LONDON MARKET EARLY CALL: Stocks Wobble After US Fed; BoE Meet Ahead

(Alliance News) - Stock prices in London are set to open lower on Thursday as European markets ...

Alliance News 17 September, 2020 | 6:59AM
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(Alliance News) - Stock prices in London are set to open lower on Thursday as European markets digest the latest US Federal Reserve policy meeting, while focus turns to the UK's own central bank, which unveils an interest rate decision at midday.

IG says futures indicate the FTSE 100 index of large-caps to open 37.18 points lower at 6,041.30 on Thursday. The FTSE 100 closed down 27.06 points, or 0.4%, at 6,078.48 on Wednesday.

The lower call for London comes after Wall Street finished mostly in the red in the wake of the Fed's decision.

The policy-setting Federal Open Market Committee left its benchmark rate unchanged in the range of 0% to 0.25%, as widely expected, and intends to keep the benchmark lending rate low until maximum employment is achieved even if inflation rises above 2%.

"We expect to maintain an accommodative stance of monetary policy until these outcomes, including maximum employment, are achieved," Powell said.

In its forward guidance, which Powell said was "strong and powerful" and will support economic growth, the Fed does not expect core personal consumption expenditure inflation to hit 2.0% until 2023. The Fed is expects unemployment to be at 4.0% in 2023, falling from 7.6% in 2020, 5.5% in 2021 and 4.6% in 2022.

The Fed also noted that, over coming months, it will continue to increase its holdings of Treasury securities and agency mortgage-backed securities at least at its current pace.

Powell said the Fed is "not out of ammo", and believes the central bank has "lots of tools".

Stephen Innes, chief global markets strategist at AxiCorp, said: "Not extending Treasury purchases was the hawkish surprise from the Fed and should drive real yields higher and gold and other commodities lower in the near term, with the rally in EURUSD stalling in particular."

Gold was quoted at USD1,942.60 an ounce early Thursday, down from USD1,969.00 on Wednesday, amid a stronger dollar. Brent oil was trading at USD41.74 a barrel, soft against USD41.90 late Wednesday.

The euro traded at USD1.1764 early Thursday, lower than USD1.1843 late Wednesday.

In the US on Wednesday, Wall Street ended mostly lower, with the Dow Jones Industrial Average ending up 0.1% but the S&P 500 down 0.5% and the Nasdaq Composite down 1.3%.

Following the Fed decision, the Bank of Japan said on Thursday it expects a moderate pace of economic improvement following the global pandemic but warned that there are "extremely high uncertainties" going forward.

The bank decided to keep its short-term policy interest rate unchanged at negative 0.1%.

The central bank noted that both Japan's and overseas economies have started picking up again, although the economies remain in a severe situation due to the impact of the coronavirus pandemic at home and abroad.

Against the yen, the dollar rose to JPY105.04 versus JPY104.85.

In Asia on Thursday, the Japanese Nikkei 225 index is down 0.6%. In China, the Shanghai Composite is down 0.7%, while the Hang Seng index in Hong Kong is down 1.5%.  

Finishing off a bumper central banking week is the BoE at midday. No change to policy is expected this week, but analysts think the UK central bank will set the stage for further easing in November.

"With November action from the Bank of England looking ever-more-likely, we'll be watching closely to see if policymakers offer up any further clues on which tools they're most likely to use," said ING.

Sterling was quoted at USD1.2928 early Thursday ahead of the BoE, lower than USD1.2996 at the London equities close on Wednesday.

Outside of the BoE, there is a eurozone consumer price index print at 1000 BST and weekly US initial jobless claims at 1330 BST.

The UK corporate calendar has blue-chip retailer Next publishing half-year results, along with full-year results from housebuilder Kier and investment manager Brooks Macdonald and interim results from food packaging firm Hilton Food.

By Lucy Heming; lucyheming@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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