(Alliance News) - Stock prices in London are seen opening higher on Thursday, following a strong finish in New York on Wednesday, after the US Federal Reserve executed another 75 basis points interest rate hike.
IG futures indicate the FTSE 100 index is to open 19.07 points higher at 7,367.30. The index closed up 41.95 points, or 0.6%, at 7,348.23 Wednesday.
New York ended sharply higher on Wednesday, with the Dow Jones Industrial Average up 1.4%, S&P 500 up 2.6% and Nasdaq Composite up 4.1%.
The federal funds rate was lifted to a 2.25% and 2.50% range, as widely expected. It had lifted rates by the same increment in June - the first hike of that magnitude since November 1994.
The US central bank also will continue reducing its holdings of treasury securities and agency debt and agency mortgage-backed securities.
All monetary policy board members voted in favour of Wednesday's three-quarter percentage point hike.
Fed Chair Jerome Powell on Wednesday said a period of slower growth may be needed for a US economy characterised by a tight labour market, though he played down recessionary fears.
In addition, he cautioned that a period of detailed forward guidance could come to an end, as the central bank now eyes a "meeting-by-meeting" approach to monetary policy decisions. Powell said Wednesday's rate hike was of the correct magnitude, though the Fed would not hesitate to implement a stronger increase if needed. However, Powell also said going forward the pace of rate hikes could slow.
"The market appears to have interpreted last night's press conference as dovish, hence the sharp move higher in US markets, slide in short end yields, and a decline in the US dollar," said CMC Markets analyst Michael Hewson.
In Asia on Thursday, Nikkei 225 index in Tokyo was up 0.2%. In China, the Shanghai Composite was 0.5%, while the Hang Seng index in Hong Kong was down 0.4%. The S&P/ASX 200 in Sydney was up 1.0%.
The dollar was lower across the board in the wake of the Fed decision. The pound was quoted at USD1.2165 early Thursday, up from USD1.2045 at the London equities close Wednesday.
The euro was priced at USD1.0207, up from USD1.0133. Against the yen, the dollar was trading at JPY135.48, well down from JPY137.17.
Brent oil was quoted at USD107.20 a barrel Thursday morning, up from USD106.68 a barrel late Wednesday. Gold stood at USD1,737.48 an ounce, higher against USD1,718.59.
Thursday's economic calendar has US GDP data at 1330 BST, after an inflation reading from Germany at 1300 BST.
The UK corporate calendar Thursday has half-year results from lender Barclays, oil major Shell, and transport firm National Express. Distiller Diageo reports annual results.
The US corporate calendar Thursday has earnings from drugmakers Merck & Co and Pfizer. In addition, trillion-dollar club members Amazon and Apple report after the market close in New York.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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