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LONDON MARKET EARLY CALL: Lower call as recession fears continue

Thu, 23rd Jun 2022 06:59

(Alliance News) - Stock prices in London are seen opening lower on Thursday after Federal Reserve Chair Jerome Powell admitted the US economy could tip into recession following aggressive interest rate hikes.

IG futures indicate the FTSE 100 index will open 14.52 points lower at 7,074.70. The large-cap index closed down 62.83 points, or 0.9%, at 7,089.22 Wednesday.

Wall Street ended lower on Wednesday, with the Dow Jones Industrial Average down 0.2%, S&P 500 down 0.1% and Nasdaq Composite down 0.2%.

The US economy remains strong but a series of aggressive rate hikes meant to cool soaring inflation could eventually trigger a recession, its top central banker cautioned.

Powell, whose testimony before US senators was closely watched by investors and analysts, said the world's largest economy faces an "uncertain" global environment and could see further inflation "surprises".

The Fed chair stressed that the US central bank understands the hardship caused by rising prices and is committed to bringing down inflation, which has reached a 40-year high.

"Sentiment has continued to ebb and flow this week, as stock markets continue to get buffeted by concerns about recession against a backdrop of central banks who appear determined to squeeze inflation out of the global economy," said CMC Markets analyst Michael Hewson.

"As we look ahead to today's European open the main focus is set to be on the latest flash PMIs for June from France, Germany, UK and the US with further weakness expected across the board in the face of higher prices and weakening demand," Hewson added.

Te Nikkei 225 index in Tokyo was down 0.1%.

Economic activity in Japan registered its best performance in seven months, as border restrictions were relaxed, survey data showed on Thursday.

The au Jibun Ban-S&P Global flash composite output index rose to 53.2 in June from 52.3 in May. Any reading over the neutral level of 50.0 indicates growth.

"Activity at Japanese private sector businesses rose solidly at the midway point of 2022 as border restrictions related to the Covid-19 pandemic were eased. The rise was the fourth in as many months and the sharpest recorded since last November amid the strongest expansion in the services sector since October 2013, with firms relating the increase to the return of international visitors," said Usamah Bhatti, economist at S&P Global Market Intelligence.

This was driven by the services business activity index, which rose to 54.2 from 52.6. The manufacturing purchasing managers' index eased to 52.7 from 53.3.

In China, the Shanghai Composite was up 0.7%, while the Hang Seng index in Hong Kong was up 1.4%. The S&P/ASX 200 in Sydney was up 0.4%.

The pound was quoted at USD1.2260 early Thursday, down from USD1.2303 at the London equities close Wednesday.

The euro was priced at USD1.0570, down from USD1.0592. Against the yen, the dollar was quoted at JPY135.50 in London, lower against JPY135.89.

Brent oil was trading at USD109.92 a barrel Thursday morning, down from USD111.14 late Wednesday. Gold stood at USD1,833.56 an ounce, lower against USD1,841.20.

Thursday's economic calendar has a slew of flash purchasing managers' index readings, including for the eurozone at 0900 BST, the UK at 0930 and the US at 1445 BST.

The UK corporate calendar has a trading statement from outsourcer Serco Group. Wine retailer Naked Wines releases annual results.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2022 Alliance News Limited. All Rights Reserved.

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