LONDON (Alliance News) - London-listed stocks are called to open lower Thursday after a weak finish in New York amid concerns of an early US interest rate hike and ahead of the Bank of England's interest rate decision and minutes which will be simultaneously released at midday.
Analysts overwhelmingly expect the UK central bank to maintain interest rates at their record low of 0.5% and asset purchases at GBP375 billion. The minutes from the meeting are expected to show that only one member of the Monetary Policy Committee, Ian McCafferty, voted for a rate hike, matching the vote split seen in the August minutes.
"Softness of the external environment, including anxieties around China, softer commodity prices and lower eurozone growth prospects are likely to weigh heavily on the MPC's deliberations," says Michael Sawicki, senior economist at Lloyds Bank. "In our view, they are unlikely to shift the balance sufficiently for McCafferty to switch back his vote, and as such we see an 8-1 vote split for unchanged rates as the most likely outcome."
IG says futures indicate the FTSE 100 to open lower at 6,161.5. The index closed up 1.4% at 6,229.01 Wednesday as expectations of further stimulus measures by Chinese officials boosted global equities markets
Having opened higher, US equities ended the session in the red after a strong JOLTS job openings report saw increased speculation in favour of a September US interest rate hike. The DJIA closed down 1.5%, the S&P 500 ended down 1.4% and the Nasdaq Composite closed down 1.2%.
The US Bureau of Labor Statistics reported Wednesday that job openings in July rose to 5.8 million from the 5.3 million seen in June and surpassing expectations of a 5.3 million increase. The Bureau said this was the highest since the series began in December 2000, beating the prior high of 5.4 million in May.
Stocks in Asia are also lower Thursday, with the Nikkei in Japan closing down 2.5%, the Hang Seng trading down 2.1%, and the Shanghai Composite down 0.8%.
Consumer inflation in China reached its highest point for a year, driven by the cost of pork and other food, while producer prices dropped sharply, officials said Thursday. The divergence complicates matters for China's wavering economy, experts said.
The consumer price index was up 2% year-on-year in August, while the producer price index was down 5.9%, the biggest drop in more than five years, the National Bureau of Statistics said. Both shifts were greater than predicted. Analysts had forecast a 1.8% rise in consumer prices, up from a year-on-year inflation of 1.6% in July, and a 5.5% drop in producer prices, compared with 5.4% year-on-year the previous month.
Meanwhile, at the World Economic Forum's event in Dalian, known as the Summer Davos, Chinese Premier Li Keqiang promised to relax restrictions on foreign capital in financial markets and said the country would meet its economic targets.
"We are speeding up structural reform," Li said. China faces a "painful and treacherous" transition from over reliance on manufacturing toward a "growth model driven by consumption and investment".
"It's true that the economy has come under downward pressure...but the Chinese economy will not have a hard landing," he said in a speech on policy direction. "Despite some moderation in speed, growth is stable."
In UK corporate news, Wm Morrison Supermarkets reported a sharp drop in profit in the first half of its financial year, as its revenue and like-for-like sales continued to decline in a deflationary UK food market and as it competes on price with other supermarkets in the face of discounters Aldi and Lidl.
The grocer reported a drop in pretax profit in the half year ended August 2 to GBP126 million from GBP239 million in the first half of the prior year, as total revenue fell 5.1% to GBP8.1 billion from GBP8.5 billion, and like-for-like sales excluding fuel declined 2.7%. It said that its like-for-like sales continue to be hit by deflation as it continues to lower prices.
Next said its pretax profit and revenue both rose in the first half of its financial year, driven by higher-than-expected full-price brand sales growth and a robust performance in its directory business, while retail sales rose only marginally. The FTSE 100-listed fashion retailer said its pretax profit for the 26 weeks to July 25 was GBP347.1 million, up from GBP324.2 million, as its total sales revenue for the period rose to GBP1.89 billion from GBP1.85 billion a year earlier.
Dixons Carphone said its like-for-like sales grew in the first quarter, driven by a strong performance in the UK and Ireland which offset mixed conditions in Southern Europe.
The electricals retailer, created by the merger of Dixons Retail and Carphone Warehouse last year, said its group like-for-like revenue growth in the 13 weeks to August 1 was 8%, driven by 10% growth in the UK and Ireland.
In the economic calendar aside from the Bank of England releases, there are US initial and continuing jobless claims at 1330 BST, alongside import and export price index. At 1600 BST there is Energy Information Administration crude oil stocks.
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
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