Stocks to retreat as pound crosses USD1.27

(Alliance News) - Stocks in London are set to open lower on Wednesday, as the pound gains strength against the dollar following dovish remarks from the US Federal Reserve.

IG says futures indicate the FTSE 100 to open down 14.4 points, 0.2%, at 7,440.84 on Wednesday. The index of London large-caps closed down 5.46 points, 0.1%, at 7,455.24 on Tuesday.

The pound crossed over the USD1.27 mark, following the comments from a US central bank official, as expectations for interest rate cuts next year increased.

Sterling was quoted at USD1.2711 early Wednesday, higher than USD1.2689 at the London equities close on Tuesday.

The US Federal Reserve is making good progress in its fight against inflation, senior bank officials said, while voicing differing opinions on the chances of another interest rate hike. "I am encouraged by what we have learned in the past few weeks – something appears to be giving, and it's the pace of the economy," Fed Governor Christopher Waller told a conference in Washington.

Economic data from October "are consistent with the kind of moderating demand and easing price pressure that will help move inflation back to two percent," he added.

The euro traded at USD1.0998, but had crossed over the USD1.10 mark slightly earlier, higher than USD1.0987. Against the yen, the dollar was quoted at JPY147.18 versus JPY147.59.

"Markets chose to focus on Waller’s comments given his previously hawkish stance on rates in a sign that the consensus was starting to shift on the [Federal Open Market Committee]," said CMC Markets' Michael Hewson.

"However one should also be careful not to read too much into Waller’s comments in that while some modest rate cuts might come over the next 12 months, rates are unlikely to come down anywhere near as quickly as they were raised," he cautioned.

Gold was quoted at USD2,044.00 an ounce early Wednesday, higher than USD2,037.08 on Tuesday.

Brent oil was trading at USD81.64 a barrel, little changed from USD81.63.

In the US on Tuesday, Wall Street ended slightly higher, with the Dow Jones Industrial Average up 0.2%, the S&P 500 up 0.1% and the Nasdaq Composite up 0.3%.

"So far this week, US stock markets have been treading water as investors appear to be wary of taking too much of a directional view ahead of the early December run of tier-one economic data," explained SPI Asset Management's Stephen Innes.

In Asia on Wednesday, the Nikkei 225 index in Tokyo closed down 0.3%. In China, the Shanghai Composite was down 0.7%, while the Hang Seng index in Hong Kong dropped 2.6%. The S&P/ASX 200 in Sydney closed up 0.3%.

The local corporate calendar has a trading statement from oil firm Harbour Energy, while water utility Pennon Group reports half-year results.

Wednesday's economic calendar has a German consumer price index reading at 1300 GMT, before a US gross domestic product reading at 1330 GMT. The UK nationwide house price index is due shortly.

By Elizabeth Winter, Alliance News deputy news editor

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