(Alliance News) - Stocks in London are set to open higher on Thursday, after Federal Reserve Chair Jerome Powell came across slightly less hawkish than feared on Wednesday.
IG says futures indicate the FTSE 100 to open 38.8 points higher, 0.5%, at 8,159.74 on Thursday. The index of London large-caps closed down 22.89 points, 0.3%, at 8,121.24 on Wednesday.
In Tokyo on Thursday, the Nikkei 225 was 0.1% higher in late trade, while Sydney's S&P/ASX 200 climbed 0.4%. The Hang Seng Index in Hong Kong shot up 2.4%, as traders returned to desks there following a public holiday on Wednesday. Financial markets in Shanghai remain closed.
In New York on Wednesday, the Dow Jones Industrial Average rose 0.2%, though the S&P 500 and Nasdaq Composite each lost 0.3%.
Powell downplayed fears that the next move on interest rates could be upwards, suggesting policy will prove restrictive enough to lower inflation.
But he also dashed hopes for a near-term rate cut noting it was taking longer to gain confidence that inflation was on track to hit the central bank's 2% target.
Powell said he believed policy was "restrictive" and believes over time, it will be "sufficiently restrictive."
In a widely expected move, the Federal Reserve kept its benchmark short-term borrowing rate in a targeted range between 5.25% to 5.50%. The federal funds rate has been at that level since July 2023, when the Fed last hiked rates, which took the range to its highest level in more than two decades.
In a statement at the conclusion of its two-day meeting, the Federal Open Market Committee said inflation has eased over the past year but remains elevated.
"The key takeaway from this meeting is that the tone was more dovish than expected, but that is because the rate hike hype in the US was over-egged, and rate cut hopes had been pared back too far in recent weeks. Market-based interest rate expectations have only shifted slightly in the aftermath of this meeting. There is now a chance of a December rate cut, with one full cut priced this year and a slightly larger chance of a second cut priced in post Powell's press conference," XTB analyst Kathleen Brooks commented.
"The other takeaway is that there is an incredibly high bar for a rate hike rather than a rate cut. Powell said that rates are restrictive at 5.25-5.5%, and it is unlikely that the Fed's next move will be a hike. At the same time, the Fed is data dependent, and will not pre commit to rate cuts. This is the inherent tension for the Fed right now: rates are high enough, but they can't pre commit to the next move because inflation remains volatile."
The pound was quoted at USD1.2532 early Thursday, rising from USD1.2487 at the time of the London equities close on Wednesday. The euro stood at USD1.0713, up from USD1.0679. Against the yen, the dollar was trading at JPY155.80, down markedly from JPY157.72.
Commerzbank analyst Michael Pfister commented: "Yesterday evening it happened again — apparently the Japanese Ministry of Finance took advantage of the general USD weakness after the Fed meeting to send another signal to the FX market that the MOF is serious about intervening. USD-JPY fell sharply within a short period of time."
Brent oil was quoted at USD83.99 a barrel early Thursday, up from USD83.78 late Wednesday. Gold was quoted at USD2,315.95 an ounce, up from USD2,308.30.
Thursday's UK corporate calendar has first quarter results from oil major Shell.
The economic calendar for Thursday has manufacturing PMIs from Germany and the eurozone. At 1330 BST, there is the weekly US initial jobless claims data.
By Eric Cunha, Alliance News news editor
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