Stocks seen up ahead of UK CPI, Fed decision

(Alliance News) - Stocks in London are set to open higher on Wednesday, ahead an inflation print for the UK and an interest rate decision by the US Federal Reserve.

IG says futures indicate the FTSE 100 index of large-caps to open 11.78 points, or 0.2%, higher at 7,548.0 on Wednesday. The FTSE 100 index closed up 132.37 points, 1.8%, at 7,536.22 on Tuesday.

The UK consumer price index for February will be published at 0700 GMT. Markets are expecting the annual inflation rate to cool to 9.8% from 10.1% in January, according to FXStreet.

Michael Hewson, chief market analyst at CMC Markets, said that even if there is a weaker-than-expected reading, the Bank of England's base rate of 4.00% "barely seems adequate" and will still increase the pressure on the central bank to hike by 25 basis points "at the very least" on Thursday.

The pound was above USD1.22 early Wednesday, quoted at USD1.2234, higher than USD1.2192 at the London equities close on Tuesday.

Focus later in the day will be on the US Federal Open Market Committee, which will announce its interest rate decision at 1800 GMT.

According to the CME FedWatch tool, markets believe there is a 86% chance the Federal Reserve will lift US interest rates by 25 basis points, with the remaining 14% expecting rates to stay at their current level.

Earlier this month, before the recent banking industry turmoil, a 50-point hike was considered possible.

"To hike or not to hike, that is the question that will dominate risk sentiment today when the Fed gets set to make a decision on rates in the shadow of a banking crisis that does appear to be all intents and purposes in the rear-view mirror," said CMC Markets' Hewson.

The euro traded at USD1.0765 early Wednesday, lower than USD1.0778 late Tuesday in London. Against the yen, the dollar was quoted at JPY132.35, higher versus JPY132.29.

The US banking sector is "stabilizing" after the recent failures of Silicon Valley Bank and Signature Bank rattled the industry, Treasury Secretary Janet Yellen told a lenders' conference Tuesday, as leaders seek to calm global worries.

The collapses had caused a crisis of confidence, with many customers of similarly sized banks withdrawing their money and depositing it in larger institutions – considered too big for the government not to bail them out if they faced failure.

But "outflows from regional banks have stabilized" following authorities' moves to shore up confidence and stem contagion, said Yellen in a speech to the American Bankers Association in Washington.

New York ended higher on Tuesday, with the Dow Jones Industrial Average up 1.0%, the S&P 500 up 1.3% and the Nasdaq Composite up 1.6%.

In Tokyo on Wednesday, the Nikkei 225 index was up 1.9%. In China, the Shanghai Composite was up 0.2%. The Hang Seng index in Hong Kong was up 1.9%. The S&P/ASX 200 in Sydney closed up 0.9%.

China and Russia's leaders hailed a "new era" in their relationship on Tuesday, putting on a united front in Moscow as Vladimir Putin accused the West of rejecting Beijing's proposals to end the Ukraine conflict.

The nations, eager to curb Western power, expressed concerns about NATO expansion in Asia and agreed to deepen a partnership which has only grown closer since Putin launched an offensive in Ukraine.

Gold was quoted at USD1,943.11 an ounce early Wednesday, flat on USD1,943.19 late Tuesday. Brent oil was trading at USD74.63 a barrel, higher than USD74.42.

In Wednesday's corporate calendar, there are full-year results from Fevertree Drinks, Pendragon and Ten Entertainment.

In the economic calendar, the UK house price index is released at 0930 GMT.

By Heather Rydings, Alliance News senior economics reporter

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