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London open: Stocks edge down as investors eye rate announcements
London stocks edged lower in early trade on Thursday as investors digested a rate hike by the Federal Reserve and looked ahead to more policy decisions from the Bank of England and the European Central Bank.
At 0830 GMT, the FTSE 100 was down 0.2% to 7,485.53, while the pound was up 0.1% versus the euro and the dollar at 1.1358 and 1.3430, respectively.
On Wednesday, the Fed hiked rates by 25 basis points, as expected, marking the third increase this year. In addition, the US central bank projected three more rate hikes in each of 2018 and 2019.
The BoE rate announcement is at 1200 GMT and the ECB policy announcement is at 1245 GMT.
Threadneedle Street is widely expected to stand pat on interest rates after last month’s increase and there will be no press conference following the announcement this time.
CMC Markets analyst Michael Hewson said: “The UK central bank is unlikely to change its view of the UK economy so soon after last month’s inflation report, but the rise in CPI inflation to 3.1% earlier this week does vindicate the concern of some policymakers about the prospect of inflation starting to become entrenched. Given recent PMI data there is a risk that we could see a couple more months of CPI at around the 3% level, though wages do appear to be showing some signs of starting to tick higher.
The ECB is also expected to leave monetary policy unchanged, so investors will be eyeing President Mario Draghi’s views on the eurozone economy.
Oanda analyst Craig Erlam said: “With the ECB having only announced a taper to its quantitative easing program at the last meeting, it’s extremely unlikely that further updates will come today and I doubt Draghi will make any promises regarding the end of bond buying from September. That said, with the economic recovery gathering momentum, Draghi is likely to be pushed on this and may offer small clues on the next steps, for example the timing of the first rate hike and how the central bank will approach raising rates and reducing its balance sheet.”
Ahead of the rate announcements, UK retail sales data is due at 0930 GMT, with economists expecting sales to have picked up a little in November to a 0.4% rise from 0.3% the month before.
In corporate news, distribution and outsourcing group Bunzl slipped after saying it has been trading in line and expects full-year revenues to rise around 15% at actual exchange rates.
Ocado was on the back foot after it reported strong but slightly slower sales growth in the fourth quarter as a lack of delivery drivers put the brakes on capacity, though previous falls in the online grocer’s average basket size were arrested.
Oilfield services group Petrofac was weaker despite saying in a pre-close update that trading was in line with expectations and that it has seen a recovery in new order intake in 2017.
888 Holdings lost ground after it said earnings before interest, taxes, depreciation and amortisation for the year to the end of December should be in line with market expectations.
Sports Direct shares slumped after the company posted a 67% drop in first-half profit, with investors seemingly unconvinced by chief executive Mike Ashley’s claims that the group’s elevation strategy is delivering a “spectacular trading performance”.
Imperial Leather and Original Source owner PZ Cussons retreated as it warned that first-half operating profits will be around 10% lower than the previous period due to reduced margins in some business units in Europe and Africa.
Outsourcer Capita tumbled after saying trading for the year to date was in line with expectations, but highlighting a challenging outlook for 2018, while Standard Chartered was hit by a downgrade to ‘sell’ at Investec.
On the upside, BT Group rallied after an upgrade to ‘buy’ at UBS, while IMI advanced after agreeing to acquire Bimba, a manufacturer of pneumatic, hydraulic and electric motion solutions with an extensive distributor network principally servicing the North American industrial automation market.
