(Alliance News) -Â With the US Federal Reserve's decision to taper its economic stimulus now confirmed, eyes turn to the Bank of England on Thursday and whether it will decide to raise UK interest rates for the first time since 2018.
Ahead of the BoE decision, stocks were buoyed by soothing comments from Fed Chair Powell over the US interest rate outlook.
BT was helping to push London's blue-chip index higher, while Currys and Aston Martin advanced in the mid-cap FTSE 250.
The FTSE 100 was up 18.20 points, or 0.3%, at 7,267.09 early Thursday. The FTSE 250 index was up 105.98 points, or 0.5%, at 23,222.95. The AIM All-Share index was up 3.18 points, or 0.3%, at 1,229.95.
The Cboe UK 100 index was up 0.3% at 719.92. The Cboe 250 was up 0.5% at 20,733.04, and the Cboe Small Companies flat at 15,554.29.
In mainland Europe, the CAC 40 in Paris and the DAX 40 in Frankfurt were both up 0.5% early Thursday.
"Central banks continue to set the tone with the BoE and Norges Bank due to meet today," said Danske Bank.
Stocks in New York rallied overnight after the US Federal Reserve said it will reduce its purchases of Treasury securities by USD10 billion per month and of mortgage-backed securities by USD5 billion, from the total of USD120 billion a month that the Fed currently is buying.
Amid growing concern about rising prices, Fed Chair Jerome Powell stuck to his view that current higher-than-expected inflation levels will come down in the second half of 2022 as the supply bottlenecks are resolved. The US central bank wants to see the labour market in the world's largest economy heal further before increasing the benchmark borrowing rate off zero, he said.
"We think we can be patient," Powell told reporters.
The momentum from Wall Street flowed through to Asia. Tokyo's Nikkei 225 index closed up 0.9%, reopening strongly after a holiday on Wednesday. In China, the Shanghai Composite ended up 0.8%, while the Hang Seng index in Hong Kong closed up 0.8%. The S&P/ASX 200 in Sydney closed up 0.5%.
With the Fed's taper plans confirmed, market focus turns to the Bank of England.
"On BoE, the markets are pricing in a 50-60% probability of a rate hike this year. Economists are divided, but we expect them to hold back from rate hikes until next year," said Danske Bank.
The BoE will announce its latest monetary policy decision, alongside the release of the Monetary Policy Committee meeting minutes and quarterly Monetary Policy Report, at midday on Thursday. There will be a press conference at 1230 GMT.
Analysts are split over whether the BoE will carry out its first post-pandemic rate hike this week after recent hawkish remarks from policy makers.
Recent comments from policy makers have raised the stakes for this year's penultimate meeting. The UK central bank's new chief economist told the Financial Times less than a fortnight ago that the BoE's November policy meeting will have a "live" decision about whether or not to raise interest rates. This came just days after BoE Governor Andrew Bailey cautioned the central bank will have to act to ease inflationary pressures.
Sterling was quoted at USD1.3635 early Thursday ahead of the BoE decision, down against USD1.3662 at the London equities close on Wednesday.
BT shares were up 3.7% in early dealings, helping to bolster the wider FTSE 100 index, after confirming its outlook for the 2022 and 2023 financial years.
The telecommunications firm reported a 3% dip in revenue for the six months to September 30 to GBP10.31 billion. Pretax profit slipped 5% to GBP1.01 billion.
However, it highlighted progress in the period. BT said it delivered GBP1 billion of gross annualised savings 18 months early at a cost of GBP571 million. It has brought forward its 2025 financial year target of achieving GBP2 billion in gross annualised savings to 2024, and peak capital expenditure from 2023 is now expected to be GBP4.8 billion, down from GBP5 billion seen previously.
It also reported record Openreach 'fibre to the premises' build in the second quarter, to bring its footprint to nearly 6 million.
"BT is on track and with results in-line with our expectations, we are today confirming our financial outlook for FY22 and FY23," said Chief Executive Philip Jansen.
"Looking further out, as we pass the peak of our fibre build and move towards an all-fibre, all-IP network, we expect a reduction in capex of at least GBP1 billion and lower operating costs of GBP500 million. From these two factors alone, by the end of the decade we expect an expansion of at least GBP1.5 billion in normalised free cash flow compared to FY22."
BT reinstated its dividend with an interim payout of 2.31p per share.
J Sainsbury fell 2.8% as the grocer backed guidance but is bracing for a normalisation in shopping trends and facing supply chain challenges.
Revenue for the half-year to September 18 rose 5.3% to GBP15.72 billion from GBP14.93 billion a year ago.
The supermarket chain swung to a pretax profit of GBP541 million from a loss of GP137 million. Underlying pretax profit improved 23% to GBP371 million.
"The business performed well through the first half, benefiting from higher in-home grocery consumption and outperforming grocery competitors, while general merchandise sales declined, as expected, against an exceptionally strong period last year," Sainsbury's said.
In the second half, Sainsbury's expects consumer behaviour to normalise and grocery growth to moderate. It also noted supply chain blockages and a tight labour market. Despite all this, the company continues to expect to report underlying pretax profit of at least GBP660 million for the financial year ending March 2022. Underlying pretax profit was GBP371 million in the first half, up 23% on a year ago.
"Our industry faces labour and supply chain challenges. However our scale, advanced cost saving programme, logistics operations and strong supplier relationships put us in a good position as we head into Christmas," said Chief Executive Simon Roberts.
Aveva was down 2.6% after Barclays downgraded the stock to Equal Weight from Overweight.
In the FTSE 250, Currys rallied 6.3% on plans to launch a GBP75 million share buyback after "robust" trading for the electrical goods retailer.
Aston Martin rose 3.2% amid a narrowed nine-month loss. Total wholesale volumes for the first nine months of 2021 soared to 4,250 from 1,555 a year ago, leading revenue to jump to GBP736.4 million from GBP270.0 million. Pretax loss narrowed to GBP188.6 million from GBP307.9 million - this was despite its third quarter loss widening to GBP97.9 million from GBP80.5 million.
Besides the BoE, the economic events calendar on Thursday has services PMI readings from Germany at 0855 GMT and the eurozone at 0900 GMT, while a UK construction PMI is out at 0930 GMT.
The euro traded at USD1.1557 early Thursday, down on USD1.1581 late Wednesday after Germany factory orders improved by less-than-hoped in September.
Destatis said manufacturing new orders rose 1.3% month-on-month in September, bouncing back from an 8.8% slide in August. This undershot consensus, according to FXStreet, for 2% growth.
Against the yen, the dollar rose to JPY114.10 versus JPY114.04.
Gold was quoted at USD1,774.77 an ounce early Thursday, higher than USD1,766.02 on Wednesday. Brent oil was trading at USD82.72 a barrel, up from USD82.02 late Wednesday ahead of the latest OPEC meeting.
The 13 members of the Organization of Petroleum Exporting Countries and their 10 allies meet from 1300 GMT for their regular monthly meeting via videoconference and are expected to re-confirm their July decision.
By Lucy Heming;Â lucyheming@alliancenews.com
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