London pre-open: Stocks seen up ahead of BoE, ECB rate decisions

(Sharecast News) - London stocks were set to rise at the open on Thursday following a positive close on Wall Street, as investors mulled the latest policy announcement from the Federal Reserve and looked ahead to rate decisions from the Bank of England and European Central Bank. The FTSE 100 was called to open 30 points higher at 7,791.

CMC Markets analyst Michael Hewson said: "Having seen the Federal Reserve hike rates yesterday evening by 25bps and signal that they are far from done, equity markets reacted by rallying strongly with the Nasdaq 100 surging to its highest levels since early September.

"For all of Fed chair Jay Powell's insistence that more rate hikes were coming, and that the Fed was not looking at cutting rates this year, his failure to push back emphatically on direct questions about market expectations of rate cuts this year, as well as the loosening of financial conditions has created an even greater divergence between market pricing on rates, and the Fed's expectations of how the economy is likely to evolve.

"To borrow a line from Cool Hand Luke, 'what we've got here is a failure to communicate'.

"Long story short, the market thinks the inflation job is done, even if the Fed hasn't arrived at that conclusion yet. Consequently, this goes a long way to explaining why US markets closed strongly higher and yields and the US dollar plunged to 9-month lows, with the euro hitting 1.1000 for the first time since April last year."

Rate decisions are due from the Bank of England and ECB at midday and 1315 GMT, respectively.

The BoE is expected to lift rates for the tenth month in a row to 4% - the highest level since autumn 2008 - as it looks to tackle inflation. The ECB, meanwhile, is also expected to raise rate by 50 basis points even after data showed this week that consumer price inflation in the eurozone fell in January to 8.5% from 9.2% in December. This was ahead of expectations of 9% and the lowest level since last May.

In corporate news, oil and gas giant Shell posted a record fourth-quarter profit of $9.8bn driven by higher trading from its liquefied natural gas (LNG) operations.

Annual earnings doubled to $39.87bn, also a record, as the company cashed in on soaring energy prices inflamed by Russia's invasion of Ukraine a year ago. The full year dividend was lifted 16% to $1.03 a share.

Shell also announced a new share buyback programme of $4bn, which is expected to be completed by the first quarter 2023 results announcement.