London pre-open: Stocks to nudge lower as investors eye Fed announcement
London stocks were set to nudge down at the open on Wednesday as investors eyed the latest policy announcement from the Federal Reserve.
The FTSE 100 was called to open five points lower at 7,583.
There are no major UK data releases due, but market participants will be mulling over a consumer sentiment survey released overnight.
GfK’s consumer confidence index rose four points to -9 in January, beating expectations for the reading to be unchanged at -13.
Joe Staton, head of market dynamics at GfK, said: “Having survived Christmas, New Year, the January Sales and Blue Monday, bullish Brits report a more upbeat view of their financial prospects for 2018 this month. From expectations for their personal financial situation to the outlook for the UK economy and major purchase index, we are reporting a rebound in levels of optimism across the board after two years of the overall index score sitting at zero or in negative territory.
“However, standing at -9, the index is still lower than this time last year (-5), and still in negative territory, and in the absence of good news about rising wages and declining inflationary pressures, this off-trend number could be a temporary blip rather than a strong sign of recovery. With 2018 still in it’s infancy, and with a great deal of uncertainty in store, there could be more turbulence in the consumer mood this year and next. Watch this space.”
The main focus of the day will come after the UK market close, when the Fed makes it rate announcement at 1900 GMT. Although the meeting itself isn’t expected to contain many surprises, it will be Janet Yellen’s last as Chair as she passes the baton to Jerome Powell.
CMC Markets analyst Michael Hewson said: “Given that today is likely to be fairly straightforward in the context of the actual announcement with no change expected investors will be looking very closely at the statement and the FOMC’s expectations about the glide path for inflation given the recent tax reform measures, along with the recent announcements of US dollar repatriation, inward investment, bonus payments and pay rises.
“Any indication that the Fed might be thinking in terms of more than two to three rate rises this year could push yields even higher, and that may well prompt the Fed to adopt a cautious tone and not deviate too much from what they said in December.”
Markets are currently pricing in more than 90% probability of another 25 basis point hike at the March meeting.
In corporate news, SSE has upgraded its estimate for annual earnings as the energy company reported progress in delivery of operations and returns from long-term investments. In a trading update, SSE said it expected to report adjusted earnings per share of 116p to 120p for the current financial year. In November it said earnings would be at least in line with analysts' consensus of 116p a share.
The company also reiterated its intention to increase the annual dividend this year by at least the rate of RPI inflation.
Government outsourcer Capita has shelved its dividend and plans a rights issue this year, alongside select disposals as new boss Jonathan Lewis finds the business "too complex", inflexible and undisciplined in structure and "short-term" in focus.
Trading for the 2017 financial year was reported to be in line with management expectations, with 2018 underlying pre-tax profits, before significant new contracts and restructuring costs, expected to be between £270-300m.
Tritax Big Box REIT updated the market on its trading ahead of the publication of its results for the year to 31 December, with the board confirming that it acquired 11 new ‘big box’ investments in 2017 with an aggregate purchase price of £435m, along with 124 acres of prime London distribution development land for a total consideration of £62.5m.
The company said it was targeting an aggregate dividend of 6.4p per share for last year, payable quarterly, of which 4.8p per share had been paid for the nine months to 30 September.