London pre-open: Stocks to fall as investors eye ECB announcement

(Sharecast News) - London stocks were set to fall at the open on Thursday following a downbeat session in the US, as investors eye the latest policy announcement from the European Central Bank. The FTSE 100 was called to open 40 points lower at 7,553.

CMC Markets analyst Michael Hewson said: "European stocks finished yesterday very much on the back foot after the OECD followed up yesterday's World Bank global growth downgrade, with one of its own.

"The OECD said the global economy would pay a heavy price for Russia's invasion of Ukraine, with much weaker growth and higher prices, which is likely to result in permanently higher inflation, and a weaker recovery.

"The OECD painted a grim outlook of low growth and higher for longer inflation levels.

"US markets also underwent a similarly negative session for the same reasons, a trend that has continued this morning in Asia, and look set to translate into a lower European open."

All eyes will be on the ECB rate decision due to 1245 BST, followed by a press conference at 1330 BST.

Although no change in policy is expected, ECB President Lagarde will use her time to tee the markets up for a policy move next month, said Hewson.

"Yet another central bank that is way behind the curve when it comes to inflation, it was only at the end of last year that ECB President Christine Lagarde said that a rate hike this year was unlikely, even as CPI prices rose to 4.9%, and were already at 6% in Germany.

"As an exercise in denial its up there with Fed chair Jay Powell who was insisting at around the same time that perhaps the word 'transitory' should be retired from the financial lexicon when describing what was happening with inflation, yet only ended the Fed's bond buying program in March this year.

"That alone should have tipped off the ECB that inflation was only likely to go one way, with down not being an option. Lagarde went on to claim that we were probably at the peak of the inflation hump and that it would start to decline into 2022."

In corporate news, bus and train operator FirstGroup has formally rejected a £1.2bn takeover approach from US private equity firm I Squared, saying it "significantly undervalues" the firm and a conditional cash component did not provide shareholders with enough certainty.

The bid, which values FirstGroup at up to 163.6p a share, includes 45.6p that is conditional on the amount the company eventually receives from the previously agreed sale of its American businesses, including the Greyhound bus line.

Tobacco and nicotine products manufacturer British American Tobacco said that its transformation was continuing at pace, with strong revenue and volume growth driving market share gains.

British American Tobacco also maintained full-year guidance for constant currency revenue growth of 2-4%, mid-single digit adjusted earnings per share growth and operating cash conversion in excess of 90% of adjusted profit from operations.