LONDON MARKET EARLY CALL: Stocks called up after BoE and ECB hikes

(Alliance News) - Stocks in London are set to open higher on Friday as investors digested a series of central bank interest rate decisions in the past two days.

IG says futures indicate the FTSE 100 to open 25.73 points higher, or 0.3%, at 7,451.90 on Friday. The index of London large-cap stocks closed down 0.9%, or 69.76 points at 7,426.17 on Thursday.

The Bank of England raised UK interest rates by 50 basis points on Thursday, as expected.

The central bank raised rates to 3.50% from 3.00% previously, as expected.

Six members backed the half-percentage-point hike, while Swati Dhingra and Silvana Tenryro backed no change and Catherine Mann favoured a larger 75 basis point hike.

Looking forward, the monetary policy committee said that there are "considerable" uncertainties around the UK's outlook and confirmed that it will respond "forcefully, as necessary".

Sterling was quoted at USD1.2218 early Friday, slightly lower than USD1.2210 at the London equities close on Thursday.

Shortly after, the European Central Bank lifted its benchmark interest rate by 50 basis points as well, also as expected, and warned there will be further "significant" rises to come.

The Frankfurt-based bank said "based on the substantial upward revision to the inflation outlook", it expects to raise rates further.

The decision takes the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility to 2.50%, 2.75% and 2.00%, respectively, from next Wednesday.

The euro traded at USD1.0657 early Friday, higher than USD1.0637 late Thursday.

The BoE and ECB moves - together with the same by the Swiss National Bank and a 25-basis-point hike by Norway's central bank - came a day after the US Federal Reserve lifted interest rates by 50 basis points. It also forecast that interest rates would peak at a higher level than previously expected.

The Federal Open Market Committee lifted the target range for the federal funds rate to 4.25% to 4.50% - the highest since 2007 - from a previous range of 3.75% to 4.00%.

"The committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time," the US central bank explained.

Against the yen, the dollar was quoted at JPY137.20, lower versus JPY137.70 late Thursday in London.

In the US on Thursday, Wall Street ended sharply lower, with the Dow Jones Industrial Average ending down 2.3%, the S&P 500 down 2.5%, and the Nasdaq Composite down 3.2%.

In Asia on Friday, the Japanese Nikkei 225 index was down 1.9%. In China, the Shanghai Composite was down 0.2%, but the Hang Seng index in Hong Kong was up 0.7%. The S&P/ASX 200 in Sydney closed down 0.8%.

Gold was quoted at USD1,782.30 an ounce early Friday, sharply higher than USD1,776.01 on Thursday. Brent oil was trading at USD80.94 a barrel, lower than USD81.07.

In Friday's corporate calendar, ten-pin bowling centre operator Hollywood Bowl will publish its full-year results.

In the economic calendar, there are flash PMI readings from the EU, France, Germany, the UK, and the US throughout the day.

By Heather Rydings, Alliance News senior economics reporter

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