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LONDON MARKET EARLY CALL: Lower Call As US Fed Keeps Rates On Hold.

LONDON (Alliance News) - Stock prices in London are seen opening in the red on Thursday, tracking US equity markets lower after the US Federal Reserve held interest rates steady on Wednesday and ahead of a Bank of England decision at midday.

IG futures indicate the FTSE 100 index is to open 31.56 points lower at 7,353.70. The blue-chip index closed down 32.96 points, or 0.4% at 7,385.26 on Wednesday.

In the US on Wednesday, Wall Street ended lower, with the Dow Jones Industrial Average down 0.6%, S&P 500 down 0.8% and Nasdaq Composite ending 0.6% lower.

As widely expected, the US Federal Reserve announced on Wednesday - after the European equities close but while New York was still trading - that it has decided to leave interest rates unchanged.

The Fed maintained the target range for the federal funds rate at 2.25% to 2.50% for the third consecutive meeting.

The US central bank said information received since its previous meeting in March showed economic activity rose at a solid rate.

The Fed said it continues to view sustained expansion of economic activity, strong labour market conditions, and inflation near its symmetric 2% objective as the most likely outcomes. Nonetheless, the central bank reiterated it will be patient as it determines future adjustments to interest rates due to global economic and financial developments and muted inflation.

In his post-monetary policy meeting press conference, Chair Jerome Powell said the Fed sees "transitory factors" contributing to recent low inflation readings.

London Capital Group's Jasper Lawler commented: "Basically, the market had gotten ahead of itself, pricing in a 65% chance of a rate cut. The Fed poured cold water on such expectations, forcing the market to reassess the likelihood of the Fed loosening monetary policy.

"Even as Jerome Powell was talking, market expectations of a cut declined, with a 50% probability of a cut now being priced in. This boosted the dollar. Stocks were less impressed as the prospect of tighter conditions saw investors pull out of equities."

The pound was quoted at USD1.3051 early Thursday, marginally lower than USD1.3090 at the London equities close Wednesday, ahead of the Bank of England's interest rate announcement.

The BoE will announce its latest monetary policy decision, alongside the release of the Monetary Policy Committee meeting minutes, at midday on Thursday.

The bank's quarterly inflation report is due alongside the rate decision in what is known as 'Super Thursday'. There will be a press conference with BoE Governor Mark Carney held at 1230 BST.

A full UK corporate calendar on Thursday has first-quarter results from oil major Royal Dutch Shell, fund manager Schroders, soft drinks bottler Coca-Cola HBC, medical devices maker Smith & Nephew, bookmaker Paddy Power Betfair, household goods maker Reckitt Benckiser and high street bank Lloyds Banking Group.

The economic events calendar on Thursday has manufacturing PMI data from Italy, France, Germany and the eurozone at 0845 BST, 0850 BST, 0855 BST and 0900 BST. At 0930 BST there is the UK construction PMI reading.

In Asia, the Hang Seng index in Hong Kong is up 0.6%. Financial markets in China are closed for a second day of the Labour Day holiday, while Japanese markets remain closed as Golden Week continues.

By Arvind Bhunjun;

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Publication:Alliance Newswire
Geographic Code:4EUUK
Date:May 2, 2019
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