London pre-open: Stocks seen lower ahead of ECB announcement

(Sharecast News) - London stocks were set to fall at the open on Thursday following a mostly downbeat session on Wall Street and disappointing earnings from Facebook owner Meta, as investors eyed the latest policy announcement from the European Central Bank. The FTSE 100 was called to open 20 points lower at 7,036.

CMC Markets analyst Michael Hewson said: "The inability of US markets to sustain yesterday's rebound along with the negative reaction to Meta's latest numbers looks set to see a lower open for European markets ahead of today's key ECB interest rate decision.

"At its last meeting in September, it was widely expected that the ECB would raise rates, with the only uncertainty being around whether they would go by 75bps or 50bps.

"The decision to raise rates by 75bps was dictated by the upgrading of the banks inflation forecasts, which were adjusted higher to 8.1% in 2022 and 5.5% in 2023.

"These targets now look incredibly dated given that we now have German inflation well above 10% and the EU headline rate also into double figures with core prices at 4.8% and likely to move higher.

"A growing number of ECB policymakers have been increasingly vocal about the need for much higher rates, despite an acknowledgment that GDP is likely to fall quite sharply. The ECB cut its 2023 and 2024 forecasts, to 0.9% and 1.9% respectively, it raised its forecast for 2022 to 3.1%.

"These GDP forecasts seem extraordinarily optimistic given the energy backdrop, and perhaps speaks to a certain amount of cognitive dissonance on the part of ECB officials."

In corporate news, UK bank Lloyds lifted net income guidance despite a fall in third quarter profit and rise in bad loan charges.

The company said it now expected net interest margin, a key measure of the difference between lending and savings rates, to be above 2.90% compared with a 2.84% in the year to date.

Pre-tax profit fell 26% to £1.5bn. Net income rose 12% to £13bn on the back of surging interest rates with impairment charges soaring to £668m from a release of £119m a year ago.

Consumer goods company Unilever said that underlying sales had grown in the third quarter, leading the group to raise its full-year sales guidance.

Unilever said underlying sales were up 10.6% over the three months ended 30 September and 8.9% year-to-date. As a result, the company now expects underlying sales growth for the full year to be above 8% as it warned of "more negative underlying volume growth" than seen in the first nine months.