Wednesday preview: Federal Reserve announces interest rate decision

The Federal Reserve is expected to stay put on interest rates when it makes its policy announcement on Wednesday.

Economists predict the central bank will keep rates at 0.25% amid low inflation and concerns about the risks arising from a slowdown in emerging markets.

“While expectations for a rate hike have drifted well into 2016, we still don't anticipate any real commitment/news on timing,” said Michael van Dulken, head of research at Accendo Markets.

He added that recent US economic data has been soft and the Fed may take its cue from other central banks considering further easing to boost their economies.

A People's Bank of China adviser highlighted there was "room for further easing in monetary policy" after it cut rates, according to reports late on Monday. Meanwhile, the European Central Bank last week said it would re-examine its €60bn a month asset purchase programme in December.

Michael Hewson, chief market analyst at CMC Markets, agreed that it was unlikely the Fed will change policy this year, “particularly given that we’re likely to see further policy easing from the Chinese authorities, and potentially the European Central Bank in the coming weeks”.

Ahead of the Fed’s policy announcement, the US will see economic data on weekly mortgage applications and advance goods trade balance.

In the Eurozone, GfK’s forward-looking consumer confidence survey is expected to show sentiment declined in November.

In company earnings, GlaxoSmithKline (GSK) reports its third quarter interims. Deutsche Bank has forecast the drugmaker to report a 10% increase in sales at constant exchange rate (CER), driven by growth in its Vaccines division due to flu season and sales in its HIV treatment company ViiV. However, the increase is expected to be offset by poor sales Advair , its treatment for asthma.

“Although margins should begin to show a sequential improvement, we expect core earnings per share (DB estimate 19.6p) to decline by 24% at CER vs a 3Q benefiting from one-off structural gains (we estimate an 11% CER decline underlying),” said Deutsche Bank analyst Richard Parkes.

“We continue to see GSK’s shares as modestly undervalued and see room for a near-term rally if earnings meet expectations, allowing investors to focus on optionality from the upcoming R&D event on 3 November.

Ahead of its results, GSK on Tuesday said it has received positive results from studies on its asthma treatment, Advair Diskus and Shingrix, its treatment for shingles, but the results of a study on its losmapimod drug for heart treatment were disappointing.

Wednesday 28 October

INTERIMS
Braemar Shipping Services, C&C Group, Gear4music (Holdings), JZ Capital Partners Ltd

INTERIM DIVIDEND PAYMENT DATE
Air Partner, Hunters Property , Hunting

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Balance of Payments (GER) (07:00)
Crude Oil Inventories (US) (15:30)
FOMC Interest Rate (US) (19:00)
GFK Consumer Confidence (GER) (07:00)
MBA Mortgage Applications (US) (12:00)

Q3
GlaxoSmithKline

FINALS
EpiStem Holdings, Redefine International

IMSS
British American Tobacco, Lloyds Banking Group, Standard Life

AGMS
Haynes Publishing Group, Murray Income Trust, Progility, Rosslyn Data Technologies

TRADING ANNOUNCEMENTS
Petra Diamonds Ltd.(DI), Standard Life, Telecity Group

FINAL DIVIDEND PAYMENT DATE
Alumasc Group, Brooks Macdonald Group