London pre-open: Stocks set for flat start ahead of MPC decision

Stocks in London are being called to start the session little changed despite the slump in US equity markets overnight after the US central bank chose not to guide towards a long string of interest rate cuts.

As expected, on Wednesday evening the Federal Reserve lowered its target range for short-term official interest rates by 25 basis points to 2.0-2.25%, despite two members of the Federal Open Market Committee voting against such a move, and announced that it would stop reducing its balance sheet one month early.

But during his presser, Fed chairman Jerome Powell described the move as a "mid-cycle adjustment", which traders took to mean that additional cuts were less likely, but later explicitly said he had never said that it was just "one and done".

The FTSE 100 was set to start the day flat at 7,586.0

Commenting on the Fed's decision, Michael Hewson at CMC Markets UK said: "Against this sort of dissent, it would have been difficult for Fed chair Powell to argue that this was the beginning of a rate cutting cycle, and makes it unlikely that the Fed would cut again at the next meeting in September unless there is a significant deterioration in the data.

"Let’s face it if you have two dissenters to a July cut, it will be doubly difficult to argue for another one just six weeks later."

Against that backdrop, at noon, the Monetary Policy Committee will announce its policy decision, alongside the release of its meeting minutes and the August Inflation Report.

In particular, investors will be looking out for a sensitivity analysis from Bank regarding the potential impact that different outcomes for Brexit might have on the economy.

MPC members are also expected to tone down rate hike expectations, although no change in policy settings is expected at this Thursday's meeting.

Global manufacturing will also be under scrutiny, with factory sector Purchasing Managers Indices referencing the month of July due out in the UK at 0930 BST, the US and Eurozone.

Shell results hit by weak natural gas prices

Royal Dutch Shell reported a 50% fall in second quarter income as weaker oil and gas prices hit results along with weaker realised chemicals and refining margins as well as higher provisions, partly offset by improved production. The oil giant said total income for the period was $3bn, compared with $6bn a year ago as the company maintained 2020 guidance. Cash flow from operating activities was $11bn, up 16%.

Shareholders in Refinitiv have agreed to definitive terms with the London Stock Exchange that will see the financial data and information provider acquired in an approximately $27.0bn all-share transaction. As a result, Refinitiv's shareholders, a consortia of investment funds affiliated with Blackstone and Thomson Reuters, will own 37% of the LSE Group and less than 30.0% of the voting rights in the LSE.

Mondi delivered interim profit before tax growth of 29% despite facing increasingly challenging trading conditions, with revenue remaining flat as higher average selling prices were largely offset by the impact of planned mill maintenance shuts. The packaging and paper specialist said it was confident of continuing to deliver a strong and industry-leading performance over the full year but admitted concern over softening demand and ongoing macro-economic uncertainty.

GlaxoSmithKline has completed a transaction with Pfizer to combine their consumer healthcare businesses into a joint venture, it announced on Thursday. The FTSE 100 pharmaceuticals giant said it had a controlling equity interest of 68%, with Pfizer holding an interest of 32%. It said the joint venture was bringing together two “highly complementary” portfolios of consumer health brands, including GSK's Sensodyne, Voltaren and Panadol and Pfizer's Advil, Centrum and Caltrate.