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(Alliance News) - Stocks in London are expected to open lower on Friday, as hawkish comments from the head of the US Federal Reserve spooked equity investors and sent the dollar higher.
The Fed is prepared, if needed, to hike interest rates further in order to bring inflation down to its long-term 2% target, Fed Chair Jerome Powell said. "We know that ongoing progress toward our two percent goal is not assured: Inflation has given us a few head fakes," Powell told a conference in Washington on Thursday.
"If it becomes appropriate to tighten policy further, we will not hesitate to do so," he added, in remarks that were briefly disrupted by climate protesters.
While the Fed's rate-setting committee is "committed" to achieving a sufficiently tight stance of monetary policy, "we are not confident that we have achieved such a stance," Powell said.
In local news, the UK economy fared better than expected in the third quarter, avoiding a contraction, but made no progress either, according to figures from the Office for National Statistics.
"As the Bank of England stated earlier this month that more than half of the impact of higher interest rates on the level of GDP is still to come through, the UK economy faces growing headwinds as we approach 2024," commented Lindsay James, investment strategist at Quilter Investors.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called down 41.4 points, 0.6%, at 7,414.27
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Hang Seng: down 1.7% at 17,221.33
Nikkei 225: closed down 0.2% at 32,568.11
S&P/ASX 200: closed down 0.6% at 6,976.50
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DJIA: closed down 220.33 points, or 0.7%, at 33,891.94
S&P 500: closed down 0.8% at 4,347.35
Nasdaq Composite: closed down 0.9% at 13,521.45
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EUR: down at USD1.0660 (USD1.0709)
GBP: down at USD1.2219 (USD1.2275)
USD: up at JPY151.45 (JPY151.00)
Gold: down at USD1,957.24 per ounce (USD1,961.11)
Oil (Brent): down at USD80.43 a barrel (USD80.69)
(changes since previous London equities close)
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ECONOMICS
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Friday's key economic events still to come:
11:00 GMT Ireland industrial production and turnover
08:00 CST US Fed Atlanta President Raphael Bostic speaks
10:00 EST US University of Michigan survey of consumers
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In the third quarter, the ONS estimates that UK gross domestic product registered no growth on a quarterly basis and was flat on the second quarter. The estimate was better than the FXStreet-cited market consensus of a 0.1% contraction. In the second quarter, GDP grew 0.2% from the first quarter. Services sector output fell 0.1% over the third quarter, which entirely offset a 0.1% increase in construction output. Production sector output was broadly flat, the ONS explained. On an annual basis, GDP grew 0.6% in the third quarter, coming in above forecasts of 0.5% growth. GDP had also grown 0.6% annually in the second quarter. The UK economy grew 0.2% in September from the previous month, picking up the pace from the 0.1% expansion seen in August from July, the ONS said. Market forecasts had expected a 0.1% contraction for September, while August's figure was revised down from 0.2%.
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BROKER RATING CHANGES
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Goldman starts Smith & Nephew with 'buy' - price target 1,400 pence
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Numis raises Ashmore to 'hold' - price target 170 pence
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COMPANIES - FTSE 100
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Diageo downgraded its outlook for the year ending June 30, 2024, amid a weak performance outlook in the Latin America & Caribbean market. It had been expecting to see a gradual improvement in organic net sales growth over its first half. However, while momentum continues in four of its five regions, it warns that growth in the first half of financial 2024 will be slower than the second half of financial 2023. Sales in the LAC market are nearly 11% of its net sales value, and are expected to fall by 20% year-on-year on an organic basis over the first half. "Macroeconomic pressures in the region are resulting in lower consumption and consumer downtrading. These impacts are slowing down progress in reducing channel inventory to appropriate levels for the current environment," it explained. Consequently, organic operating profit growth for the first half of its financial year will decline from the prior year. It expects to see a "gradual" improvement in organic net sales and operating profit growth in the second half of financial 2024 compared to the first half.
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COMPANIES - FTSE 250
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Ahead of its annual general meeting, Redrow warned that the housing market has remained "subdued" in August. The housebuilder said net private reservation values dropped 25% year-on-year to GBP384 million. It now guides for annual profit before tax to be at the lower end of its GBP180 million to GBP200 million range, with revenue also to come in at the lower end of the GBP1.65 to GBP1.7 billion range. It expects the annual average number of outlets to be around 113, which is behind its September guidance of 117. "The business has had to adapt to this more difficult trading environment in terms of build rate and operating costs. However, we continue with our strategy of delivering our high quality, award winning Heritage homes to our target customers," said Chair Richard Akers.
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OTHER COMPANIES
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Insurer Allianz took its biggest hit from natural disasters in a decade in the third quarter of 2023 but still confirmed its full-year outlook. Munich-based Allianz reported net income attributable to shareholders of EUR2.02 billion in the three months that ended September 30, down 30% from EUR2.87 billion a year before. Core earnings per share declined by 28% to EUR5.22 from EUR7.23. This was despite total business volume rising by 4.5% to EUR36.5 billion from EUR34.9 billion. Operating profit fell by 15% to EUR3.47 billion in the third quarter from EUR4.06 billion a year before. This was mainly due to a lower operating insurance service result in Property-Casualty insurance, Allianz said, as the division's combined ratio took a 7.3 percentage point hit from natural catastrophes - the biggest in a decade. Looking ahead to all of 2023, Alliance confirmed its operating profit target of EUR14.2 billion, plus or minus EUR1 billion.
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By Elizabeth Winter, Alliance News senior markets reporter
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