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(Alliance News) - Stock prices in London were called slightly higher on Wednesday, as investors awaited the all-important interest rate decision to come from the US Federal Reserve.
The decision will come at 1800 GMT, which is an hour earlier in Europe and the UK than normal due to the time change in Europe on Sunday.
The central bank is widely expected to enact another 75 basis point hike, as it has done for the last three meetings.
"The main focus of attention has shifted in the past few days towards what might be coming in December, as markets increasingly price the prospect of a policy pivot, pause or slowdown, as we head into year-end," CMC's Michael Hewson said.
According to CME's FedWatch tool, there is currently thought to be an equal chance of a 50 basis point hike or a 75 basis point hike in December, with both possibilities standing at a 48% likelihood.
"The US jobs market is not tightening, and the US inflation is not easing. So, there is no reason for the Fed to announce the end of the tightening cycle, in a way to trigger a positive euphoria across stock and bond markets, which would, in return, boost both inflation and jobs in the US," Swissquote Bank analyst Ipek Ozkardeskaya maintained.
On Thursday, it will be the Bank of England's turn. The UK central bank also is expected to lift rates by 75 basis points. However, with the recent economic and political volatility, Threadneedle Street's decision seems less clear cut than the Fed's.
"There are a few reasons why the BoE might opt for a smaller hike at this meeting or provide a less hawkish signal about the future decisions. The weaker PMI and growth figures we have seen of late are, by definition, disinflationary. What's more, the government's U-turn on tax cuts means there will be less of a fiscal boost than before," commented City Index & Forex.com analyst Fawad Razaqzada.
"It is not just the rate decision that is important, but the central message about the path of interest rates."
Here is what you need to know ahead of the London market open:
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MARKETS
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FTSE 100: called up 10.7 points, 0.1%, at 7,196.86
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Hang Seng: up 2.4% at 15,827.17
Nikkei 225: closed down 0.1% at 27,663.39
S&P/ASX 200: closed up 0.1% at 6,986.70
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DJIA: closed down 79.75 points, or 0.2%, at 32,653.20
S&P 500: closed down 0.4% at 3,856.10
Nasdaq Composite: closed down 0.9% at 10,890.85
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EUR: higher at USD0.9884 (USD0.9873)
GBP: higher at USD1.1504 (USD1.1465)
USD: lower at JPY147.47 (JPY148.07)
GOLD: higher at USD1,650.84 per ounce (USD1,644.63)
OIL (Brent): higher at USD95.43 a barrel (USD94.48)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
10:00 CET EU manufacturing purchasing managers' index
08:00 CET Germany foreign trade
09:55 CET Germany labour market statistics
09:55 CET Germany manufacturing PMI
08:15 EDT US ADP national employment report
14:00 EDT US Federal Reserve interest rate decision
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Food inflation in the UK soared to a record 12% in October, as even basics such as tea bags, milk and sugar all saw significant price rises. Overall shop prices are now 6.6% higher than they were this time last year – also a record – but food inflation jumped well above September's 11% and the three-month average rate of 9.7%, according to the British Retail Consortium-Nielsen Shop Price Index. Fresh food prices are now 13% more than last October, up from 12.1% in September. Non-food inflation accelerated to 4.1%, up from 3.3% in September.
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Boris Johnson has confirmed he will attend the Cop27 conference in Egypt, piling further pressure on UK Prime Minister Rishi Sunak to backtrack on his decision to snub the climate summit. The former prime minister said he was "happy to go" to Sharm El Sheikh for the United Nations meeting opening on Sunday. However, Sunak is leaving his own decision to the last minute, having initially ruled out attending before signalling he could U-turn in the face of widespread criticism. The PM's own climate adviser Alok Sharma had said he was "disappointed" that Sunak was not planning to attend.
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Embattled UK Home Secretary Suella Braverman has been referred to a financial watchdog by Labour over concerns of a breach of insider trading laws. Shadow city minister Tulip Siddiq has asked the Financial Conduct Authority to investigate the leaking of information that led to Braverman's resignation. Rishi Sunak has been under sustained pressure since deciding to reappoint Braverman to the role six days after she was forced out by Liz Truss while she was still prime minister.
