LONDON MARKET EARLY CALL: Higher call as inflation worries ebb for now

(Alliance News) - Stocks in London are set to open higher on Thursday, tracking gains in the US ...

Alliance News 14 October, 2021 | 7:01AM
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(Alliance News) - Stocks in London are set to open higher on Thursday, tracking gains in the US overnight as nerves were soothed by a broadly as-expected US inflation reading and a softening of consumer price pressures in China.

IG says futures indicate the FTSE 100 index of large-caps will open up 39.88 points, or 0.6%, at 7,181.70 on Thursday. The FTSE 100 closed up 11.59 points, or 0.2%, at 7,141.82 on Wednesday.

"Due to last night's resilient US performance, markets here in Europe look set to open slightly higher, with the FTSE 100 looking to open at its highest levels in over a month," said Michael Hewson.

Wall Street ended mostly higher on Wednesday, with the Dow Jones Industrial Average closing flat, the S&P 500 up 0.3%, and the Nasdaq Composite up 0.7%

Stocks in New York got a lift after US inflation data on Wednesday held no major surprises, the core measure rising 0.2% month-on-month in September, in line with expectations after a rise of 0.1% in August.

The headline annual inflation rate was 5.4% for September, ticking up slightly ahead of expectations for price growth to be in line with the 5.3% reported for August.

On Thursday, China reported that factory inflation hit its highest level in a quarter of a century on surging commodity costs last month - but consumer price growth eased.

The producer price index, which measures the cost of goods at the factory gate, rose 10.7% year-on-year in September, the National Bureau of Statistics said, marking the biggest jump in its data going back to October 1996. This marked an uptick from 9.5% growth in August.

More reassuringly, consumer price growth was flat month-on-month, undershooting forecasts for a rise of 0.3% and following on from 0.1% growth last month. The annual measure also was lower than expected, rising just 0.7% against forecasts of 0.9%.

In Asia on Thursday, the Japanese Nikkei 225 index was up 1.4%. In China, the Shanghai Composite was flat, while the Hang Seng index in Hong Kong was shut for a holiday. The S&P/ASX 200 in Sydney was up 0.5%.

Focus now lies on US producer prices and jobless claims figures, due on Thursday at 1330 BST.

The US Federal Reserve will be keeping an eye on the factory price monitor after minutes on Wednesday showed the central bank could begin reducing the pace of its USD120 billion monthly asset purchase programme by as soon as mid-November.

At present, the Fed is currently buying at least USD80 billion in Treasury securities and USD40 billion in mortgage-backed securities. The minutes indicated the Fed probably would start by cutting USD10 billion a month in Treasury securities and USD5 billion a month in MBS.

Participants noted that if a decision to begin tapering purchases occurred at the next meeting, the process of tapering could commence with the monthly purchase calendars beginning in either mid-November or mid-December.

"In their discussion of inflation, participants observed that the inflation rate was elevated, and they expected that it would likely remain so in coming months before moderating," the minutes showed, though the central bank continues to believe price pressures are transitory.

The US dollar was largely lower early Thursday, though continued to make gains against the safe haven Japanese yen.

Sterling was quoted at USD1.3666 early Thursday, higher than USD1.3565 at the London equities close on Wednesday. The euro traded at USD1.1590 early Thursday, firm on USD1.1575 late Wednesday.

Against the yen, the dollar rose to JPY113.57 versus JPY113.35.

Gold was quoted at USD1,790.27 an ounce, down from USD1,792.11 on Wednesday. Brent oil was trading at USD83.84 a barrel early Thursday, up from USD83.11 late Wednesday.

The UK corporate events calendar on Thursday has trading statements from emerging markets-focused asset manager Ashmore Group, pizza delivery chain Domino's Pizza, recruiter Hays and transport operator National Express.

By Lucy Heming; lucyheming@alliancenews.com

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