Lower call in wake of Fed meeting minutes

(Alliance News) - Stocks in London are set to open lower on Thursday, a day after Federal Open Market Committee meeting minutes indicated that further rate hikes would be "appropriate" for the Federal Reserve to contain inflation.

IG says futures indicate the FTSE 100 index of large-caps to open down 7.99 points, or 0.1%, at 7,577.20 on Thursday. The FTSE 100 index closed up 31.10 points, 0.4%, at 7,585.19 on Wednesday.

At its December meeting, the FOMC lifted the target range for the federal funds rate by 50 basis points to 4.25% to 4.50% - the highest since 2007 - from a previous range of 3.75% to 4.00%.

Detailing the rationale behind its decision, the FOMC minutes noted inflation was "unacceptably high", remaining "well above" the committee's longer-run goal of 2%.

It also noted the labour market remained "very tight", putting upward pressure on wages and prices.

"Participants observed that a slowing in the pace of rate increases at this meeting would better allow the committee to assess the economy's progress toward the committee's goals of maximum employment and price stability," the minutes said.

However, the policymakers continued to expect that further rate hikes would be "appropriate" to achieve these aims.

In the US on Wednesday, Wall Street ended higher, with the Dow Jones Industrial Average ending up 0.4%, the S&P 500 up 0.8% and the Nasdaq Composite up 0.7%.

The dollar was mixed in the wake of the meeting minutes, The euro traded at USD1.0612 early Thursday, higher than USD1.0598 late Wednesday. Against the yen, the dollar was quoted at JPY132.54 versus JPY131.87.

Sterling was quoted at USD1.2039 early Thursday, lower than USD1.2054 at the London equities close on Wednesday.

Recession-bound Britain will emerge from its winter of discontent with economic growth, lower inflation and shorter hospital waiting lists, Prime Minister Rishi Sunak vowed.

Issuing a five-point list of promises for the new year, Sunak also vowed to bring down the national debt, and pass new legislation to stop boatloads of migrants crossing the Channel from France.

In Asia on Thursday, the Japanese Nikkei 225 index finished 0.4% higher. The S&P/ASX 200 in Sydney closed up 0.1%.

In China, the Shanghai Composite was up 1.0%, while the Hang Seng index in Hong Kong was up 1.3%.

China will begin normalising travel between the mainland and Hong Kong from Sunday, Beijing announced Thursday, easing painful pandemic restrictions that have kept the border mostly sealed for almost three years.

All but three of Hong Kong's 12 crossings with the mainland have been closed since the start of the coronavirus pandemic in early 2020.

China saw a further fall in business activity across the service sector in December, data from S&P Global showed.

The latest Caixin business activity index rose to 48.0 in December, from a six-month low of 46.7 in November. While still in contraction, the rate of decline for the service sector was only "modest" overall.

Gold was quoted at USD1,853.20 an ounce early Thursday, lower than USD1,857.48 on Wednesday. Brent oil was trading at USD78.83, higher than USD78.07.

Stephen Innes at SPI Asset Management said a demand-side debate between China's reopening and recession risk in the US is driving Brent's move below USD80.

In Thursday's corporate calendar, there are trading statements from clothing retailer Next and bakery chain Greggs.

In the economic calendar, there is a UK services PMI reading at 0930 GMT. The ADP employment report, a precursor to Friday's nonfarms, is released at 1315 GMT.

By Heather Rydings, Alliance News senior economics reporter

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