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LONDON MARKET EARLY CALL: Higher Call On US Interest Rate Cut Hope

Fri, 12th Jul 2019 07:00

(Alliance News) - Stock prices in London are seen opening higher on Friday, following record highs being set in the US on Thursday, amid optimism that the US Federal Reserve will cut interest rates at its upcoming monetary policy meeting at the end of July.

IG futures indicate the FTSE 100 index is to open 28.18 points higher at 7,538.00. The blue-chip index closed down 20.87 points, or 0.3%, at 7,509.82 on Thursday.

In the US on Thursday, Wall Street ended broadly higher, with the Dow Jones Industrial Average up 227.88 points, or 0.9%, and the S&P 500 up 0.2%. The Dow ended above 27,000 for the first time on Thursday and the S&P closed within touching distance of the 3,000 mark.

However, the Nasdaq Composite index closed down 0.1%.

The latest equity milestone for the Dow, which was accompanied by a fresh record for the S&P 500, came as US Federal Reserve Chair Jerome Powell completed a second day of congressional testimony, during which he emphasized economic risks in remarks that were widely interpreted as signaling a likely interest rate cut.

CMC Markets analyst David Madden said: "Jerome Powell left the door open to interest rate cuts, and that helped the Dow Jones trade above 27,000 - for the first time ever. Given how much expectations have been built up, markets are likely to react badly should interest rates be kept on hold later this month.

"The Fed boss might trim rates later this month, and drop another hint about potentially lower rates later this year as a way of keeping equity markets on side. There has been a lot of talk of rates being cut by 50 basis points, but some people think that would be excessive when you remember that the unemployment is close to a 50 year low."

The Japanese Nikkei 225 index is up 0.2% on Friday. In China, the Shanghai Composite is up 0.5%, while the Hang Seng index in Hong Kong is up 0.4%.

The pound was quoted at USD1.2545 early Friday, marginally lower than USD1.2555 at the London equities close Thursday.

The economic events calendar on Friday has eurozone industrial production figures at 1000 BST and US producer prices at 1330 BST.

The UK corporate calendar on Friday has trading statements from emerging markets-focused asset manager Ashmore Group and no-frills gymnasiums operator Gym Group.

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