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(Alliance News) - Stocks in London were called higher on Thursday ahead of a European Central Bank interest rate decision later in the day, with analysts expecting a significant hike.
The ECB will announce its interest rate decision on Thursday at 1315 BST. The bank is set to carry out just its second interest rate hike in over 10 years. Markets are somewhat divided about whether the ECB will announce another 50 basis point hike, or dig deeper with a 75bp lift.
"The last few days has seen this narrative shift after several governing council hawks got a lot louder in their pronouncements for much more aggressive rate moves, arguing the case for a 75bps rate move, after headline inflation pushed up to 9.1% at the beginning of the month," said CMC Markets' Michael Hewson.
The threat of recession is rising in Europe, a top EU official warned on Wednesday, as skyrocketing energy prices caused by Russia's invasion of Ukraine punish the economy.
"Uncertainty remains exceptionally high and the risk of a recession is rising," EU Economics Affairs Commissioner Paolo Gentiloni told a conference at Bruegel, a think tank in Brussels. "We may well be heading into one the most challenging winters in generations."
In Asia, the Nikkei 225 was performing well against Asian stock index peers on Thursday, thanks to a better-than-expected reading for economic growth in the second quarter off 2022.
Wall Street also had enjoyed a good session on Wednesday.
"US markets...saw a positive finish after the latest Fed beige book showed that while growth was slowing, price pressures were also easing in a number of districts. This easing prompted a pullback in the US dollar, as well as a slide in yields," CMC's Hewson said.
The US central bank will stay the course on its aggressive fight against high inflation for "as long as it takes" to bring prices down, a top Federal Reserve official said Wednesday.
Echoing comments from other leading policymakers, Fed Vice Chair Lael Brainard highlighted the message that the central bank has no plans to pivot or lower interest rates any time soon.
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 17.20 points, or 0.4%, at 7,267.90
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Hang Seng: down 0.8% at 18,892.26
Nikkei 225: up 2.3% at 28,065.28
S&P/ASX 200: up 1.8% at 6,848.70
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DJIA: closed up 435.98 points, or 1.4%, at 31,581.28
S&P 500: closed up 71.68 points, or 1.8%, at 3,979.87
Nasdaq Composite: closed up 246.99 points, or 2.1%, at 11,791.90
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EUR: up at USD1.0011 (USD0.9945)
GBP: up at USD1.1515 (USD1.1469)
USD: down at JPY143.54 (JPY144.45)
GOLD: up at USD1,719.35 per ounce (USD1,711.32)
OIL (Brent): down at USD88.52 a barrel (USD89.34)
(changes since previous London equities close)
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ECONOMICS
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Thursday's key economic events still to come:
14:15 CEST ECB monetary policy decision
11:00 BST Ireland consumer price index
11:00 BST Ireland industrial production
09:00 CEST Spain housing price index
07:45 CEST Switzerland unemployment
08:30 EDT US unemployment insurance weekly claims report
11:00 CDT US Fed Chicago President Charles Evans speaks
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Japan's economy grew slightly more than expected in the second quarter of 2022, data from the Cabinet Office showed. Gross domestic product grew 0.9% quarter-on-quarter for the three months ended June 30, above the 0.5% increase initially estimated. This reversed a 0.1% decline in the first quarter of the year. On an annualised basis, GDP rose 3.5% in the second quarter, a significant upgrade from the initial 2.2% increase reported.
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Australia's trade surplus fell in July as exports declined, data from the Australia Bureau of Statistics showed. The country's seasonally-adjusted surplus on goods and services dropped to AUD8.73 billion - around USD5.88 billion - from AUD17.13 billion in June. This was due to exports falling 9.9% month-on-month to AUD55.28 billion from AUD61.36 billion, "driven by falls in coal, coke and briquettes and Metals ores and minerals." Meanwhile, imports rose 5.2% to AUD46.55 billion from AUD44.23 billion.
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UK homebuyer inquiries fell in August at the steepest rate since the early stages of the coronavirus pandemic as the cost-of-living crisis and wider economic challenges affected market conditions, according to surveyors. The Royal Institution of Chartered Surveyors said a net balance of 39% of property professionals reported a fall rather than a rise in new buyer inquiries in August, marking the sharpest downturn since April 2020. New buyer inquiries have now been falling for four months in a row. House sales were also down in August, falling for five months in a row, with the latest feedback implying this downward trend is becoming further entrenched, Rics said.
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BROKER RATING CHANGES
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Morgan Stanley cuts ITV to 'underweight' (equal-weight) - price target 55 (65) pence
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Berenberg raises AIB Group to 'buy' (hold) - price target 3.20 (2.65) EUR
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COMPANIES - FTSE 100
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Associated British Foods said its trading in the financial year ending September 17 has been "well ahead" of last year, thus far, noting higher revenue as a result of price actions and volumes increases. The group has seen particular revenue growth with Primark, thanks to the ending of Covid-19 restrictions in the UK and the consequent return of more normal customer behaviour. Primark total sales are expected to be GBP7.7 billion, 40% ahead of the previous year. ABF said its outlook for the year remains unchanged, anticipating a "significant" increase in adjusted operating profit.
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Melrose announced its intention to separate its GKN Automotive and GKN Powder Metallurgy businesses, as it increased interim profit and revenue in line with expectations. The industrial acquisition specialist explained that the demerger will result in two independent and separately listed companies. In the six months that ended June 30, pretax profit climbed to GBP128 million from GBP114 million, while revenue increased to GBP3.88 billion form GBP3.72 billion the previous year. Melrose said it is on track to meet its full-year expectations as a result. The firm declared an interim dividend of 0.825 pence per share, up 10% from the previous year.
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COMPANIES - FTSE 250
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Darktrace swung to an annual profit and saw strong revenue growth across all geographies, leading the firm to confirm its expectations for the coming financial year. In the financial year that ended June 30, Darktrace swung to a pretax profit of USD5.3 million from a loss of USD143.9 million the previous year. Revenue jumped to USD415.5 million from USD285.1 million. The firm said scale efficiencies created by its multi-year contract model were the main driver behind the improved figures. As a result, the company expects revenue growth between 30% and 33%, up from previous expectations of between 29% and 32%, for the new financial year. Darktrace also confirmed that discussions about a takeover offer from Thoma Bravo have been terminated, after Thoma Bravo said it doesn't intend to make an offer.
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Housebuilder Vistry reported an "excellent" first-half performance that "significantly" exceeded its expectations at the start of the year. In the six months that ended June 30, Vistry's pretax profit fell to GBP111.3 million from GBP156.2 million the previous year. The firm cited GBP71.4 million in additional fire safety provisions for the decline in profit. Revenue, however, climbed to GBP1.16 billion from GBP1.12 billion. Completions increased to 3,219 from 3,126. Chief Executive Greg Fitzgerald added that the company has made a "solid start" to the second half, leaving the group well positioned for the full-year. It declared an interim dividend of 23 pence per share, up from 20p a year prior.
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OTHER COMPANIES
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Restaurant Group narrowed its interim loss and nearly doubled its revenue despite a "challenging" market environment. In the six months that ended July 3, the Wagamama chain owner reported a pretax loss of GBP28.5 million, narrowed from GBP57.6 million the previous year. Sales nearly doubled to GBP423.4 million from GBP216.8 million. Restaurant Group explained that the Concessions business had been hurt in the first quarter of its financial year as a result of limited travel but has since seen a "better than expected" recovery. Looking forward, the firm said it was "well positioned" to deliver long-term growth despite an uncertain consumer environment.
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By Heather Rydings; heatherrydings@alliancenews.com
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