Stocks called up on interest rate cut hopes

(Alliance News) - Stocks in London are set to open higher on Friday, after US markets hit fresh highs on hopes for interest rate cuts.

IG says futures indicate the FTSE 100 to open up 14.0 points, 0.2%, at 7,706.46 on Friday. The index of London large-caps closed up 13.15 points, 0.2%, at 7,692.46 on Thursday.

In the US on Thursday, Wall Street ended higher, with the Dow Jones Industrial Average up 0.3%, the S&P 500 up 1.0% and the Nasdaq Composite up 1.5%.

Interest rate optimism helped equities on Thursday. The conviction that the European Central Bank will enact its first of the cycle in June grew following a post-decision press conference with President Christine Lagarde.

The Frankfurt-based official lender left the interest rate on the main refinancing operations, the marginal lending facility, and the deposit facility at 4.50%, 4.75% and 4.00%, respectively.

This marked the fourth-successive meeting the central bank has left eurozone interest rates unmoved. The ECB has enacted 450 basis points - 4.5 percentage points - worth of hikes during the current cycle. It kicked off the hiking cycle in July 2022 with its first interest rate lift in 11 years.

Telling reporters in a press conference following the decision, Lagarde said policymakers have only "just begun" talk on "dialling back" the ECB's restrictive monetary policy stance.

As far as rate cuts go, Lagarde comments suggested the wait will end in June at the earliest. She said policymakers have a "little more data" to mull over by the April decision, but "a lot more" in June.

Meanwhile, Federal Reserve Chair Jerome Powell said the central bank "can and will" cut rates this year if current economic trends continue. However, a red-hot US jobs report on Friday could threaten that outlook.

Powell's remarks suggest the Fed still intends to begin lowering interest rates this year from the current 23-year high of between 5.25-5.50%, despite a recent uptick in monthly inflation.

The CME FedWatch tool puts the chances of a rate reduction in June at 59%.

Sterling was quoted at USD1.2810 early Friday, higher than USD1.2793 at the London equities close on Thursday.

The euro traded at USD1.0948 early Friday, higher than USD1.0934 late Thursday. Against the yen, the dollar was quoted at JPY147.87, down versus JPY148.09.

In Asia on Friday, the Nikkei 225 index in Tokyo was up 0.2%. In China, the Shanghai Composite was up 0.6%, while the Hang Seng index in Hong Kong was up 1.5%. The S&P/ASX 200 in Sydney closed up 1.1%.

Gold was quoted at USD2,161.22 an ounce early Friday, higher than USD2,155.87 on Thursday.

Brent oil was trading at USD83.48 a barrel early Friday, higher than USD82.80 late Thursday.

Focus on Friday will be on the latest US job report, though before that, there is a eurozone gross domestic product reading at 1000 GMT.

The local corporate calendar has annual results from business information and events company Informa.

By Sophie Rose, Alliance News senior reporter

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