market is starting to accept the current Greek deal is unlikely to survive in its current form and a best case scenario would see more concessions,” said chief market analyst at City Index Peter Esho.

“A worst case scenario is not being priced into the market but a new dangerous level of political discussion is growing – Greece’s elected and increasingly popular left leaning politicians argue the Euro zone is unwilling to let Greece go and so better concessions should be negotiated.

“The market might find this a little too overbearing, putting more pressure on risk assets in the near term.”

Traders will have a raft of US data to digest today including an update on housing starts and building permits for April and minutes form the latest meeting of the Federal Open Market Committee (FOMC).

A Bloomberg poll predicted a 4.7 percent increase in housing starts to an annualised rate of 685,000.

Weekly oil inventories data from the Department of Energy will also be of interest.

In the UK, the Office for National Statistics will release first quarter employment data this morning.

Across the Atlantic, the Dow Jones Industrial Average (DJIA) dropped 63 points (0.5 percent) to end the session at 12,632 and the broader S&P 500 index shed 7.5 points (0.55 percent) to close at 1,330.

Likewise, Asian markets were in selling mode today. Japan’s benchmark Nikkei 225 index tumbled 144 points (1.6 percent) to 8,756 and China’s Shanghai Composite Index was down 17.5 points (0.75 percent) at 2,357 at the end of the session.

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