London pre-open: Stocks seen higher after US gains; BoE in focus

(Sharecast News) - London stocks were set to jump at the open on Thursday following strong gains on Wall Street, after the Federal Reserve stood pat on interest rates and chair Jerome Powell struck a dovish note.

The FTSE 100 was called to open around 50 points higher, as investors eyed a policy announcement from the Bank of England at midday.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: "The Federal Reserve (Fed) meeting went better than many expected. The Fed left interest rates unchanged as planned, but Chair Jerome Powell repeated that the rate cuts will begin 'sometime this year' and that it would be appropriate to slow the pace of QT 'fairly soon'.

"There is no particular time regarding when the Fed will start giveaways, but we know that the recent uptick in inflation, the strong NFP figures, or the above-target growth don't seem to be a concern for most Fed members. 10 of them plotted three or more rate cuts for this year, and 9 of them plotted two rate cuts or fewer. The median forecast is three rate cuts, unchanged from the December plot. The only hawkish tilt was for 2025. In 2025, the Fed members expect three cuts and not four. Voila.

"Yesterday's Fed decision was such a relief for the market, where the fear of seeing the Fed turn hawkish was reigning. The probability of a June rate cut spiked past 75% after the meeting from around 60% on Monday."

On home shores, the BoE is widely expected to keep rates on hold at 5.25% when it announces its decision at midday.

Market participants will also be mulling the latest data from the Office for National Statistics, which showed that the government borrowed more than expected in February.

Public sector borrowing excluding banks came in at £8.4bn last month, above expectations for £6bn. However, it was still down by £3.4bn on February last year.

Senior ONS statistician Jessica Barnaby said: "This was the fourth consecutive month in which borrowing was lower than in the same month a year ago, with growth in tax receipts exceeding growth in spending.

"Across the financial year to date, borrowing was the lowest it has been for four years.

"Relative to the size of our economy, debt remains at levels last seen in the early 1960s."

In corporate news, savings and investments firm M&G beat analysts' forecasts with its 2023 results, with net client flows, adjusted profits and operating capital generation all up materially on the previous year.

Adjusted operating profit before tax totalled £797m, up from £625m in 2022, which the firm put down to a resilient performance in Asset Management, and improved contributions from Life, Wealth and Corporate Centre. This was well ahead of the consensus forecast of £750m, according to UBS.

UK fashion retailer Next held guidance for 2024 after posting a better-than-expected 5% rise in annual profits to £918m.

The company said it still expected pre-tax earnings of £960m, based on a 2.5% increase in full price sales. Total sales for the year to January 2024 rose 6% to £5.8bn.

FirstGroup said it has secured the contract from Transport for London (TfL) to operate the London Cable Car between Greenwich Peninsula and the Royal Docks area, starting on 28 June for an initial five-year term extendable up to eight years.

The FTSE 250 passenger transport operator said its expected revenues were £60m over the contract's duration, with patronage risk assumed by TfL and minimal capital expenditure required. FirstGroup said it would enhance the cable car service, and planned to implement educational outreach and work placements for local school students in Greenwich and Newham boroughs during the contract period.