Stocks to slide ahead of Fed rate decision

(Alliance News) - Stocks in London are set to open lower on Wednesday, as equities across the globe retreat ahead of a trio of central bank decisions.

IG says futures indicate the FTSE 100 to open down 15.3 points, 0.2%, at 7,644.9 on Wednesday. The index of London large-caps closed up 7.26 points, 0.1%, at 7,660.20 on Tuesday.

Before the Fed decision, investors will be looking at the latest inflation print from the UK.

The consumer price index is expected to show that inflation ticked up to 7.1% in August from 6.8% in July, according to FXStreet-cited consensus.

The Bank of England will be looking closely at the print before its interest rate decision on Thursday. It will be paying particular attention to core inflation, which is forecast to cool to 6.8% from 6.9%.

The rise in the headline inflation figure is forecast to be driven by rising fuel prices, amid the latest rise in oil costs.

Monetary policymakers will likely be relieved to see oil prices have eased somewhat overnight, with Brent oil fetching USD93.47 a barrel early Wednesday compared with USD95.20 late Tuesday.

The Federal Open Market Committee will announce its interest rate decision at 1900 BST on Wednesday. A press conference with Chair Jerome Powell will follow shortly after. According to the CME FedWatch Tool, there is a 99% chance the central bank will leave the federal funds rate range unchanged at 5.25% to 5.50%.

Consequently, the market will be focusing on the guidance about any future rate hikes, or even any hints for when rates will be cut.

Sterling was quoted at USD1.2390 early Wednesday, down from USD1.2399 at the London equities close on Tuesday.

The euro traded at USD1.0681, lower than USD1.0691. Against the yen, the dollar was quoted at JPY147.84, up versus JPY147.71.

Japan's top currency official Masato Kanda told reporters Japan is "closely cooperating with the authorities abroad, the US authorities, and sharing views that excessive movement (in the foreign currency exchange rate) is undesirable".

"We are observing (the market) with a sense of urgency and will take appropriate measures without ruling out any means against excessive movement," he said.

In Asia on Wednesday, the Nikkei 225 index in Tokyo was down 0.5%, as data revealed a sharp annual drop in Japanese imports in August, helping to narrow the country's trade deficit. Exports to China, one of Japan's major trading partners, dropped 11%, as total exports edged down 0.8%.

In China, the Shanghai Composite was down 0.4%, while the Hang Seng index in Hong Kong was down 0.7%.

China's central bank left key interest rates unchanged on Wednesday, as widely expected. The one-year loan prime rate, which serves as a benchmark for corporate loans, was maintained at 3.45%, the People's Bank of China said in a statement. It had been cut from 3.55% in August, in an attempt to counter the post-Covid growth slowdown in the world's second-largest economy.

The five-year LPR, which is used to price mortgages, was held at 4.2%.

According to SPI Asset Management's Stephen Innes, the move to keep rates was "particularly risk-averse, given the property concerns" in the country.

"We could be nearing the point where traders throw in the towel on expectations of more significant stimulus or a substantial improvement in economic momentum," he added.

The S&P/ASX 200 in Sydney was down 0.6%.

In the US on Tuesday, Wall Street ended in the red, with the Dow Jones Industrial Average down 0.3%, the S&P 500 down 0.2% and the Nasdaq Composite down 0.2%.

Gold was quoted at USD1,930.20 an ounce early Wednesday, lower than USD1,933.01 on Tuesday.

In Wednesday's UK corporate calendar, there are half year results from insurer M&G. There are also full-year results from Supermarket Income REIT.

By Elizabeth Winter, Alliance News senior markets reporter

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