London pre-open: Big falls expected as Fed sets hawkish tone

(Sharecast News) - UK stocks are expected to retreat from a fresh four-month high on Thursday after comments from the Federal Reserve sunk indices on Wall Street the previous evening. Meanwhile, nerves were starting to show ahead of the Bank of England's policy announcement expected at midday.

Stock futures were pointing to a 0.9% drop on the FTSE 100 when it opens at 0800 BST, entirely wiping out the 0.9% rise made on Wednesday when it settled at 7,731.65 - its highest close since 23 May.

Eyes on BoE after hawkish tone set by Fed

The closely watched Federal Open Market Committee meeting drew to a close after the end of the previous trading session in London, with policymakers deciding to keep interest rates unchanged from the 5.25-5.5% range, as was widely expected by the market. This was the second time this year where its rate-hiking cycle has been paused.

However, 12 of the 19 voting FOMC members said they expect to raise rates once more this year, at one of the two remaining meetings in November or December. Furthermore, looking further forward, the committee indicated that interest rates would only be lowered to around 5% by the end of 2024, indicating that they remain committed to a 'higher-for-longer' strategy.

At a press conference following the meeting, chair Jerome Powell said he still needed to see "convincing evidence" that higher interest rates are having the desired effect on inflation before the FOMC can begin to loosen monetary policy.

The comments, which dragged US stock markets into the red, will likely have worried UK investors ahead of the BoE's own Monetary Policy Committee meeting, given recent optimism that today's expected interest-rate hike - by 25 basis points to 5.5% - will be the last in the central bank's current cycle.

Next lifts guidance again

UK fashion retailer Next on Thursday lifted full-year guidance for the third time in four months after better-than-expected summer sales and said inflationary pressures should ease next year. Pre-tax profits are now forecast to come at £875m from previous guidance of £845m, with brand full-price sales growth increasing to 2.6% from 1.8%.

Safety equipment group Halma said it expects deliver good underlying growth in the first half, as it maintained full-year guidance. Halma, which offers a range of services including hazard detection, water analysis and medical devices, is sticking with its forecasts made in June at the time of its full-year results, which indicated "good" organic revenue growth at constant currencies and a return on sales of 20%.

Travel caterer SSP Group is set to finish the financial year at the upper end of its previously stated revenue and EBITDA ranges. For the last 16 weeks of the financial year, SSP was expecting revenue to be 116% of 2019 levels, driven by a recovery in passenger numbers, particularly in the air sector, and improvements in their customer and digital offers. The group's revenue for the entire year is projected to be £3.0bn, marking a 37% growth year-on-year, with expectations for the next financial year's EBITDA to fall between £325m and £375m.