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Sunak should "fast track, not back track" on nature-friendly farming reforms, conservation groups have urged. Wildlife and Countryside Link is urging the new prime minister to maintain and boost funding for the new environmental land management scheme and to deliver on all strands of the plans to support nature. The call comes as the government prepares to set out proposals on the future of farming funding, after it announced a review of the policy, and polling suggests the public think ministers are not supporting farmers to help nature.
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BROKER RATING CHANGES
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Goldman cuts British American Tobacco to 'neutral' (buy) - price target 3,800 (4,050) pence
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Barclays resumes Capricorn Energy with 'equal weight' - target 242 pence
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Bernstein cuts ITM Power to 'market-perform' (outperform) - price target 95 (370) pence
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COMPANIES - FTSE 100
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GSK reported revenue of GBP7.83 billion in the third quarter, rising 18% from GBP6.63 billion a year before. Pretax profit dropped 15% to GBP1.01 billion from GBP1.19 billion. GSK noted strong growth in Specialty Medicines, and record sales for its shingles vaccine Shingrix. "We are again raising our full-year guidance and expect good momentum in 2023, further strengthening our confidence in our performance outlooks, driven by Shingrix global expansion and expected new launches including our new RSV vaccine," it said. GSK now expects to deliver sales growth of between 8% and 10% at constant exchange rates in 2022, and growth in adjusted operating profit of between 15% and 17% at constant exchange rate. The guidance excludes any contribution from Covid-19 solutions. GSK declared a dividend of 13.75p for the period. It said this is no change to its expected full-year dividend of 61.25p per share.
Separately GSK also said its respiratory syncytial virus older adult vaccine candidate has been granted priority review by the US Food & Drug Administration. The FDA accepted the biologics license application for the vaccine, and granted it priority review, which means it will expedite the review of the BLA, reducing the review period by four months. "If approved, GSK's RSV older adult vaccine candidate has the potential to be the first vaccine available to help protect adults aged 60 years and older from lower respiratory tract disease caused by RSV infection," the drug maker said.
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Clothing retailer Next reiterated annual pretax profit guidance of GBP840 million. In the third quarter to October 29, it said total full price sales edged down 0.1% year-on-year, but rose 0.4% when interest income is included. This was slightly ahead of its expectations. For the rest of the year, Next expects full-price sales to shrink by 2% annually.
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COMPANIES - FTSE 250
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Aston Martin Lagonda said revenue in the third quarter increased 33% to GBP315.5 million from GBP237.6 million, with revenue in the year to date up 16%. Pretax loss in the third quarter widened to GBP225.9 million from GBP97.9 million a year prior. For the whole year, Aston Martin expects wholesale sales of 6,200 to 6,600, revised down from 6,600. "In addition to this revision to our volume outlook, we are also incurring incremental costs specifically associated with mitigating [supply chain] issues, impacting margin expansion. We now have visibility on resolution to these isolated supply chain disruptions, including the associated incremental costs, which we expect to be in the range of approximately GBP20 million, and are confident of optimising Q4 to ensure the best transition into 2023," Aston said. It expects cash inflows from "more normalised working capital dynamics" to only become visible towards the end of the fourth quarter and into early next year.
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Wizz Air reported that revenue in the six months to September jumped to EUR2.19 billion from EUR880.4 million a year before. Pretax loss widened to EUR389.7 million from EUR119.6 million. "Revenue in the first half of the fiscal year was materially higher than it was in the same period last year, and up 31% versus the same period pre-Covid-19...Revenue per available seat kilometre improved from minus 10% during the first quarter to plus 11% during the second quarter, ahead of guidance, all measured versus the pre-Covid-19 quarters. This was driven by load factors recovering and improved yields, no longer held back by Covid-19 or the war," Wizz Air explained. As it moves into the winter, the budget carrier is gearing up to operate at a 35% higher capacity in the second half, compared to pre-pandemic 2019. Average fares are also above 2019 levels. Wizz says it is taking measures to mitigate the impact of inflation on its costs.
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OTHER COMPANIES
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Ryanair reported its October traffic statistics, with a 38% year-on-year rise in passengers during the month to 15.7 million. Load factor also improve to 94% from 84% a year before. On a rolling 12-month basis, passenger numbers nearly tripled and load factor was 12% higher.
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By Elizabeth Winter; elizabethwinter@alliancenews.com
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