LONDON MARKET OPEN: Stocks lower ahead of BoE and ECB decisions

(Alliance News) - Stock prices in London opened lower on Thursday amid a busy 48 hours for central bank interest rate decisions.

The FTSE 100 index opened down 50.46 points, or 0.7%, at 7,445.47. The FTSE 250 was down 147.08 points, or 0.8%, at 18,890.84, and the AIM All-Share was down 3.62 points, or 0.4% at 832.93.

The Cboe UK 100 was down 0.8% at 744.41, the Cboe UK 250 was down 0.8% at 16,312.70, and the Cboe Small Companies was down 0.8% at 13,034.47.

On Wednesday, the US Federal Reserve lifted interest rates by 50 basis points, as widely expected, but forecast that interest rates would peak at a higher level than previously expected.

The Federal Open Market Committee lifted the target range for the federal funds rate to 4.25% to 4.50% - the highest since 2007 - from a previous range of 3.75% to 4.00%.

"Recent indicators point to modest growth in spending and production. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures," the Fed said.

"The committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time."

For Ipek Ozkardeskaya at Swissquote Bank, the Fed's message was very clear: "The Fed is not ready to stop hiking rates - even though they will be hiking by smaller chunks...No pause, no cut, no softening in sight."

In the US on Wednesday, Wall Street ended lower, with the Dow Jones Industrial Average down 0.4%, the S&P 500 down 0.6% and the Nasdaq Composite down 0.8%.

ING currency strategist Francesco Pesole said the as-expected hike by the Fed halted the dollar's downtrend, though it failed to rebound sharply.

The pound was quoted at USD1.2366 early on Thursday in London, lower compared to USD1.2410 at the equities close on Wednesday. The euro stood at USD1.0635, down against USD1.0660. Against the yen, the dollar was trading at JPY136.06, higher compared to JPY134.82.

On Thursday morning, the Swiss National Bank matched the Fed, also raising its key interest rate by 50 basis points, to 1.0%. The central bank added that additional rises in the SNB policy rate "cannot be ruled out" to ensure price stability over the medium term.

Still to come on Thursday, the Bank of England announces its interest rate decision at midday, followed shortly afterward by the European Central Bank. Both also are expected to raise rates by half a percentage point, though a 75-basis-point hike by the ECB is considered possible.

In European equities on Thursday, the CAC 40 in Paris was down 1.2%, while the DAX 40 in Frankfurt was down 1.0%, ahead of the central bank announcements.

In London, Land Securities was one of the few blue-chip stocks in the green on Thursday morning, up 0.1% after Goldman Sachs raised the commercial property developer and investor to 'neutral' from 'sell'.

SSE and National Grid were down 0.5% and 1.1% respectively as both firms welcomed Ofgem's approval of transmission investments needed to meet the UK government's 50 gigawatt offshore wind target by 2030.

SSE said the decision by the UK regulator confirms that all SSEN transmission projects will be taken forward as part of the Accelerated Strategic Transmission Investment framework.

As a result, two 2 gigawatt subsea high-voltage direct current links will be taken forward as joint ventures with National Grid Electricity Transmission, amongst other projects.

Ofgem confirmed these will be exempt from proposals to introduce competitive ownership of onshore electricity networks.

National Grid said the decision confirmed that National Grid Electricity Transmission will be responsible for the delivery of 17 major onshore electricity transmission projects.

In the FTSE 250, Clarkson was up 2.2%, after JPMorgan placed the shipping services provider on 'positive catalyst watch'.

Big Yellow was up 1.4% after Goldman Sachs raised the self-storage firm to 'buy' from 'neutral'.

Currys dropped 6.0% after it swung sharply to a loss in the six months ended October 29, as revenue declined.

The electricals retailer posted a pretax loss of GBP548 million, swinging from a profit of GBP48 million in the previous year. Revenue fell to GBP4.47 billion from GBP4.79 million.

More significantly, Currys booked an impairment of goodwill of GBP511 million in the half-year, compared to no such impairment a year before. It said this arose at the time of the Dixons Carphone merger in 2014. Currys also blamed lower international profits and margin for the swing to a loss.

Elsewhere in London, Zotefoams jumped 8.6% after it reported that the positive momentum seen in the first three quarters of its financial year had continued into the fourth, putting its full-year profit ahead of expectations.

In the nine months ended September 30, the industrial plastics maker said revenue was around 24% ahead of the same period the previous. In addition, trading in October and November had remained strong.

As a result, the firm now expects adjusted pretax profit in 2022 to be ahead of current market expectations, which it placed at GBP10.7 million.

In Asia on Thursday, the Japanese Nikkei 225 index closed down 0.4%. In China, the Shanghai Composite closed down 0.3%, while the Hang Seng index in Hong Kong closed down 1.6%. The S&P/ASX 200 in Sydney closed down 0.6%.

China's retail sales plunged last month, official data showed, as Covid restrictions and a property market crisis hammered the world's second-largest economy.

November retail sales sank 5.9% on-year, marking the second successive contraction, according to data released by the National Bureau of Statistics.

The data also showed industrial production grew 2.2% on-year last month, less than half October's rate, while unemployment rose 0.1 percentage point to 5.6%.

Brent oil was quoted at USD81.95 a barrel at early in London on Thursday, down from USD82.51 late Wednesday. Gold was quoted at USD1,779.11 an ounce, down sharply against USD1,810.74.

Still to come on Thursday's economic calendar, beside the central bank announcements, there are US unemployment insurance claims at 1330 GMT.

By Heather Rydings, Alliance News senior economics reporter

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