FTSE called flat before US CPI, Fed minutes

(Alliance News) - Stocks in London are called to open largely flat on Wednesday, ahead of a key US inflation print and minutes from the Federal Reserve's March meeting.

IG says futures indicate the FTSE 100 index of large-caps to open down 6.3 points, 0.1%, at 7,779.42 on Wednesday. The FTSE 100 index closed up 44.16 points, or 0.6% at 7,785.72 on Tuesday.

"European markets have got off to a solid start to the week despite a warning from the IMF about the wider banking sector, and risks to growth more broadly," said CMC Markets analyst Michael Hewson.

UK output is expected to contract by 0.3% this year before rebounding to grow by 1% next year, economists working for the body said.

It puts the UK firmly at the bottom in the G7 group of advanced economies this year. The only other economy that the IMF expects to decline is Germany's, which is expected to contract by 0.1%.

However, it is at least better news than a previous IMF forecast, which predicted that the economy would shrink by 0.6% this year.

In the US on Tuesday, Wall Street had a muted session, with the Dow Jones Industrial Average ending up 0.3%, the S&P 500 flat, and the Nasdaq Composite down 0.4%.

"With markets currently in a bit of a "twilight zone" between Friday's US payrolls report and today's March CPI numbers, the picture with respect to the Fed's next move on rates could well become a little bit clearer, even as last week's economic data largely pointed to some softening in the US economy," Hewson added.

US inflation data for March will be released at 1330 BST. Markets are expecting the annual inflation rate to cool to 5.2% from 6.0%, according to FXStreet. From the previous month, consumer prices are expected to rise 0.4%, compared to 0.5% in February.

Core inflation - excluding food and energy - is expected to edge up to 5.6% annually from 5.5% in February.

"[The rise in core inflation] is what the Fed is most concerned about, particularly in services which has continued to rise, and will likely drive policy decisions going forward," Hewson considered.

There will be some more insight into the central bank's thinking with the release of the Federal Open Market Committee meeting minutes at 1900 BST.

The dollar was mixed against major currencies in early exchanges.

Sterling was quoted at USD1.2436 early Wednesday, higher than USD1.2427 at the London equities close on Tuesday. The euro traded at USD1.0928, up from USD1.0914. Against the yen, the dollar was quoted at JPY133.77, up versus JPY133.61.

In Asia on Wednesday, the Nikkei 225 index was up 0.6%. In China, the Shanghai Composite was up 0.2%, though the Hang Seng index in Hong Kong was down 0.8%. The S&P/ASX 200 in Sydney was up 0.4%.

Gold was quoted at USD2,020.43 an ounce early Wednesday, higher than USD2,002.83 on Tuesday. Brent oil fetched USD85.86 a barrel, higher than USD85.22.

In Wednesday's UK corporate calendar, there are full-year results from cinema operator Everyman Media Group and DP Eurasia, the master franchisee for Domino's Pizza in Russia, Turkey, Azerbaijan and Georgia.

By Elizabeth Winter, Alliance News senior markets reporter

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