9th Oct 2014 06:33
LONDON (Alliance News) - UK stocks are set to open considerably higher Thursday after the US Federal Reserve minutes took a more doveish tone than investors had anticipated.
Futures indicate the FTSE 100 to open 58 points higher at 6,540.7. The index closed Wednesday at 6,482.24.
The Fed's minutes of the September 16-17 meeting revealed that members had concerns about global growth because of the impact of a strong US dollar. Some members said the stronger currency will hurt Fed's efforts to get annual inflation back to its 2% target in the next few years.
There was also a disagreement over the Fed's promise to keep interest rates at zero for a "considerable time", with several voting members expressing concerns that the phrase will give markets an inaccurate outlook for when the central bank will tighten.
"The concern was raised that the reference to 'considerable time' in the current forward guidance could be misunderstood as a commitment rather than as data dependent," the minutes said.
However, others were reluctant to change the "considerable time" phrase for fear that markets would read a change in guidance as a hawkish shift in policy.
The minutes also confirmed the Fed will end its bond-buying program after October.
With the minutes seen as having a doveish bias, the euro rose to USD1.2740, gaining from last week's two-year low near USD1.25. Ahead of the London open, the euro trades at USD1.2738. The pound is quoted at GBP1.6159
"This unexpectedly doveish tone would appear to suggest that once again markets got their knickers in a twist over nothing, and that a Fed rate hike still remains some way off, though speculation about the timing will still continue with every subsequent bit of positive data over the coming weeks," says Michael Hewson, chief market analyst at CMC Markets.
US stocks rallied in response to the minutes with the DJIA closing up 1.6%, the S&P up 1.8% and the Nasdaq Composite up 1.9%.
Asian trading, however, has been mixed Thursday, with the Hang Seng currently outperforming, trading up 1.0%. The Shanghai Composite trades down 0.1%, and the Japanese Nikkei closed down 0.8%.
German trade surplus fell to EUR17.5 billion in August , missing expectations of a fall to EUR18.5 billion from July's figure of EUR22.2 billion. The fall was caused by a decline in both imports and exports and highlighted further the recent struggles of Europe's biggest economy.
Old Mutual has priced its OM Asset Management initial public offering below its previous estimate. The FTSE 100 financial services group priced the IPO at USD14.00 per share after initially intending to price it between USD15.00 and USD17.00 per share. The company is selling 18.3% of its stake in the company.
FTSE 250-listed catalogue retailer N Brown has reduced its full-year guidance, saying that the second half of the year will be hit by weak September sales. In its half-year report, the company reported a decline in first half pretax profit to GBP42.7 million from GBP44.1 million in the previous year. Revenue also declined in the period to GBP407.3 million from GBP409.6 million, but N Brown maintained its interim dividend at 5.67 pence per share.
Thursday's other main focus is the Bank of England interest rate decision at 1200 BST. The monetary policy committee is expected to maintain the interest rate at 0.5% and asset purchase at GBP375 billion. Also in the economic calendar, is the European Central Bank's monthly report at 0900 BST, which contains a detailed analysis of the prevailing economic situation in the eurozone and the risks to price stability.
Later in the day is US initial jobless claims for the week ending October 3 and continuing jobless claims for the week ending September 26 will be released at 1330 BST. ECB President Mario Draghi will be speaking at the Brookings Institution in Washington DC at 1600 BST.
By Neil Thakrar; [email protected]
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