London pre-open: Stocks seen up after Fed signals rate cuts

(Sharecast News) - London stocks were set to surge on Thursday following strong gains on Wall Street, after the Federal Reserve signalled interest rate cuts were on the way next year, and as investors eyed policy announcements from the Bank of England and the European Central Bank. The FTSE 100 was called to open 72 points higher at 7,620.

CMC Markets analyst Michael Hewson said: "It had been widely anticipated that Fed chairman Jay Powell's main challenge yesterday would be in trying to push back on the idea that the US central bank was ready to cut rates sharply over the next 12 months. With the sharp fall in yields since November there was an expectation that the loosening in financial conditions might put the central banks fight against inflation at risk.

"It was therefore quite surprising that yesterday's statement and dot plots embraced that narrative, delivering an early Christmas present to the markets, returning the 2024 median for dot plots to 4.6%, back to where it had been in September, while forecasting core PCE to decline to 2.4%.

"At the press conference Powell tried to give the impression that the Fed retained the option to hike rates again, however this message is rather undermined by the fact that the FOMC cut their dot forecasts as much as they did. The admission that the FOMC discussed rate cuts was also noteworthy.

"If 'higher for longer' wasn't dead before last night, it certainly is now, and certainly makes the job of both the Bank of England, as well as the ECB later today that much harder in maintaining a hawkish bias, with European markets set to open sharply higher, with new record highs expected for the DAX and CAC 40."

The BoE rate announcement is due at midday, while the ECB will make its statement at 1315 GMT.

"Having seen the Federal Reserve leave rates unchanged yesterday its now the turn of the Bank of England and ECB to follow suit, as well as try to navigate the messaging of when they expect to start cutting them," said Hewson.

In corporate news, electrical retailer Currys held annual guidance as interim losses narrowed and its Nordics unit reported an improvement in gross margins.

The company posted a loss before tax of £46m, compared with a loss of £548m a year earlier. UK like-for-like revenue fell 3% to £2.2bn.

"Our priorities this year are simple: to get the Nordics back on track, to keep up the UK&I's encouraging momentum, while strengthening our balance sheet and liquidity. We're making good progress on all these in a still challenging economic environment," said chief executive Alex Baldock.

"In the Nordics, our trusted brands have delivered substantial gross margin gains, which combined with strong cost discipline have resulted in significantly improved profits. There's still a long way back to healthy Nordics performance, but we're on the way."

Bunzl said it expects operating profit for the year to the end of December to be "slightly ahead" of prior guidance, with revenue in line.

Chief executive Frank van Zanten said: "I'm pleased with the performance Bunzl has delivered this year, reflecting the dedicated efforts of our people in supporting our customers around the world.

"The group is on track to deliver moderate adjusted operating profit growth, supported by a record operating margin, and we are guiding to further growth in 2024, continuing to build on the strong performance we have seen over recent year."