29th Nov 2018 06:59
LONDON (Alliance News) - Stocks in London are set to open higher on Thursday, following substantial gains in the US overnight, after US Federal Reserve Chairman Jerome Powell hinted interest rate rises could slow.
Powell's statement during a speech at the Economic Club of New York marked a departure from his comments in October, when he said that the Fed was a "long way" from neutral.
"Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy - that is, neither speeding up nor slowing down growth," Powell said Wednesday.
The Fed last raised its benchmark US interest rate in September, setting it at a range of 2.00% to 2.25% based on the strong US labour market conditions and low inflation. The US central bank is expected next month to hike again, for the fourth time in 2018.
"The prospect of a Fed pause was just what the equity market doctor ordered and boosting investor sentiment. Powell's dovish pivot reduces nagging concerns about vigorous interest rate hikes while providing the market with one of the best holiday gifts, a significant bounce in global equity markets," said Stephen Innes, head of trading APAC at Oanda.
IG says futures indicate the FTSE 100 index of large-caps to open 33.48 points higher at 7,038.00 on Thursday. The FTSE 100 index closed down 12.33 points, or 0.2%, at 7,004.52 on Wednesday.
In the US on Wednesday, Wall Street ended firmly in the green, with the Dow Jones Industrial Average ending up 2.5%, the S&P 500 up 2.3% and Nasdaq Composite up 3.0%.
In Asia on Thursday, the Japanese Nikkei 225 index ended up 0.4%. In China, the Shanghai Composite is down 0.9%, while the Hang Seng index in Hong Kong is down 1.0%.
The economic events calendar on Thursday has eurozone consumer confidence data at 1000 GMT and Germany unemployment figures at 0855 GMT and inflation readings at 1300 GMT. In addition, US core personal consumption expenditure, which is the US Federal Reserve's preferred inflation gauge, is due at 1330 GMT. The minutes of the US Federal Open Market Committee will be released at 1900 GMT.
After the market close on Wednesday, the Bank of England's annual stress test showed UK banks are strong enough to withstand a disorderly Brexit and the country's financial system is resilient to the wide range of risks it could face.
In the 2018 stress-test scenario, UK GDP falls by 4.7%, the UK unemployment rate rises to 9.5%, UK residential property prices fall by 33% and UK commercial real estate prices fall by 40%. The scenario also includes a sudden loss of overseas investor appetite for UK assets, a 27% fall in the sterling exchange rate index and Bank Rate rising to 4%.
The BoE said that the seven participating banks, which include Royal Bank of Scotland Group, Barclays, HSBC Holdings, Lloyds Banking Group, Standard Chartered, Nationwide Building Society and Santander UK did not reveal capital inadequacies and were consequently not required to submit a revised capital plan.
The stress tests came amid stark warnings on Wednesday from the BoE and the UK government about the impact on the UK economy of a no-deal Brexit.
The UK corporate calendar on Thursday has full-year results from travel agent Thomas Cook Group - which gave a stark preview of the results by issuing a profit warning on Tuesday - and soft drinks maker Britvic. There are also half-year results from car auction operator BCA Marketplace, brewer Greene King and a trading statement from transport company Go-ahead Group.
In early company news, shopping centre owner Intu said a consortium which had mulled making a formal takeover offer for the FTSE 250 constituent has decided against such a move.
"The consortium is highly appreciative of the cooperation shown by intu's board of directors and management team over the past six weeks. However, given the uncertainty around current macroeconomic conditions and the potential near-term volatility across markets, the consortium is not able to proceed with an offer within a timeframe which is manageable within the confines of the Code timetable," the consortium comprising Peel Group, Olayan Group and Brookfield Property Group said in a statement.
Since the consortium first raised the possibility of making an offer for Intu in October, shares in the retail property investor have risen 25%. Earlier this year, in April, peer Hammerson dropped its own takeover bid for Intu, believing the deal was not in the interest of shareholders.
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