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(Alliance News) - Central banks will continue to dominate market attention on Wednesday, with the latest policy decision by the US Federal Reserve due after the European equities close.
Also on Wednesday, policymakers from the European Central Bank will meet to discuss strains in the eurozone caused by rising borrowing costs.
Amid expectations of a foward guidance-busting 75-basis-point hike, the US interest rate decision is due at 1900 BST, followed by a press conference with Fed Chair Jerome Powell at 1930 BST.
A 75-point hike would take the key federal funds rate to a range of 1.50% to 1.75%.
The dollar was easing back from multi-year highs ahead of the decision.
"Anything less than a 75 basis point hike, and a firm indication that a similar move is coming in July, would likely trigger a dollar sell-off," said Matthew Ryan, senior market analyst at financial services firm Ebury. "A 50 basis point move, which we contend remains very much possible, would lead to a violent move lower in the greenback, in our view."
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.5% at 7,225.40
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Hang Seng: up 1.1% at 21,301.26
Nikkei 225: closed down 1.1% at 26,326.16
S&P/ASX 200: closed down 1.3% at 6,601.00
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DJIA: closed down 151.91 points, or 0.5%, at 30,364.83
S&P 500: closed down 14.15 points, or 0.4%, at 3,735.48
Nasdaq Composite: closed up 19.12 points, or 0.2%, at 10,828.35
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EUR: up at USD1.0479 (USD1.0414)
GBP: up at USD1.2029 (USD1.2011)
USD: down at JPY134.71 (JPY134.88)
Gold: up at USD1,820.50 per ounce (USD1,814.44)
Oil (Brent): down at USD121.55 a barrel (USD124.93)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday's key economic events still to come
1000 CEST France IEA oil market report
1000 CEST Germany IFO economic forecast summer report
1100 CEST EU foreign trade
1100 CEST EU industrial production
1100 BST Ireland goods exports and imports
0830 EDT US advance monthly sales for retail & food services
0830 EDT US import & export price indices
1000 EDT US manufacturing & trade: inventories & sales
1030 EDT US EIA weekly petroleum status report
1400 EDT US interest rate decision
1430 EDT US press conference with Fed Chair Powell
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European Central Bank policymakers will gather for an exceptional meeting on Wednesday, as more indebted eurozone members came under stress from rising borrowing costs. "The Governing Council will have an ad-hoc meeting on Wednesday to discuss current market conditions," a spokesperson for the Frankfurt-based institution said. The ECB drew a line under years of ultra-loose monetary policy at its regular meeting last week, bringing an end to its massive bond-buying stimulus programme at the beginning of July. It also announced its first planned interest rate hike in over a decade for the same month, as inflation in the eurozone takes off. The switch in central bank policy has raised the spectre of "fragmentation" in the eurozone, where the borrowing costs for some, more indebted members rise faster than for others. ECB policymakers will gather from 1100 local time.
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French consumer prices increased year-on-year in May, pushed up by the rampant energy sector. According to Insee, France's annual inflation rate accelerated to 5.2% in May from 4.8% in April. Iness said energy price growth accelerated to 28% annually in May from 27% in April. Food prices rose 4.3% yearly, having grown 3.8% in April. On a harmonised basis, a measure which allows for EU-wide comparison, yearly consumer price growth raced to 5.8% in May from 5.4% in April. May's harmonised figure was in line with the FXStreet- cited market estimate.
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UK Home Secretary Priti Patel said preparation for the next deportation flight to Rwanda "begins now" after last-minute interventions by the European Court of Human Rights led to the cancellation of the initial flight. Patel said she will "not be deterred from doing the right thing" as Government sources confirmed to the PA news agency that all migrants were removed from the plane which was set to take off on Tuesday night. The European Court of Human Rights confirmed that it had granted an urgent interim measure in regards to an Iraqi national, and it is understood the Court was considering a number of further requests. PA understands that the appeals were considered by an out-of-hours judge on papers, overruling the UK rulings. It is understood that, at the present time, there is not a route for the Home Office to appeal against the decision.
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Japan machinery orders saw surprising growth in April, figures from the Cabinet Office showed. Total machinery orders surged 34% in April on the month before, following 2.5% growth in March. Excluding volatile orders for ships and those from electric power companies, machinery orders rose 11% monthly in April, accelerating from March's 7.1% climb. April's core reading came in markedly ahead of an FXStreet cited forecast predicting a 1.5% decline in orders. On an annual basis, machinery orders jumped 19%, beating an FXStreet-cited estimate of 5.3% growth. In March, machinery orders had risen 7.6% annually.
