Stocks seen up; US rates seen staying high

(Alliance News) - Stocks in London are set to open higher on Friday, following firm words from a US Federal Reserve official on Thursday insisting the US central bank will keep interest rates high for some time.

IG says futures indicate the FTSE 100 index of large-caps to open 40.31 points, or 0.5%, higher at 7,787.60. The FTSE 100 index closed down 83.41 points, or 1.1%, at 7,747.29 on Thursday.

Federal Reserve Vice Chair Lael Brainard said on Thursday that interest rates will need to remain high for some time even as inflation eases, vowing the central bank plans to "stay the course" in fighting price increases.

"Even with the recent moderation, inflation remains high, and policy will need to be sufficiently restrictive for some time," Brainard said in prepared remarks for an event in Chicago.

The Fed has raised the benchmark US lending rate rapidly from around zero to a range of 4.25% to 4.50% in the past year. Brainard's latest remarks suggest rates will have to stay high for a while longer.

In the US on Thursday, Wall Street ended lower, with the Dow Jones Industrial Average down 0.8%, the S&P 500 down 0.8% and the Nasdaq Composite down 1.0%.

Brainard's comments came as the US Treasury began taking measures to prevent a default on Federal government debt on Thursday.

Such "extraordinary measures" can help reduce the amount of outstanding debt subject to the limit, currently set at USD31.4 trillion, but the Treasury has warned that the tools would only help for a limited time – likely not longer than six months.

A default would harm US credibility, and JPMorgan Chase Chief Executive Jamie Dimon cautioned Thursday that "we should never question the creditworthiness of the US government".

In the UK, consumer confidence has fallen again to a near-historic low amid inflation woes and growing concern about another jump in energy bills.

GfK's long-running consumer confidence index dropped three points in January to minus 45 after a short-lived and weak rally in the previous quarter.

The pessimistic mood developed even as the rate of UK inflation eased for the second month in a row in December, to 10.5%.

Sterling was quoted at USD1.2375 early on Friday, firm on USD1.2363 at the London equities close on Thursday.

The euro traded at USD1.0831 early on Friday, higher than USD1.0795 late Thursday. Against the yen, the dollar was quoted at JPY129.11, higher versus JPY128.45.

In Tokyo on Friday, the Nikkei 225 index closed up 0.6% despite consumer prices in Japan hitting a multi-decade higher.

Japan's consumer prices rose 4% in December from a year earlier, a level not seen since December 1981, fuelled in part by higher energy bills, government data showed.

The acceleration comes after a 3.7% increase in prices in November, and the data from the internal affairs ministry showed inflation for the 2022 calendar year stood at 2.3%.

The figures were released days after Japan's central bank again opted to leave its ultra-easy monetary policy intact, bucking the trend set by peers abroad who have hiked rates to tackle rising prices.

In China, the Shanghai Composite was up 0.7%, while the Hang Seng index in Hong Kong was up 1.5%. The S&P/ASX 200 in Sydney closed up 0.2%.

Gold was quoted at USD1,928.08 an ounce early on Friday, sharply higher than USD1,919.03 on Thursday. Brent oil was trading at USD86.46 a barrel, up against USD85.36 on Thursday.

In Friday's corporate calendar, there are trading statements from flexible office provider Workspace and merchant bank Close Brothers, as well as half-year results from book and stationery retailer TheWorks.co.uk.

In the economic calendar, there are UK retail sales at 0700 GMT alongside the German producer price index.

By Heather Rydings, Alliance News senior economics reporter

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