Stocks to edge up and pound rises before BoE

(Alliance News) - Stocks in London are set to edge higher at Friday's open, as the market digests the week's interest rate decisions, and looks to one from the Bank of England.

IG says futures indicate the FTSE 100 to open up 8.2 points, 0.1%, at 7,636.46 on Friday. The index of London large-caps climbed 25.52 points, 0.3%, at 7,628.26 on Thursday. So far this week, it has risen 0.9% and is on a four-day win streak.

"The FTSE 100 has made headway, but below the surface a swathe of UK-focussed firms have seen their share price fall as worries about the [Bank of England]'s need to tighten further grow stronger," noted IG's Chris Beauchamp.

In a week dominated by central bank decisions elsewhere, market attention is shifting to the BoE's own decision next Thursday. The pound continued its upward trajectory, as sticky inflation data, combined with strong employment and economic growth prints, set the stage for the BoE to continue its rate-hiking cycle.

Sterling was quoted at USD1.2784 early Friday, rising from USD1.2759 at the London equities close on Thursday. The euro traded at USD1.0942, higher than USD1.0930.

The ECB lifted interest rates in the eurozone by 25 basis points, as expected, on Thursday.

The Frankfurt-based central bank acknowledged in its statement on Thursday that inflation has been coming down, but is nonetheless projected to remain "too high for too long".

ECB President Christine Lagarde said a pause was not even an option for the ECB. Her words suggest a hike in July is all but assured, and that the September meeting is also a live one.

Stocks on Wall Street rallied on Thursday, despite hawkish rhetoric from the US Federal Reserve, with the Dow Jones Industrial Average up 1.3%, while the S&P 500 and the Nasdaq Composite both rose 1.2%.

The Federal Reserve left interest rates unchanged on Wednesday but signalled further increases were on the way before the end of the year.

"Quite simply, markets aren't buying it with US 2-year yields below the levels they were prior to Wednesday's Fed meeting. In essence, the market thinks the Fed is done as far as rate hikes are concerned," CMC Markets analyst Michael Hewson commented.

Meanwhile, the Japanese yen weakened slightly overnight, as the Bank of Japan said it would maintain its long-standing, ultra-loose monetary policy as it looks to boost economic growth.

It left its negative interest rate in place and did not adjust the band in which rates for 10-year government bonds fluctuate, a scheme known as yield curve control

Against the yen, the dollar was quoted at JPY140.74, up versus JPY140.52.

Officials had been widely expected to keep policies unchanged after the second two-day meeting chaired by new Governor Kazuo Ueda.

The central bank has gone against the grain as its global peers hike interest rates to tackle inflation, pushing down the value of the yen against the dollar.

The Nikkei 225 index in Tokyo was up 0.2%. In China, the Shanghai Composite was up 0.3%, while the Hang Seng index in Hong Kong was up 1.0%. The S&P/ASX 200 in Sydney was up 1.1%.

Gold was quoted at USD1,955.73 an ounce early Friday, little changed from USD1,955.88 on Thursday.

Brent oil fetched USD75.58 a barrel, edging up USD74.81.

In Friday's economic calendar, there's a eurozone inflation reading at 1000 BST. The local corporate calendar has a trading statement from grocer Tesco.

By Elizabeth Winter, Alliance News senior markets reporter

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