Stocks seen lower after string of rate hikes

(Alliance News) - Stocks in London are set to open lower on Friday, after a busy two days for interest rate decisions.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank said: "The new market game is being played between two camps: 'the financial stress and how the authorities are dealing or promising to deal with potential renewed turmoil' camp, and 'the recession worries' camp.

IG says futures indicate the FTSE 100 index of large-caps to open 41.80 points, or 0.6%, lower at 7,457.80 on Friday. The FTSE 100 index closed down 67.24 points, 0.9%, at 7,499.60 on Thursday.

The Bank of England on Thursday raised UK interest rates by 25 basis points, as widely expected. The decision took the key UK bank rate to 4.25% from 4.00% previously.

The vote was split, with seven Monetary Policy Committee members voting for the hike and two voting for the bank rate to remain unchanged.

Sterling was quoted at USD1.2278 early on Friday, down from USD1.2325 at the London equities close on Thursday.

Thursday's move by the BoE followed similar interest rate decisions by the Swiss National Bank and Norges Bank on Thursday morning, the US Federal Reserve on Wednesday, and the European Central Bank last week.

The Fed raised US interest rates by a quarter of a percentage point, resisting the urge to pause hikes in the face of banking sector turmoil, while the SNB raised rates by a more aggressive 50 basis points. The ECB raised rates by the same amount last week. The Norwegian central bank opted for a 25 basis point hike.

In the US on Thursday, Wall Street ended higher, with the Dow Jones Industrial Average up 0.2%, the S&P 500 up 0.3%, and the Nasdaq Composite up 1.0%.

The euro traded at USD1.0829 early Friday, down from USD1.0895 late Thursday. Against the yen, the dollar was quoted at JPY130.33, down from JPY130.73.

In Tokyo on Friday, the Nikkei 225 index was down 0.1%. In China, the Shanghai Composite was down 0.7%, while the Hang Seng index in Hong Kong was down 0.8%. The S&P/ASX 200 in Sydney closed down 0.2%.

Japan's consumer prices rose 3.1% in February from a year earlier, slowing from the four-decade highs seen in previous months, government data showed.

The figure, which excludes volatile fresh food, met market expectations and comes after the government introduced relief measures for soaring energy bills.

It is the first deceleration in over a year, marking a fall from January, when prices jumped 4.2% on-year – the highest level since September 1981, fuelled in part by higher energy bills.

Japan's private sector growth continued to strengthen in March, according to preliminary survey data on Friday.

The au Jibun Bank flash composite purchasing managers' index rose to 51.9 points from 51.1 in February, improving further above the 50-mark that separates expansion from contraction.

The flash services PMI rose to 54.2 from 54.0, with services business activity seeing its steepest increase since October 2013. This was better than market consensus of 53.8, as cited by FXStreet.

Japan's flash manufacturing output PMI rose to 47.4 from 45.3, remaining in contraction.

There are flash PMI readings from the UK and the US at 0930 GMT and 1345 GMT, respectively. For Germany, a reading is due at 0830 GMT, followed by the EU at 0900 GMT.

Gold was quoted at USD1,988.38 an ounce early Friday, lower than USD1,992.82 on Thursday. Brent oil was trading at USD75.96 a barrel, lower than USD76.59.

In Friday's UK corporate calendar, there are half-year results from JD Wetherspoon and Smiths Group.

By Heather Rydings, Alliance News senior economics reporter

Comments and questions to [e-mail]

Copyright 2023 Alliance News Ltd. All Rights Reserved.