FTSE 100 called higher ahead of BoE decision

(Alliance News) - The FTSE 100 is called to start slightly higher on Thursday, recovering some of its weekly loss, ahead of the Bank of England's latest interest rate decision.

IG says futures indicate the index of London large-caps to open 16.7 points, or 0.2%, higher at 7,748.79 on Thursday. The FTSE 100 lost 32.00 points, 0.4%, on Wednesday, closing at 7,732.09. It is down 0.6% so far this week.

Thursday's economic calendar has the UK interest rate decision at 1200 BST, before a US producer price reading at 1330 BST. US jobless claims also are at 1330 BST.

The Bank of England is expected to lift UK interest rates by 25 basis points on Thursday, but attention will be on whether it guides for more hikes in meetings ahead, or suggests a pause is coming.

The expected quarter-point hike would take the benchmark rate to 4.50%. The announcement at 1200 BST is followed by a press conference with Governor Andrew Bailey at 1230 GMT.

Indications about where bank rate goes thereafter will be closely scrutinised. Last week, the European Central Bank raised eurozone interest rates by 25 basis points, a slowdown from a 50 point hike previously, but it said there is still "more ground to cover" in the fight against inflation.

A day earlier, the Federal Reserve in the US also announced a quarter-percentage-point lift, but strongly hinted of a pause thereafter.

Inflation in the US is running around half as hot as in the UK, however. It slowed to 4.9% in April from 5.0% in March, according to data released on Wednesday. In the UK in March, inflation was 10.1%.

Ahead of the BoE decision, the pound was buying USD1.2622 on Thursday morning, flat from USD1.2620 late Wednesday.

"On the currency front, the divergence between the Fed – which is getting concrete results on its inflation fight, and the BoE – which still deals with double-digit inflation, should support the medium term bullish outlook for cable. The pair is about to break above a long-term down-trending channel top, if successful, we could see traders set their eyes back on the 1.30 mark," Swissquote analyst Ipek Ozkardeskaya commented.

Stocks in New York ended largely higher on Wednesday, with tech shares getting a boost after the data that showed US inflation slowing. The Nasdaq Composite surged 1.0%, the S&P 500 added 0.5%, though the Dow Jones Industrial Average edged down 0.1%.

"US markets had a more positive bias, finishing the day higher, with the Nasdaq 100 leading the gains, and the Dow lagging as yields and the US dollar slid back. Yesterday's inflation data was particularly welcome as it supported the narrative of a pause in the Fed's rate hiking cycle at the next meeting. Today's April PPI numbers could well reinforce that narrative further, if they continue to slow at the pace we've seen in the past few months," CMC Markets analyst Michael Hewson commented.

US annual producer price growth is expected to have cooled to 2.4% in April, according to FXStreet cited consensus, from 2.7% in March.

China's annual inflation ebbed to a more than two-year low, according to figures from the National Bureau of Statistics on Thursday.

Consumer prices grew just 0.1% on-year in April, slowing from a 0.7% climb in March and falling short of FXStreet cited consensus of a 0.3% rise. It was the tamest annual inflation rate since consumer prices fell 0.2% year-on-year in February 2021.

Meanwhile, producer prices declined 3.6% year-on-year in April. Factory gate prices had declined by 2.5% annually in March. They had been expected to decline 3.2% last month, according to FXStreet.

The cool inflation readings may boost the case for fiscal policy stimulus.

In Asia on Thursday, the Shanghai Composite was down 0.1% in afternoon dealings, while the Hang Seng in Hong Kong was 0.5% lower. The Nikkei 225 in Tokyo was down 0.1% in late trade. The S&P ASX 200 was also down 0.1% shortly before the closing bell in Sydney.

The euro traded at USD1.0982 early Thursday, up from USD1.0975 at the time of the European equities close on Wednesday. The dollar faded to JPY134.24, from JPY134.48.

Gold rose to USD2,032.64 an ounce from USD2,023.42. A barrel of Brent fetched USD77.17, rising from USD76.85.

In Thursday's UK corporate calendar, there are trading statements from ITV, John Wood Group and Rolls-Royce.

By Eric Cunha, Alliance News news editor

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