LONDON MARKET COMMENT: Stocks Seen Higher After Fed's Decision

Thu, 30th Apr 2015 06:00

LONDON (Alliance News) - UK shares are set to open higher Thursday, as analysts believe the US Federal Reserve will not raise rates until September, even though the central bank didn't rule out tightening interest rates earlier.

IG says futures indicate the FTSE 100 to open 11 points higher at 6,957.2, after closing lower Wednesday, down 1.2% at 6,946.28.

The Fed's decision came Wednesday after a report that US economic growth screeched to a halt in the first quarter of 2015. The US central bank said it expects the US economy to grow at "a moderate pace" despite the first-quarter slowdown, which it attributed partly to "transitory factors."

"Last night's Fed statement not surprisingly offered few surprises as to the Federal Open Market Committee?s thinking, with the committee removing all calendar references to what the Fed might do next," says Michael Hewson, chief markets analyst at CMC Markets UK.

"We do know that the Fed still thinks that the slowdown in Q1 is transitory, and while we saw US markets also decline yesterday, the move lower was much more sedate given that it is likely that we probably won?t see a move on rates before September, at the earliest," writes Hewson.

Wednesday, US GDP inched up by just 0.2% in the first quarter following the 2.2% growth seen in the fourth quarter. The modest uptick compared to economist estimates for an increase of about 1.0%. The report showed a significant slowdown in the pace of consumer spending growth, as the rough weather kept consumers away from stores despite the recent drop in energy prices.

Wall Street ended lower Wednesday, with the DJIA and the S&P 500 down 0.4%, while the Nasdaq Composite ended down 0.6%.

In Asia on Thursday, the Japanese Nikkei 225 trades down 2.6%. Meanwhile, the Hang Seng trades down 0.5% and the Shanghai Composite is trading higher 0.5%.

In a full UK corporate calendar Thursday, Royal Bank of Scotland Group, Royal Dutch Shell, Smith & Nephew and International Consolidated Airlines Group release first-quarter results. Schroders and Tullow Oil issue first-quarter interim management statements. James Fisher & Sons, STV Group and Howden Joinery Group issue interim management statements. Shire publishes its first quarter results at 1200 BST, while Globo releases its full-year results.

In the economic calendar, Bank of Japan's interest rate decision is due at 0400 BST. Meanwhile, German retail sales and unemployment rate are due at 0700 BST and 0855 BST, respectively. Italian and eurozone's CPI are due at 1000 BST. In the US, jobless claims are due at 1330 BST.

By Daniel Ruiz; danielruiz@alliancenews.com