(Alliance News) - Stocks in London are set to open slightly lower on Thursday, as caution prevails ahead of an interest rate decision by the EU, following the US's quarter-point rate hike on Wednesday, which had been widely predicted.
IG says futures indicate the FTSE 100 index of large-caps to open down 17.7 points, 0.2%, at 7,770.67 on Thursday. The index closed up 15.34 points, or 0.2% at 7,788.37 on Wednesday.
In the US on Wednesday, Wall Street ended lower, with the Dow Jones Industrial Average ending down 0.8%, the S&P 500 down 0.7% and the Nasdaq Composite down 0.5%.
Stocks struggled despite the US Federal Reserve hinting that interest rates have reached their peak for this tightening cycle.
The Federal Reserve lifted US interest rates by 25 basis points on Wednesday, and, in a press conference shortly after the announcement, Chair Jerome Powell emphasised a change in language around future policy.
"In the statement from March we had a sentence that said: 'the committee anticipates that some additional policy firming may be appropriate'. That sentence is not in the statement any more, we took that out," Powell said.
"The idea of a pause may have pleased investors - because the bank failures help tightening the lending conditions and throw a solid ground for a pause in rate hikes. But what pleased investors less is Powell pushing back on a potential rate cut later this year," CMC Markets' Michael Hewson considered.
The dollar was weaker in early exchanges in Europe.
Sterling was quoted at USD1.2589 early Thursday, rising from USD1.2543 at the London equities close on Wednesday. The euro traded at USD1.1087 early Thursday, higher than USD1.1057 late Wednesday. Against the yen, the dollar was quoted at JPY134.47, down versus JPY135.09.
Now attention turns to the European Central Bank.
The market is expecting the ECB to slow down its pace of interest rate hikes to a 25 basis point hike - the same as the Fed - but with sticky inflation and record low unemployment, there remains the possibility of another 50 basis point move.
The Frankfurt-based central bank will announce its decision at 1415 CEST. A press conference with ECB President Christine Lagarde will follow at 1500 CEST.
"ECB Chief Christine Lagarde will certainly not announce the end of the rate hikes in the eurozone. She will likely stay firm on the ECB’s determination to fight inflation, and insist that the economic data will determine the size of the upcoming ECB actions," CMC's Hewson predicted.
In Asia on Thursday, markets in Japan were closed for Greenery Day. The S&P/ASX 200 in Sydney was marginally lower.
In China, the Shanghai Composite was up 0.8%, the Shanghai market reopening for the first time since Friday last week after an extended Labour Day holiday in China. The Hang Seng index in Hong Kong was up 1.1%.
China's manufacturing sector fell back into contraction last month, according to the latest survey data, casting doubt over the resilience of the country's rapid economic rebound following the rollback of zero-Covid restrictions.
The Caixin manufacturing purchasing managers' index fell to 49.5 points in April from 50.0 in March. Falling below the 50-point mark that separates expansion from contraction, it points to a slight deterioration in the sector.
"A recent slew of official first-quarter economic data beat market expectations, suggesting that China's economy was recovering at a fast pace after the country lifted Covid controls. Yet it remains to be seen if the rebound is sustainable after a short-term release of pent-up demand," said Wang Ze, Caixin senior economist.
"The Caixin China manufacturing PMI in April, in particular, pointed to the fact that the economic recovery has yet to find a stable footing."
Gold was quoted at USD2,043.69 an ounce early Thursday, higher than USD2,025.44 on Wednesday. Brent oil was trading at USD72.97 a barrel, higher than USD72.01.
In Thursday's UK corporate calendar, there are first-quarter results from oil major Shell, as well as trading statements from retailer Next and defence contractor BAE Systems.
In the economic calendar, in addition to the ECB decision, there are services PMI prints from the UK and the EU starting from 0900 BST.
By Elizabeth Winter, Alliance News senior markets reporter
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