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BROKER RATING CHANGES
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Berenberg cuts Rolls-Royce to 'hold' (buy) - price target 100 (160) pence
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UBS raises London Stock Exchange to 'buy' (neutral) - price target 8,500 pence
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Credit Suisse cuts abrdn to 'underperform' (outperform) - price target 180 (230) pence
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Investec cuts Scottish Mortgage Investment Trust to 'hold' ('buy') (on Tuesday)
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COMPANIES - FTSE 100
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Premier Inn hotel chain-owner Whitbread said trading has been ahead of expectations. Whitbread said it plans to invest around GBP20 million to GBP30 million in labour, refurbishments and IT in its current financial year given a "tight" jobs market and its focus on maintaining a market leading position. "However, our high levels of occupancy and continued strong sales performance mean we remain confident in our continued margin recovery in the UK," it said. For its first quarter ended June 2, total sales were up 22% on their pre-pandemic level and up 11% on a like-for-like basis from pre-pandemic, meaning financial year 2020. UK total sales were 18% above pre-pandemic times. "The strength of Premier Inn's recovery in the UK continues to be ahead of expectations with a particularly strong Q1 performance that is well ahead of pre-pandemic levels, and we continue to significantly outperform the market," said Chief Executive Alison Brittain. Germany, where Whitbread's open hotel estate now stands at 40, also performed well, with total like-for-like sales up 12% from pre-pandemic. "This impressive Q1 performance, together with improved visibility into Q2, gives us increased confidence in delivering a strong first half and remaining ahead of the market for the rest of the year," said Brittain.
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Copper miner Antofagasta said repairs to concentrate pipeline at Los Pelambres, Chile, have started. The pipeline is expected to resume operations by the end of the month. "Total expenditure to repair the pipeline and bring it back to normal operations is not expected to be material," said Antofagasta, though it cautioned that full-year copper production is expected to be at the bottom end of its original 660,000 to 690,000 guidance range.
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Rio Tinto said it has delivered first ore from the Gudai-Darri iron ore mine. The capital cost for the mine - its first greenfield mine in the Pilbara, Western Australia, in more than a decade - is estimated at USD3.1 billion, with the firm's total capital expenditure guidance for 2022 unchanged at around USD8 billion. Production from the mine will continue to ramp up through the remainder of this year and is expected to reach full capacity during 2023, Rio Tinto said. "The mine's commissioning and ramp-up is expected to increase Rio Tinto's iron ore production volumes and improve product mix from the Pilbara in the second half of this year. Full-year shipments guidance for 2022 remains at 320 to 335 million tonnes (100% basis) subject to risks around the ramp up of new mines, weather and management of cultural heritage," the company said.
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COMPANIES - FTSE 250
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Books and stationery retailer WH Smith reported growth on pre-pandemic levels. For the 15 weeks to June 11, total revenue was just above its pre-pandemic level for the first time, driven by the Travel arm, which saw sales at 123% of 2019 levels. The Travel rebound was led by North America, where sales were 111% of 2019, while they were 104% in the UK and only 88% in the Rest of the World region. Meanwhile, High Street operations saw revenue at just 79% of 2019 levels so far in the company's third quarter, worsening from the second quarter outturn of 84%. "This includes the impact from the cyber incident on Funky Pigeon. We saw a good performance from our Platinum Jubilee ranges, which resonated well with customers, and our focus on front-of-store mega deals is delivering good results," the company noted. With its travel arm's strong performance expected to carry into the peak summer trading period, WH Smith said it now expects full-year results at the higher-end of analyst forecasts.
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COMPANIES - SMALL CAP
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Vehicle retailer Motorpoint reported a surge in annual revenue, but flagged an uncertain outlook amid inflationary pressures and supply chain issues. Revenue for the financial year ended March 31 jumped 83% to GBP1.32 billion from GBP721.4 million the year before, which the company chalked up to market share growth and vehicle price inflation. This helped pretax profit more than double to GBP21.5 million from GBP9.7 million. The outlook appears shaky, with Motorpoint noting that rising inflation is putting pressure on consumer spending, something which is likely to reduce overall sales in its markets. Further, supply chain issues will continue to limit new car production, which in turn constrains used-car supply. Nonetheless, it said: "Given the group's proven track record of profitability and proactively responding to market conditions, alongside our capital light model and robust balance sheet, the board is confident in its decision to continue to progress towards its medium term strategic goals." Motorpoint did not recommend a dividend, in line with the year before, as it focuses on driving "significant growth".
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Wednesday's shareholder meetings
Angling Direct PLC - AGM
888 Holdings PLC - AGM
Christie Group PLC - AGM
Deltic Energy PLC - AGM
Distribution Finance Capital Holdings PLC - AGM
Ferrexpo PLC - AGM
Foresight Solar Fund Ltd - AGM
Foxtons Group PLC - AGM
IGas Energy PLC - AGM
NAHL Group PLC - AGM
NB Global Monthly Income Fund Ltd - AGM
Phoenix Spree Deutschland Ltd - AGM
Science in Sport PLC - AGM
SourceBio International PLC - AGM
Standard Life Investments Property Income Trust PLC - AGM
Tortilla Mexican Grill PLC - AGM
WANdisco PLC - AGM
Whitbread PLC - AGM
Xaar PLC - AGM
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By Tom Waite; thomaslwaite@alliancenews.com
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