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(Alliance News) - Stocks in London are called lower on Thursday, as global equities suffer after hawkish rhetoric from the Federal Reserve.
The focal point of the day will be the interest rate decision from the Bank of England at 1200 BST. According to FXStreet-cited market consensus, the BoE is still largely expected to enact a 25 basis point hike. However, after Wednesday's unexpected cooling in headline inflation, the prospect of a pause to rate hikes has grown.
A quarter-point hike will take the benchmark bank rate to 5.50% from 5.25%. It will bring UK interest rates to their highest level in roughly 16 years and it will be Threadneedle Street's 15th successive hike.
In the meantime, the Federal Reserve's "hawkish pause" is dominating market sentiment.
The Fed decided to hold the federal funds rate between 5.25-5.5%, a 22-year high. Despite pausing rates, the accompanying rhetoric was hawkish, with Fed Chair Jerome Powell refusing to rule out further interest rate rises. Projections released in the Fed's dot-plot showed the likelihood of one more increase this year, then two reductions in 2024, two fewer than were indicated during the last update in June.
The US central bank also raised economic growth forecasts upwards, with gross domestic product now expected to rise by 2.1%. That was more than double the June estimate, supporting hopes that the world's largest economy is not heading into recession.
In early company news, Next raised annual guidance for sales and profit, while JD Sports said its on track for its full year, as it targets brand expansion in Europe.
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 69.3 points, 0.9%, at 7,662.35
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Hang Seng: down 1.2% at 17,667.80
Nikkei 225: closed down 1.4% at 32,571.03
S&P/ASX 200: closed down 1.4% at 7,065.20
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DJIA: closed down 76.85 points, 0.2%, at 34,440.88
S&P 500: closed down 0.9% at 4,402.20
Nasdaq Composite: closed down 1.5% at 13,469.13
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EUR: down at USD1.0636 (USD1.0718)
GBP: down at USD1.2322 (USD1.2396)
USD: up at JPY148.38 (JPY147.64)
GOLD: down at USD1,928.83 per ounce (USD1,945.43)
OIL (Brent): down at USD92.85 a barrel (USD94.40)
(changes since previous London equities close)
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ECONOMICS
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Thursday's key economic events still to come:
EU ECB Board Member Isabel Schnabel speaks at ECB Research Conference
16:00 CEST EU FCCI flash consumer confidence indicator
12:00 BST UK interest rate decision
08:30 EDT US Philadelphia Fed business outlook survey
08:30 EDT US international transactions
08:30 EDT US unemployment insurance weekly claims report
10:00 EDT US leading indicators
16:30 EDT US federal discount window borrowings
16:30 EDT US foreign central bank holdings
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BROKER RATING CHANGES
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RBC cuts Brooks Macdonald price target to 1,900 (2,100) pence - 'sector perform'
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Jefferies raises Tui to 'hold' (underperform) - price target 6.10 (2.10) EUR
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COMPANIES - FTSE 100
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JD Sports Fashion said on track for its full year, with interim growth being driven by its premium Sports Fashion business. In the 26 weeks to July 29, revenue rose 8.3% year-on-year to GBP4.78 billion from GBP4.42 billion, while pretax profit jumped 26% to GBP375.2 million from GBP298.3 million. The clothing retailer raised its interim dividend to 30p from 0.13p. The firm said it has made strong progress on its strategic objectives, and targets opening over 200 JD stores worldwide over its financial year. Trading in the last seven weeks has been in line with its expectations, with organic sales growth at 10% in constant currency. It expects annual pretax profit before adjusted items to be in line with current market consensus expectations of GBP1.04 billion. "We are going to accelerate JD brand growth in Europe through purchasing the non-controlling interest in both ISRG and MIG, and the acquisition of GAP stores in France. This is alongside the proposed acquisition of Courir in the region," said CEO Regis Schultz.
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Next said sales in the six months to July rose 5.4% year-on-year to GBP2.64 billion from GBP2.50 billion, as pretax profit rose 4.8% to GBP419.8 million from GBP400.6 million. The retailer increases its guidance for full price sales in the second half to 2.0% annual growth, compared to its previous guidance of 0.5%. This would take full-year growth to 2.6%. While it noted that the guidance may be perceived as "cautious" given the 3.2% growth in the first half, Next maintains growth will moderate due to the erosion of purchasing power amid inflation, and the softening in the employment market as the year progresses. It also raised full-year guidance for pretax profit to GBP875 million from GBP845 million previously, which would be up 0.5% from the prior year. It also expects to make an exception gain of GBP110 million form the Reiss transaction, which is not included in the profit guidance.
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COMPANIES - FTSE 250
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Component and solutions company Essentra announced the acquisition of BMP, an Italian family-owned manufacturer and distributor of protective caps and plugs. The initial cash consideration is EUR33.5 million, with a deferred contingent consideration of up to EUR3.5 million. For 2023, BMP s expected to generate revenue of EUR13.4 million. The buy will expant its product portfolio and offering "while unlocking further cross-selling opportunities and growing our presence in Europe", said CEO Scott Fawcett.
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OTHER COMPANIES
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DFS Furniture said it continued to win market share in a "very tough market" during its financial year, which ended on June 25. The furniture retailer said revenue from continuing operations fell 5.2% year-on-year to GBP1.09 billion from GBP1.15 billion, as pretax profit slumped 49% to GBP29.7 million from GBP58.5 million. Underlying profit before tax and brand amortisation was GBP30.6 million, which was in line with its interim guidance. It expects underlying profit before tax and brand amortisation to imrpove in the low single digits in financial 2024, to a GBP30 to GBP35 million range. This assumes market volumes fall 5%, DFS notes. "We are confident the market will recover, however we can't predict how quickly that will happen. We have a clear route to a 5% PBT margin without market recovery, supported by further margin improvement, new cost efficiencies and continued growth in Home," DFS said. It recommends a final dividend of 3.0p, down from 3.7p, bringing the annual total to 4.5p, down from 7.4p in the previous year.
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By Elizabeth Winter, Alliance News senior markets reporter
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