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(Alliance News) - Stock prices in London are seen opening higher on Thursday as markets respond positively to the US Federal Reserve's plan to taper quantitative easing and pave the way for an interest rate lift-off next year.
The Fed's messaging was "clear and concise", CMC Markets analyst Michael Hewson commented, something the Bank of England will be hoping to replicate as it takes centre stage later today. Also due at midday Thursday is a monetary policy decision from the European Central Bank.
IG futures indicate the FTSE 100 index is to open 93.0 points, or 1.3%, higher at 7,263.75. The blue-chip index closed down 47.89 points, 0.7%, at 7,170.75 on Wednesday.
In early corporate news, boohoo cut its annual outlook amid virus concerns and potentially high product return rates. Schroders confirmed a Sky News report that it is in talks to acquire a "significant stake" in renewables infrastructure manager Greencoat Capital.
Aviva boosted its share buyback programme. Domino's Pizza has reached a deal with its franchisees to end a long-running dispute and usher in a "new era of collaboration and accelerated growth".
Asian equities were mostly higher on Thursday. The Nikkei 225 in Tokyo jumped 2.1%, and the Shanghai Composite closed 0.8% higher. The Hang Seng in Hong Kong was up 0.3% in late trade, reversing an earlier decline. The S&P/ASX 200 in Sydney closed down 0.4%.
The dollar was mixed. The pound was quoted at USD1.3263 early Thursday, rising from USD1.3222 at the London equities close on Wednesday. The euro stood at USD1.1300, up from USD1.1262. Against the yen, however, the dollar was trading at JPY114.11, up from JPY113.80.
The US Federal Reserve on Wednesday said it was on track to end its pandemic-era bond purchases by March, as the central bank kept interest rates at historic lows.
The Federal Open Market Committee decided to keep the target range for the federal funds rate at 0.00% to 0.25%.
However, the Fed said it would reduce its purchases of Treasury securities by USD20 billion per month and for mortgage-backed securities by USD10 billion, from the current USD120 billion a month that the central bank currently is buying.
This paves the way for the end of its pandemic-era bond purchases in March, as policymakers at the Fed envisage three interest rate hikes by the end of 2022, with further increases in rates expected in both 2023 and 2024.
"A relief rally following the Federal Reserve (Fed) meeting is what's in play right now, as yesterday's decision, though hawkish was mostly priced in," Swissquote analyst Ipek Ozkardeskaya commented.
"The inflation talk is heating up in Europe as well, and the latest inflation data in Britain showed that inflation exceeded the 5% mark in November, while the BoE was expecting to end the year somewhere near 4%. Yet, no one expects to see a rate action from the BoE today. Nor from the ECB."
The Bank of England announces its latest monetary policy decision at 1200 GMT, before the European Central Bank at 1245 GMT.
Aside from the interest rate decisions, the economic events calendar on Thursday has PMI readings from the eurozone, UK and the US at 0900 GMT, 0930 GMT and 1445 GMT respectively. The latest US jobless claims numbers are due at 1330 GMT.
On the London Stock Exchange, AIM-listed online retailer boohoo cut annual sales and margins guidance due to Omicron uncertainty and as returns rates hit net sales. It has also seen "continued disruption" hit online deliveries alongside persistent virus-related cost inflation.
However, boohoo said: "It is the view of the board that the factors currently negatively impacting the business are primarily related to the ongoing impact of the pandemic and are, therefore, transient in nature."
In the three months to November 30, net sales increased 10% year-on-year to GBP506.2 million from GBP460.7 million. On a two-year basis, net sales are 53% higher.
For the financial year ending February 28, boohoo now expects net sales growth in the 12% to 14% range, cut from previous guidance of a rise of 20% to 25%.
"This reflects our expectation that the factors impacting our performance in the period persist through the remainder of the financial year, and recent developments surrounding the Omicron variant could pose further demand uncertainty and elevated returns rates particularly in January and February," the retailer explained.
Boohoo's adjusted earnings before interest, tax, depreciation and amortisation margin is expected to be between 6% and 7%, lowered from previous guidance of 9% to 9.5%. This will imply an adjusted Ebitda of GBP117 million to GBP139 million.
FTSE 250-listed Domino's Pizza said it has reached a deal with its franchisees. The firm said the acrimony "held the company back", and it can now "begin a new era".
Under the terms of the deal, Domino's will make a one-time capital investment of about GBP20 million, spread over three years, to boost digital acceleration. It will also increase marketing investment and develop an improved new store incentive scheme, to encourage new site openings.
The deal runs for an initial three years from January 3.
In addition, Domino's lifted its medium-term system sales guidance to at least the upper end of the previously announced GBP1.6 billion to GBP1.9 billion target.
"This is an important moment for Domino's, and I'm delighted we have reached what is truly a great resolution with our franchisees," Chief Executive Officer Dominic Paul said.
In the FTSE 100, Schroders confirmed it is in discussions to take a "significant stake" in Greencoat Capital.
Sky News reported on Thursday that Schroders was in talks to buy a 75% stake in the renewables-focused managers. Greencoat Capital manages London-listed Greencoat UK Wind and Greencoat Renewables.
"Schroders continues to evaluate potential acquisition opportunities in line with its strategy to build a comprehensive private assets platform and enhance its leadership position in sustainability," the company said.
Aviva lifted its current buyback programme to GBP1 billion from GBP750 million. The scheme will be extended to no later than March 31.
The increase is part of the insurer's commitment to return GBP4 billion to ordinary shareholders.
"We will update further on our capital return and dividend plans at our full year results in March 2022," CEO Amanda Blanc added.
In the M&A news, Rothermere announced its offer for publisher Daily Mail & General Trust has become unconditional in all respects.
Rothermere upped its offer for the Daily Mail newspaper owner earlier in December by 5.9% to 270 pence per share in cash from 255p previously. The increase was worth GBP40 million.
Rothermere on Thursday said it has agreed to acquire or has already acquired DMGT shares representing just under 57% of the company. It said its offer remains open until January 6, and it intends to cancel DMGT's A shares from trading.
Brent oil was quoted at USD74.68 a barrel early Thursday, rising from USD73.30 at the London equities close on Wednesday. Gold stood at USD1,785.23 an ounce, up from USD1,767.04.
By Eric Cunha; ericcunha@alliancenews.com
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