London pre-open: Stocks to rise ahead of BoE rate announcement

(Sharecast News) - London stocks were set to rise at the open on Thursday ahead of the latest policy announcement from the Bank of England, and after the US Federal Reserve lifted rates overnight by 75 basis points - its biggest hike since 1994. The FTSE 100 was called to open 21 points higher at 7,294.

CMC Markets analyst Michael Hewson said: "In the aftermath of last night's Fed decision today's European open looks set to be a positive one, after Asia markets also got a lift from last night's events.

"Now we've seen the Fed decide at the very last minute to rip up its forward guidance playbook, last night's decision increases the pressure on the Bank of England to follow suit later today with at least a 50bps hike in response.

"The reality is given where the pound is now, and Governor Andrew Bailey's own assertion that 80% of UK inflation is imported, the central bank needs to send a message that it is also serious about tackling its own inflation problem.

"Last night the Fed laid down a marker that inflation was its primary concern. For too long the Bank of England has given the impression it doesn't really care about its inflation target, and that needs to change.

"While that may come across as harsh the evidence speaks for itself. Over the past decade the MPC has been very quick to cut rates and been glacial when it comes to raising them again. While there are those who say it is foolish to hike into a slowdown because the economy can't support it, you can also posit that the economy can't support inflation at current or higher levels either, so it comes down to what is the lesser of two evils.

"Inflation has a habit of becoming entrenched and embedded, and rate rises can be very effective in squeezing it out. A short sharp shock if you like is probably better than a prolonged income squeeze.

"With the pound at current levels against the US dollar the central bank needs to look at the FX channel, and help keep a floor under the pound, which has been under pressure for weeks. That means a 25bps today won't be anywhere near sufficient, and that we need to see a minimum of 50bps later today with a firm commitment to tackle current levels of inflation, which the Bank of England tells us have yet to peak."

In corporate news, safety equipment maker Halma reported a rise in adjusted annual profits after a surge in revenues and said it was on track to deliver high returns in the current year.

The company posted adjusted pre-tax profit of £316m, up 14% as revenue rose 16% to pass £1.5bn for the first time.

Publishing company Informa said that year-to-date trading has been "robust" across both its academic and B2B businesses, boosting underlying revenues by more than 40% year-on-year.

Informa said its performance so far in 2022, combined with strong forward visibility on subscriptions revenues in its Taylor & Francis unit, exhibitor and delegate bookings in live and on-demand events and favourable currency trends, had put the group on track to meet the upper-end of its full year guidance range of £2.15bn-£2.250bn and adjusted operating profits of £470.0m-£490.0m.