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LONDON MARKET EARLY CALL: Stocks Seen Higher As Jackson Hole Continues

Fri, 28th Aug 2020 07:01

(Alliance News) - Stock prices in London are seen opening higher on Friday on expectations that US interest rates will stay at low levels for as long as needed to support the world's top economy.

IG futures indicate the FTSE 100 index is to open 38.01 points higher at 6.038.00. The blue-chip index closed down 45.61 points, or 0.8%, at 5,999.99 Thursday.

In the US on Thursday, Wall Street ended mostly higher, with the Dow Jones Industrial Average up 0.6% and the S&P 500 up 0.2% but the Nasdaq Composite down 0.3%. The S&P 500 index ended at fresh record highs for the fifth consecutive session.

At the Jackson Hole economic symposium on Thursday, the US Federal Reserve outlined a major policy change that gives greater weight to its mission of maximising employment for the benefit of lower-income families, while placing less emphasis on fighting inflation.

Chair Jerome Powell said the aim is to correct the "shortfalls" in achieving the Fed's full employment goal while recognizing that, with changes in the global economy, a tight job market does not necessarily drive prices higher.

In practice, the change has no impact in the near-term but will keep borrowing rates low for much longer than in prior economic expansions. The new policy makes it clear the central bank will allow inflation to stay above its 2.0% target "for some time" before raising interest rates.

"The S&P 500 continued its record-breaking rally as the Fed is expected to let inflation and employment run higher in a move that will likely accompany low-interest rates for years to come. Fed's move seems to imply a lower rate for longer, which is being viewed favourably today as investors around the world universally like the sound of cheap money," said AxiCorp's Stephen Innes.

The pound was quoted at USD1.3261 early Friday, up from USD1.3192 at the London equities close on Thursday.

The euro stood at USD1.1870 early Friday, up sharply from USD1.1798 at the European equities close Thursday. Against the yen, the dollar was trading at JPY106.40, lower from JPY106.50.

In commodities, Brent oil was quoted at USD45.65 a barrel from Friday morning, up from USD44.68 a barrel at the London equities close Thursday. Gold was quoted at USD1,940.71 an ounce, up from USD1,919.95.

The Japanese Nikkei 225 index is down 2.5%. In China, the Shanghai Composite is up 0.4%, while the Hang Seng index in Hong Kong is up 0.8%.

Japan's Prime Minister Shinzo Abe is to announce his resignation over health issues, local media reported Friday, hours before he is due to address a press conference.

"Abe intends to resign as his illness has worsened and he worries it will cause trouble" in leading the country, national broadcaster NHK said, without citing a source.

The UK corporate calendar for Friday has half-year results from plastic and fibre supplier Essentra and infrastructure investment company BBGI SICAV.

In Friday's economic calendar is eurozone consumer confidence at 1000 BST and US core personal consumption expenditures at 1330 BST. Bank of England Governor Andrew Bailey speaks at the Jackson Hole virtual symposium around 1400 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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