London pre-open: Stocks seen lower after Wall St losses; BoE in focus

London stocks were set to fall at the open on Thursday, taking their cue from Fed-fuelled losses on Wall Street as investors eyed the latest policy announcement from the Bank of England.

The FTSE 100 was called to open 116 points lower at 6,649 after stocks in the US slumped to a 15-month low on Wednesday as the Fed hiked rates for the fourth time this year, as expected, but Chair Jerome Powell failed to soothe investors’ nerves.

"The risk off mood continued into Asia and European bourses are pointing to heavy losses on the open. Stocks are experiencing the worst reaction to a Fed policy announcement since 1994," said London Capital Group analyst Jasper Lawler.

"As expected, the Fed raised rates for a fourth time this year and also softened its outlook for 2019, with just two hikes now planned. The Fed gave an upbeat assessment of the economy whilst lowering GDP expectations to 3.2% and inflation forecasts. However, the tweaks to the policy statement weren’t dovish enough for the market.

"Going into the announcement traders were braced for a much more dovish Fed, given the mounting concerns over the health of the global economy. Questions were being raised as to whether the Fed could even hike given the growing risks. Whilst the Fed’s subtle tweaks to the statement, GDP and inflation outlook cast acknowledgment to the market’s concerns, the changes were by no means significant."

Lawler noted that the recent market chaos and tightening of financial conditions has not fundamentally altered the Fed’s outlook. “Despite the Fed hanging onto its positive outlook, we do know that the Fed will only go forth and hike if data coming out of the US improves,” he said.

With the Fed out of the way, market participants will turn their attention to the Bank of England, which is due to make its own policy announcement at 1200 GMT, amid expectations that there will be no change to interest rates.

"Whilst wage growth is a solid 3.3% and inflation above the target 2%, Brexit uncertainty will mean another wait and see BoE meeting," said Lawler.

Ahead of that, UK retail sales are at 0930 GMT and the CBI distributive trades survey is at 1100 GMT.

In corporate news, Stagecoach has agreed to sell its North America bus and coach division to a US private equity firm for $271.4m.

The FTSE 250 group said it would use the proceeds of the sale to pay down debt.

Industrial thread maker Coats said it had bought Asia-based material planning company ThreadSol for up to $12m in cash.

ThreadSol's cloud-based digital applications help clothing and footwear companies minimise waste.

"This complementary suite of software solutions for the apparel and footwear industries will enable brands, retailers and manufacturers to drive productivity gains, supply chain control and speed to market," Coats said.

The initial payment is $5m, with further payments of up to $7m to 2022.

Greencoat UK Wind said it was buying the Douglas West wind farm in Scotland from Blue Energy for £45m.

Douglas West is located 7 miles south west of Lanark, Scotland and will have a total capacity of 45MW, and will be subsidy free. Construction is expected to start in 2019, with commencement of commercial operations targeted for July 2021.