18th Sep 2024 06:48
(Alliance News) - Stocks in London are called to open lower on Wednesday, after some unconvincing trade in New York, ahead of the latest Federal Reserve interest rate decision later.
A UK inflation reading steals some of the spotlight, on the eve of the next Bank of England decision.
The UK data is released at 0700 BST, with the US rate decision at 1900 BST. Elsewhere, the economic calendar has a eurozone inflation reading and construction output data at 1000 BST.
IG says futures indicate the FTSE 100 to open 22.6 points lower, 0.3%, at 8,287.26 on Wednesday. The index of London large-caps closed up 31.42 points, 0.4%, at 8,309.86 on Tuesday.
According to the CME FedWatch Tool, there is a 65% chance that the Fed will cut interest rates by 50 basis points on Wednesday and a 35% chance of a 25 basis point cut. The federal funds rate range is currently at between 5.25% and 5.50%.
"The market is waiting for the Fed to cut rates today for the first time in years: the economist Bloomberg survey expects 25bps; markets are split between pricing 25bps and 50bps, with the most speculation in Fed Funds futures since they began trading in 1988; some joke the Fed should cut 37.5bps to please everyone," analysts at Rabobank commented.
"There were hopes US retail sales data could make the case for 25 or 50bps, but they didn’t. The headline was stronger than consensus, but the ex-autos figure was weaker."
US retail sales edged higher in August, albeit at a more modest pace than July. The value of retail purchases, unadjusted for inflation, increased 0.1% in August on-month after an upwardly revised 1.1% gain in July, the Census Bureau reported. That was ahead of the FXStreet consensus which predicted a fall of 0.2%.
Excluding autos and gasoline stations, sales advanced 0.2%, slightly below the 0.3% consensus.
The pound was quoted at USD1.3157 early Wednesday, fading from USD1.3164 at the time of the London equities close on Tuesday. The euro stood unmoved at USD1.1119. Against the yen, the dollar was trading at JPY141.34, down from JPY141.76.
The price of gold edged up to USD2,566.61 an ounce from USD2,564.83. Brent oil was quoted at USD73.15 a barrel, down from USD73.60.
The rate of annual consumer price inflation in the UK is expected to have remained at 2.2% in August, where it stood in July, according to consensus cited by FXStreet.
"Today, we will get one more piece of inflation data from the UK ahead of the Bank of England's interest rate meeting tomorrow. However, these are unlikely to have any impact on interest rate expectations," Commerzbank analyst Antje Praefcke commented.
"For one thing, only a small minority expects a rate cut tomorrow anyway. For another, service inflation in particular is likely to be higher again in August. The decline in July was due to very volatile components, which is why we were sceptical as to whether this trend would continue. Accordingly, core inflation is likely to remain stubbornly high, the annual rate may even be higher again than in July, and support our expectation that the BoE will leave the key rate unchanged tomorrow."
The BoE announces a rate decision at midday on Thursday. Bank rate currently stands at 5.00%.
Equities in Asia were mixed on Wednesday. In Tokyo, the Nikkei 225 was up 0.1% in late trade. In China, the Shanghai Composite was down 0.1%. In Sydney, the S&P/ASX 200 was 0.1% lower. Financial markets in Hong Kong are closed.
Wednesday's UK corporate calendar sees full-year results from consumer goods firm PZ Cussons.
By Eric Cunha, Alliance News news editor
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