London pre-open: Stocks set for lower start, Fed policy in focus

(Sharecast News) - Stocks were set for a slightly lower start at the end of the week with investors' focus on the recent move higher in US government bond yields and the associated risks for economic growth. Heading into the bank holiday to mourn the passing of Queen Elizabeth II, as of 0718 BST, futures tracking London's top-flight index were retreating by 37.0 points to 7,255.0.

Weekly jobless claims figures published the day before in the US had confirmed that the country's labour market remained tight as a drum, which against the backdrop of recent higher-than-expected readings on inflation had seen traders nudge their forecasts for monetary policy tightening higher.

"Beyond the impact on the U.S. economy, investors remain cautious on the demand destruction linked to the tightening by all the major global central banks," with the exception of the Bank of Japan, BMO Capital Markets said, according to Dow Jones Newswires.

"Given this backdrop, we're anticipating the run-up to the FOMC decision and the knee-jerk price action will be defining for the direction of U.S. rates during the fourth quarter."

The yield on the policy sensitive two-year US Treasury note hit 3.926% on Thursday, a fresh 52-week high, while come Friday morning Fed funds futures were discounting a one-in-four chance of a 100 basis point interest rate hike by the Federal Reserve on 21 September.

Yet economic data released in the People's Republic of China overnight had surprised to the upside.

Retail sales, industrial production and fixed asset investment in China all surprised to the upside in August.

The annual rate of increase in the former accelerated from 2.7% in July to 5.4% (consensus: 3.2%) for August and in the case of industrial output from 3.8% to 4.2% (consensus: 3.8%).

Year-to-date fixed capital investment was up by 5.8% year-on-year (consensus: 5.5%).

Nonetheless, Julian Evans-Pritchard, senior China economist at Capital Economics, was expecting economic momentum to remain weak into 2023 due to the ongoing drag from Covid-19 restrictions in the Asian giant which it said were likely to remain in place at least until the People's Congress next March.

On home shores, the Office for National Statistics reported a 1.6% month-on-month drop in retail sales (consensus: -1.4%).

Drug giant Astra gets green light from Brussels for Beyfortus

AstraZeneca and Sanofi said their Beyfortus drug for the prevention of lower respiratory tract disease in newborns and infants has been recommended for marketing authorisation in the European Union If approved, Beyfortus would be the first and only single-dose passive immunisation for the broad infant population, including those born healthy, at term or preterm, or with specific health conditions.

Business process outsourcing firm Capita has agreed to sell its Pay360 division to Access PaySuite in a deal that values the division at £150.0m. Capita said on Friday that the disposal of Pay360 was on a cash-free, debt-free basis, representing a 14.3x multiple on the business' 2021 underlying earnings of £10.5m.