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LONDON MARKET EARLY CALL: FTSE 100 To Pull Back Ahead Of US Fed

Wed, 16th Sep 2020 06:50

(Alliance News) - Stock prices in London are set to open lower on Wednesday, pulling back from solid gains in the previous session as caution sets in ahead of the US Federal Reserve's interest rate decision due after the European close.

IG says futures indicate the FTSE 100 index of large-caps to open 28.84 points lower at 6,076.70 on Wednesday. The FTSE 100 closed up 70.29 points, or 1.3%, at 6,105.54 on Tuesday.

"European markets had a much better session yesterday driven by a dose of retail therapy, helping to push the FTSE 100 to its best levels this month, and while US markets also finished the day higher, a late selloff into the close tempered gains there," said Michael Hewson, chief market analyst at CMC Markets.

He added: "This late sell-off from the intraday peaks in the US could well mean that European markets may well open a little mixed this morning, with a slight downward bias, as we look ahead to today's long-awaited Federal Reserve rate meeting."

In the US on Tuesday, the Dow Jones Industrial Average ended marginally higher, the S&P 500 up 0.5% and Nasdaq Composite up 1.2%.

The US Federal Open Market Committee will conclude its two-day policy meeting on Wednesday and announce its decision at 1900 BST. This will be followed by a press conference with Fed Chair Jerome Powell at 1930 BST.

No change is expected on interest rates.

Jeffrey Halley, senior market analyst for Asia Pacific at Oanda, said: "We expect the Fed to reiterate its lower-for-longer call on rates, and to do whatever it takes on the liquidity front to support growth and unemployment. We may get some insight into the nuances of their new fuzzy inflation targeting process."

At the end of August, Powell presented the results of the US central bank's strategy review, revealing that the Fed has shifted to a "flexible form of average inflation targeting".

The change means inflation can stay above the 2.0% target "for some time" before the Fed will need to act by raising interest rates, Powell said in a speech to the annual Jackson Hole central bank symposium.

The dollar was lower against major currency pairings ahead of the Fed.

Sterling was quoted at USD1.2899 early Wednesday, higher than USD1.2858 at the London equities close on Tuesday.

The euro traded at USD1.1849 early Wednesday, flat against USD1.1847 late Tuesday. Against the yen, the dollar fell to JPY105.27 from JPY105.48.

In Asia on Wednesday, the Japanese Nikkei 225 index is slightly higher. In China, the Shanghai Composite is down 0.2%, while the Hang Seng index in Hong Kong is down 0.1%.  

Gold was quoted at USD1,961.90 an ounce early Wednesday, higher than USD1,951.10 on Tuesday. Brent oil rose to USD41.41 a barrel from USD40.16 late Tuesday.

Outside of the Fed in the international events calendar on Wednesday, there are UK consumer and producer price index prints at 0700 BST. Later in the morning, there is the eurozone trade balance at 1000 BST, with US retail sales in the afternoon at 1330 BST.

A busy calendar for smaller UK companies on Wednesday has half-year results from cafe and restaurant operator Loungers, mobile payments platform Boku, ticketing software firm accesso Technology and life sciences investor BioPharma Credit.

By Lucy Heming; lucyheming@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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