(Alliance News) - Stocks in London are expected to open in the green on Wednesday, as a cooler-than-expected UK inflation print helped to calm nerves ahead of an interest rate decision from the US later, with the Bank of England to follow on Thursday.
The UK headline inflation unexpectedly cooled last month, as stubborn core price pressure finally eased, figures from the Office for National Statistics showed. Market forecasts had been expecting inflation to creep back up, amid the rising cost of fuel.
"While this dip in inflation eases the pressure somewhat on the Bank of England to raise rates once more, it likely still remains poised to pull the trigger on another 25 [basis point] interest rate hike tomorrow. If this proves to be the case, many will be asking when enough is enough. The BoE has had a tough task in navigating its fight against inflation, and this morning's figures suggest it may finally be having a real impact," said Richard Carter, head of fixed interest research at Quilter Cheviot.
The pound fell to USD1.2358 shortly after the print, from USD1.2393 just before, suggesting the market believes a hike on Thursday may be the BoE's last for now.
However, before the BoE's announcement tomorrow, investors will be keeping a close eye on the Federal Reserve.
A pause to rate hikes is widely considered to be the likely outcome of the bank's two-day meeting. Consequently, the market will be focusing on the guidance about future decisions, including any hints for when rates will be cut.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called up 35.0 points, 0.5%, at 7,695.2
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Hang Seng: down 0.4% at 17,934.10
Nikkei 225: closed down 0.7% at 33,023.78
S&P/ASX 200: closed down 0.5% at 7,163.30
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DJIA: closed down 106.37 points, 0.3%, at 34,517.93
S&P 500: closed down 0.2% at 4,443.95
Nasdaq Composite: closed down 0.2% at 13,678.19
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EUR: down at USD1.0681 (USD1.0691)
GBP: down at USD1.2358 (USD1.2399)
USD: up at JPY147.88 (JPY147.71)
GOLD: down at USD1,930.50 per ounce (USD1,933.01)
OIL (Brent): down at USD93.53 a barrel (USD95.20)
(changes since previous London equities close)
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ECONOMICS
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Wednesday's key economic events still to come:
11:00 CEST EU construction output
09:30 BST UK house price index
09:30 BST UK forecasts for the economy statistical release
07:00 EDT US MBA weekly mortgage applications survey
14:00 EDT US Federal Reserve economic projections
14:00 EDT US interest rate decision
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Annually, UK consumer prices rose by 6.7% in August, easing from a 6.8% rise in July. August's reading undershot market forecasts, as cited by FXStreet, which had predicted the inflation rate to heat up to 7.1%. On a monthly basis, UK consumer prices rose 0.3% in August, having fallen 0.4% in July from June. Market expectations had been for a 0.7% rise in August. The annual core inflation rate - which excludes energy, food, alcohol, and tobacco - cooled to 6.2% in August, from July's reading of 6.9%. August's reading had been expected to come in at 6.8%.
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UK producer input prices fell 2.3% in August, after falling by a revised 3.2% in July. August's reading was expected to be a 2.7% decline, while July was first reported as a 3.3% fall. Crude oil and petroleum products provided the largest downward contribution to annual rates of input and output inflation, respectively, the ONS said. Producer input prices rose 0.4% on a monthly basis in August, reversing the 0.4% monthly fall in July. They had been expected to rise by 0.2%.
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UK Prime Minister Rishi Sunak is reportedly mulling over watering down some of the government's net zero pledges, drawing sharp criticism from across the political spectrum and environmental groups. The BBC reported that the prime minister could use a speech in the coming days to announce a major shift in the Tory Party's approach to green policy. While he is not expected to ditch the legal commitment to reach net zero carbon emissions by 2050, Sunak could say that the UK has overperformed on tackling climate change and that other nations need to step up their action, according to the broadcaster. The BBC says it has seen documents suggesting there could be changes to as many as seven core policies or commitments.
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UK Chancellor Jeremy Hunt will meet with technology and creative firms on the west coast of the US as part of efforts to make Britain the "next Silicon Valley". Hunt will hold talks with tech giants including Microsoft, Amazon and Alphabet in Los Angeles, San Francisco and Seattle as he seeks to boost investment in the UK. His trip, starting on Wednesday, will also feature a speech to British senior tech leaders, entrepreneurs and investors to highlight the UK's success in the region, according to the Treasury. He will also hold a roundtable with representatives from the biggest video game companies.
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BROKER RATING CHANGES
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HSBC starts Computacenter with 'buy' - price target 3,015 pence
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Exane BNP cuts WPP to 'neutral' - price target 840 pence
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JPMorgan cuts Pennon price target to 675 (850) pence - 'neutral'
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COMPANIES - FTSE 100
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M&G said insurance revenue climbed to GBP1.82 million annually in the six months to June 30, from GBP1.78 billion. The investment manager swung to a pretax profit of GBP128 million from GBP1.77 billion loss. Assets under management & administration fell to GBP332.8 billion from GBP348.9 billion a year before. The interim results "underpin [its] confidence" in delivering its core priorities and financial targets, with M&G remaining on track to achieve its operating capital generation target of GBP2.5 billion by the end of 2024. It lifted its interim dividend to 6.5p from 6.2p. Excluding the Heritage business, which includes corporate pensions, annuities, life, savings and investment products, net client flows eased to GBP700 million in the six-month period, from GBP1.2 billion a year prior. "Net flows remain positive into a third consecutive year despite known headwinds from UK institutional clients," M&G said.
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COMPANIES - FTSE 250
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Dunelm reported a mixed annual performance, as revenue rose but profit slipped. In the 52 weeks to July 1, the homewares retailer said revenue rose 3.6% year-on-year to a record GBP1.64 billion from GBP1.58 billion, but pretax profit dropped 9.4% to GBP192.7 million from GBP212.8 million. It proposed a final ordinary dividend of 27p per share, taking the full-year total to 42p, up from 40p a year before. The firm is "pleased" with its trading in the new financial year. While consumer behaviour remains unpredictable, Dunelm said its value proposition is "resonating well", and it expects annual growth in sales and pretax profit, which will be driven by volume.
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OTHER COMPANIES
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The UK's home secretary warned Meta Platforms that rolling out end-to-end encryption on its platforms must "not to come at a cost to our children's safety". Suella Braverman and security minister Tom Tugendhat have called on the company, which owns Facebook, Instagram and WhatsApp, to "work with us" and ensure police can access data. "The use of strong encryption for online users remains a vital part of our digital world and I support it, so does the government, but it cannot come at a cost to our children's safety," she said. The minister demanded that Meta develop robust safeguards as part of their plans for end-to-end encryption.
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By Elizabeth Winter, Alliance News senior markets reporter
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