LONDON MARKET OPEN: Shares Fall At The Open After Fed Holds Fire

LONDON (Alliance News) - Stocks opened lower on Friday, after the US Federal Reserve left its benchmark interest rate unchanged on Thursday, saying that recent global economic and financial developments may restrain economic activity and are likely to put further downward pressure on inflation in the near term.

The decision to leave interest rates unchanged at 0-0.25% followed last month's Chinese stock market correction, which played havoc on global financial markets and drove up the dollar as panicked investors fled to US assets.

The Federal Open Market Committee decided to wait for more evidence of US economic strength "in light of the heightened uncertainties abroad and a slightly softer expected path for inflation," Fed Chair Janet Yellen said. "We want to take a little bit more time to evaluate the likely impacts on the US," she added.

The decision to keep rates on hold was not unanimous, as Richmond Fed President Jeffrey Lacker voted to raise rates by 25 basis points. However, the Fed's 'dot-plot' showed 13 members still expect an interest-rate hike this year, down from 15 of 17 members in the Fed's last survey in June.

"Yes, October remains a possibility," Fed Chair Janet Yellen said in a press conference after the Fed decision was announced. The bank has two more scheduled 2015 policy statements: October 28 and December 16.

Rob Carnell, chief international economist at ING, said; "We still like the idea of an October hike, as December could be made awkward by end of year liquidity issues."

But Societe Generale economist Aneta Markowska, who had expected a rate hike in Thursday's decision, said a December rate hike now looks more compelling than October. Merkowska said that the concerns Yellen has about global economic and financial developments are unlikely to be resolved in the next six weeks.

"It probably will take a good string of positive data to bring that individual around. Another potential issue facing the Fed in October is the small, but not-negligible risk of a government shutdown and another debt ceiling showdown," she added.

Gold prices spiked following the decision as the dollar tumbled. The metal hit a high of USD1,134.20 an ounce on Thursday, and gold miners Randgold Resources, up 3.4% and Fresnillo, up 2.8%, were the top gainers in the FTSE 100.

The blue-chip index itself traded down 0.8% at 6,141.79, the FTSE 250 was down 0.3% at 16,985.25 and the AIM All-Share was down 0.1% at 740.20.

European stocks were also lower, with the CAC 40 in Paris down 1.3% and the DAX 30 in Frankfurt down 0.9%.

In Asia, the Japanese Nikkei closed down 2.0%, while the Hang Seng was up 0.1% and the Shanghai Composite was up 0.4%.

Petra Diamonds posted a decline in full-year profit driven by a weaker diamond market and a reliance on mature mining areas, as the group's revenue fell despite its production edging higher in line with its guidance.

FTSE 250-listed Petra said its pretax profit for the year to the end of June was USD85.0 million, compared to a USD124.4 million profit a year earlier, as its revenue declined 10% to USD425.0 million from USD471.8 million. The group said it will pay a dividend for the year of 3.0 cents per share, its maiden payout.

Petra said is results were hit by its underground production being heavily reliant on mature, diluted mining areas and by a weak diamond market over the year, though this was partially offset by a beneficial impact of the depreciation of the South African rand. The company's shares traded up 0.5%.

Payments company Worldpay Group announced that it intends to float on the London Stock Exchange, indicating the company does not intend to accept a bid made for it by French rival Ingenico.

Worldpay said it intends to raise GBP890.0 million in the float, with private equity owners Advent International and Bain Capital to sell around 25% of their stake in the company. Worldpay said the funds raised in the initial public offering would be used to back its growth plans, give it access to a wider range of capital-raising options and allow it to cut its debt pile.

Iron ore pellets producer Ferrexpo's shares plummeted 20% after it said its transactional bank in Ukraine has been declared insolvent. Ferrexpo said Bank F&C had been declared insolvent by its largest shareholder, Kostyantin Zhevago.

The company said it will update the market where necessary on the situation at the bank but said its operations have not been affected so far. It currently has around USD174.0 million of its total USD280.0 million cash balance held at Bank F&C.

AIM-listed financing provider Private & Commercial Finance Group was up 18% after it said it is trading ahead of expectations in its current financial year. Scott Maybury, its chief executive, said in a statement to be given at its annual general meeting that the company has continued to outperform its targets on portfolio growth, quality and profitability.

In the economic calendar, eurozone current account is due at 0900 BST. In the US, Conference Board leading indicators are due at 1500 BST. Investors will also be keeping an eye on developments in Greece over the weekend as the country prepares for elections on Sunday.

Greeks will go to the polls for the third time this year to cast a vote on whether to stay the course with former prime minister Alexis Tsipras, cast the country into the hands of conservative leader Evangelos Meimarakis, or choose one of the myriad smaller parties whose strength is increasing by the day.

Two polls published this week show Tsipras' Syriza and Meimarakis' New Democracy party nearly neck-and-neck, with each pulling in around 27% of the vote. On Thursday, a poll showed New Democracy edging slightly ahead.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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