Stocks seen down, pound below USD1.20 on Fed

(Alliance News) - Stocks in London were set to open lower on Friday, amid renewed fear about the future of interest rates, following hawkish comments from a US Federal Reserve policymaker that pushed the pound below USD1.20.

IG says futures indicate the FTSE 100 index of large-caps to open 23.33 points, or 0.3%, lower at 7,989.20.

The FTSE 100 index closed above 8,000 points for the first time on Thursday. It ended 14.70 points, or 0.2%, higher at 8,012.53 and set a new record high of 8,047.06 points earlier in the day.

Michael Hewson at CMC Markets said a remark by Cleveland Fed President Loretta Mester on Thursday that there had been a "compelling case for a 50 basis point rate hike" at the US central bank's last policy meeting prompted "another bout of US dollar strength and higher yields".

"Her comments also raised the prospect that she may not have been alone in thinking along those lines," he added.

Sterling was quoted at USD1.1936 early Friday, lower than USD1.2004 at the London equities close on Thursday.

The euro traded at USD2.0633 early Friday, lower than USD1.0674 late Thursday. Against the yen, the dollar was quoted at JPY134.73, higher versus JPY134.08.

The comments added to the weight on the US stock market, following data that revealed US producer price inflation picked up on a monthly basis in January.

On a monthly basis, the producer price index for final demand increased 0.7% in January, reversing from a 0.2% decline in December, according to data from the US Bureau of Labor Statistics.

This came above market expectations, according to FXStreet. Consensus had expected the producer price index to increase 0.4% in January.

On an annual basis, the index for final demand rose 6.0% in January, slowing from a 6.5% increase in December. Markets had expected producer price inflation to cool to 5.4%.

Wall Street ended sharply lower in response, with the Dow Jones Industrial Average ending down 1.3%, the S&P 500 down 1.5% and the Nasdaq Composite 1.8%.

In Asia on Friday, the Nikkei 225 index was down 0.7%. In China, the Shanghai Composite was down 0.6%, while the Hang Seng index in Hong Kong was down 1.1%. The S&P/ASX 200 in Sydney closed down 0.9%.

Brent oil was trading at USD84.09 a barrel early Friday, lower than USD85.13 late Thursday. Gold was quoted at USD1,824.36 an ounce, sharply lower than USD1,835.31.

In Friday's corporate calendar, there are annual earnings from bank NatWest and building materials firm Kingspan.

In the economic calendar, there are German producer price index and UK retail sales data at 0700 GMT.

By Heather Rydings, Alliance News senior economics reporter

Comments and questions to [e-mail]

Copyright 2023 Alliance News Ltd. All Rights Reserved.