London pre-open: Stocks to nudge lower ahead of BoE rate announcement
London stocks looked set to nudge a touch lower at the open as investors digested an expected rate hike from the Federal Reserve and looked ahead to the latest rate announcement from the Bank of England.
The FTSE 100 was expected to open four points lower at 7,470.
On Wednesday, the Fed hiked interest rates for the second time this year by 25 basis points to between 1 and 1.25%, as expected, with Chair Janet Yellen reiterating that inflation is expected to return to target and forecasting one more hike this year. However, she added that policymakers will be watching low inflation numbers closely after some disappointing readings.
The Bank of England rate announcement is due at 1200 BST, with market participants largely expending policy to remain unchanged. Before that, retail sales are at 0930 BST.
Oanda analyst Craig Erlam said: "The timing of the latest monetary policy decision from the BoE couldn’t be much worse, as the country prepares to start Brexit negotiations without a stable government following the surprising snap election result. To make matters worse for policy makers, this comes as inflation has hit 2.9%, higher than what it anticipated would be the peak only a month ago.
"While policy makers claimed after the last meeting that they would only need little upside news on growth or inflation to consider voting for tighter policy, I would be extremely surprised to see them act at this moment in time. The huge amount of economic uncertainty paired with the temporary drivers of inflation and lower growth prospects is surely a good enough reason to look through the current spike in prices. Should they not look beyond this and even signal a possible hike in the near-term, it would catch markets completely off guard which could provide a significant boost to sterling."
In corporate news, as a statement of confidence in its transformation from a generator of coal power to biomass energy, Drax has announced a new dividend policy that will see it pay out £50m this year grow from there on.
Yorkshire-based Drax plans to lift adjusted operating profits above £425m by 2025 from the £140m last year, with more than a third expected to come from its retail business and biomass supply.
Sky issued an update to the market on Thursday morning, announcing that both itself and Liberty Global’s Virgin Media were forming a strategic partnership that would enable businesses of varying sizes to benefit further from “advanced television advertising”, across both the Virgin TV and Sky platforms.
The FTSE 100 company said advertisers would be able to target a potential audience over time of more than 30 million viewers, which it said put it on par with “leading social networks”.