7th Jul 2016 06:33
LONDON (Alliance News) - London stock prices are expected to open higher Thursday, after the minutes from the last Federal Reserve meeting revealed officials were divided about raising US interest rates this year.
IG says futures indicate the FTSE 100 to open 63.61 points higher at 6,527.2. The index closed down 1.3%, or 81.78 points, at 6,463.59 on Wednesday. Financial and housebuilding stocks again dominating the biggest fallers as more fund managers suspended trading in their UK property funds following the turmoil caused by the Brexit vote.
Wall Street ended higher Wednesday after the Fed minutes. The DJIA closed up 0.4%, the S&P 500 up 0.5%, and the Nasdaq Composite up 0.8%.
After the London close on Wednesday, the US central bank released the minutes for its June 14-15 meeting. As the meeting took place before the UK's vote to leave the European Union, the market was interested to see the Fed's view on the economy given the weak May nonfarm payrolls number.
"Most participants judged that, in the absence of significant economic or financial shocks, raising the target rate for the federal funds rate would be appropriate if incoming information confirmed that economic growth had picked up, that job gains were continuing at a pace sufficient to sustain progress toward the Committee's maximum-employment objective, and that inflation was likely to rise to 2% over the medium term," the minutes read.
"A couple of members" said they would need "sufficient evidence to increase their confidence that economic growth was strong enough to withstand a possible downward shock to demand and that inflation was moving closer to 2% on a sustained basis."
Economists at Nomura say that, while the minutes for the April meeting surprised the market with how upbeat that meeting was, the June minutes highlighted uncertainty, including the Brexit referendum.
"The committee will need more data to confirm that the economy is evolving in line with its outlook, especially given the heightened uncertainty brought on by the United Kingdom's referendum vote to leave the European Union," Nomura says.
"The committee now sees the neutral rate being held down at low levels, implying there is less room to tighten monetary policy. As such, we continue to think that the next short-term interest rate increase is most likely to come at the December meeting," the Japanese bank predicts.
In Asia Thursday, the Nikkei 225 in Tokyo closed down 0.7%, while the Shanghai Composite continues flat, and the Hang Seng in Hong Kong is up 0.9%.
London stock indices are likely to benefit from a rebound in oil prices, which rose after the American Petroleum Institute weekly crude oil stocks shrank. The API said the stock of oil fell by 6.7 million barrels in the week to July 1, compared to a 3.9 million barrel fall in the week before.
Ahead of the London stock market open Brent oil trades at USD48.91 a barrel compared to USD47.61 at the equities market close on Wednesday.
Marks & Spencer Group reported growth in group sales in the first quarter of its financial year and said its guidance remains unchanged for the full year.
The food, clothing and homeware retailer said group sales in the 13 weeks ended July 2 grew by 1.3% on the same period the year before, as 4.0% growth in the food division offset an 8.3% decline in the clothing & home division.
M&S said its new Simply Food stores continued to perform ahead of its expectations, while clothing & home was hit by a "weak market". Clothing & home sales also suffered from the retailer's decision to run fewer price promotions, while lowering everyday prices.
Chief Executive Steve Rowe added: "While it is too early to quantify the implications of Brexit, we are confident that our strategic priorities and the actions we are taking remain the right ones to deliver results for our customers and our business."
Associated British Foods also reported growth in revenue in the first 40 weeks of its financial year and said its full-year outlook has improved due to sterling weakness after the UK's European Union referendum.
AB Foods, which owns discount fashion retailer Primark, as well as British Sugar, along with agriculture and consumer goods businesses, said group revenue in the 40 weeks ended June 18 grew by 1% year-on-year.
"Following the result of the EU referendum, sterling has weakened further and at these rates we expect a bigger translation benefit in the final quarter with no material transactional effect. As a result, our outlook for this financial year has improved, and we no longer expect a decline in adjusted earnings per share for the group for the full year," AB Foods said in a statement.
In the economic calendar, Halifax house prices for the UK are at 0830 BST, just before industrial and manufacturing production data at 0930 BST. The focus will then be on the accounts of the European Central Bank's meeting on June 2 at 1230 BST.
US ADP employment change is at 1315 BST, as is initial and continuing jobless claims. The National Institute of Economic and Social Research's UK GDP estimate is at 1500 BST and the US Energy Information Administration's crude oil stocks are at 1600 BST.
By Neil Thakrar; [email protected]; @NeilThakrar1
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