London pre-open: Stocks to dip ahead of Fed announcement

(Sharecast News) - London stocks were set to dip at the open on Wednesday following heavy losses in the previous session and a downbeat day on Wall Street, as investors braced for another big rate hike by the US Federal Reserve. The FTSE 100 was called to open six points lower at 7,186.

CMC Markets analyst Michael Hewson said: "The slide in US markets which saw the S&P 500 close at a one-month low looks set to see markets in Europe continue with the negative theme, and another weak open as we look ahead to today's Federal Reserve rate decision.

"With a mini budget set to be outlined later this week, and the government borrowing more than expected in July, pressure will increase on new PM Liz Truss and Chancellor Kwasi Kwarteng on how they intend to fund the latest energy price cap fiscal package. In July, the government borrowed £4.9bn and this is expected to rise to £8.2bn in August as higher rates put upward pressure on debt payments.

"Yesterday the Swedish Riksbank surprised markets by hiking its headline rate by 100bps, more than had been expected, pushing it from 0.75% to 1.75%, with the prospect of more to come.

"The aggressive nature of the move raised concerns that we might well see the Federal Reserve follow suit later today, followed by the Bank of England and Swiss National Bank tomorrow, with yields pushing higher across the board,

"The main question today is whether we see the Fed move by 75bps today, or by 100bps which some started to call for in the middle of last week, after US core prices turned out to be much stickier than expected."

In corporate news, JD Sports said it had agreed a truce with former CEO Peter Cowgill, including a non-compete and consultancy deal that will see him receive £5.5m in addition to his salary package up to his departure in May and a 12 month notice period.

Cowgill was unceremoniously dumped from the company he helped build into a multi-national leisure and sportswear chain after shareholders raised concerns about his bonuses and reluctance to split the roles of chairman and chief executive.

Student accommodation provider Unite Group has disposed of a portfolio of six properties in Aberdeen for £33.0m, in line with prevailing book value and reflecting a passing net operating income yield of 6.0% for the 2022-23 academic year.

Unite Group said it had sold the portfolio, which was made up of 1,050 beds, to Clearbell Property Partners III, a fund managed by Clearbell Capital.