LONDON MARKET EARLY CALL: Stocks called up as Powell signals slowdown

(Alliance News) - Stocks in London are set to open higher on Thursday, after Federal Reserve Chair Jerome Powell suggested that the US central bank could ease its pace of interest rate hikes "as soon as" December.

IG says futures indicate the FTSE 100 index of large-caps to open 32.85 points, or 0.4%, higher at 7,605.90 on Thursday. The FTSE 100 index closed up 61.05 points, 0.8%, at 7,573.0 on Wednesday.

"The time for moderating the pace of rate increases may come as soon as the December meeting" of the Federal Open Market Committee, Powell said in a speech at the Brookings Institution think tank on Wednesday.

He said the full effects of the bank's rate hikes are yet to be felt and warned that policy will likely have to remain tight "for some time" to restore price stability.

Monetary policy affects the economy and inflation with "uncertain lags", he said. "Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down."

In the US on Wednesday, stocks on Wall Street rallied in the wake of Powell's words. The Dow Jones Industrial Average ended up 2.2%, the S&P 500 up 3.1%, and the Nasdaq Composite up 4.4%.

Powell added that it remains "very plausible" for the US economy to reach a soft landing despite a series of aggressive moves to cool demand and bring down prices.

"I do continue to believe that there's a path to a soft or softish landing," he said at an event in Washington, referring to a scenario where unemployment rises but the US avoids a severe recession.

US employers eased their hiring pace in November, with job creation slowing the most since early 2021, payroll firm ADP said on Wednesday.

Private employment rose by 127,000 jobs this month, much less than analysts expected and below the 239,000-job increase in October, with firms no longer in "hyper-replacement mode", the survey showed.

The ADP figures provide foretaste of the key US nonfarm payrolls report for November, which is due on Friday.

The dollar weakened significantly after Powell's comments.

Sterling was quoted at USD1.2103 early Thursday, sharply higher than USD1.1907 at the London equities close on Wednesday.

The euro traded at USD1.0449 early Thursday, up significantly against USD1.0295 late Wednesday. Against the yen, the dollar was quoted at JPY136.39, notably lower versus JPY139.54.

Gold was quoted at USD1,783.04 an ounce early Thursday, surging against USD1,753.29 on Wednesday as the dollar, with which the yellow metal has an inverse relationship, weakened.

Brent oil was trading at USD86.35 a barrel early Thursday, higher than USD85.44 late Wednesday.

In Asia on Thursday, stocks were trading higher. The Japanese Nikkei 225 index was up 0.9%. The S&P/ASX 200 in Sydney was up 1.0%. In China, the Shanghai Composite was up 0.4%, while the Hang Seng index in Hong Kong was up 1.5%.

China's top Covid official has signalled a possible relaxing of the country's strict zero-tolerance approach to the virus, after nationwide protests calling for an end to lockdowns and greater political freedom.

Speaking at the National Health Commission Wednesday, Vice Premier Sun Chunlan said the Omicron variant was weakening and vaccination rates were improving, according to the state-run Xinhua news agency.

Sun – a central figure behind Beijing's pandemic response – said this "new situation" required "new tasks".

In Thursday's corporate calendar, there are annual results from retail investment platform AJ Bell and online auction operator Auction Technology Group.

In the economic calendar, there are a slew of manufacturing PMI releases from the EU, France, Germany, the UK, and the US throughout the day.

By Heather Rydings; [e-mail]

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