London pre-open: Stocks seen higher; Q1 GDP eyed
London stocks were set for a firmer open on Thursday, taking their cue from positive sessions in the US and Asia as investors digested the latest Federal Reserve minutes and awaited first-quarter economic growth data for the UK.
The FTSE 100 was expected to open 15 points higher at 7,530.
The latest minutes from the Fed released on Wednesday revealed that most members think a rate hike should happen soon as long as the economy continues to rebound from first-quarter weakness. The minutes also suggested the central bank members were in agreement on how the Fed can unwind its $4.5trn balance sheet. It's understood the Fed will implement caps on how much it will allow to drop off the balance sheet without reinvestment each month.
CMC Markets analyst Michael Hewson said: "The process would be signalled beforehand with a series of caps, almost like a taper where the Fed would only allow a fixed US dollar amount of bonds and mortgage backed securities to run off every month, while reinvesting the rest.
"There was also some more detail on how US policymakers viewed the bigger than expected slowdown seen in Q1. While most members viewed the slowdown as transitory there was broad agreement that it would be prudent to wait for further data to establish that fact before hiking again, though they did express the view that is what they expected would happen.
"Only then would it be considered appropriate to raise rates again, which rather begs the question as to whether the market is correct in thinking that June is more or less a done deal for a rate rise, despite the somewhat patchy nature of recent economic data."
On the data front, BBA mortgage approvals are at 0930 BST, along with the first-quarter gross domestic product release. Market participants will also be eyeing the Opec meeting in Vienna.
In corporate news, water company United Utilities upped its dividend 1.1% after a year where revenue and profit both leaked modestly lower but it remained confident of meeting its long-term targets.
Revenue for the year to 31 March slipped to £1.70bn from £1.73bn due to slight accounting changes from a joint venture, while underlying profit before tax of £389m was up £19m on the previous year due to increased financing costs from higher inflation on index-linked debt. The proposal of a final dividend of 25.92p took the total dividend for the year to 38.87p, an annual increase of 1.1%.
Payment systems provider PayPoint posted its preliminary results for the year to 31 March, claiming “good growth” in its core retail networks as gross revenue rose 3.6% to £203.4m.
The FTSE 250 company said net revenue grew 6.2% to £117.5m, while operating profit improved 1.1% to £53.3m.
Retail services net revenue grew to £39.9m - an increase of 31.6% - as the firm also benefited from a profit on the sale of its mobile division of £19.5m.