London pre-open: Stocks seen slightly weaker on Super Thursday
London stocks were set for a slightly weaker open on Super Thursday, as investors await a rate decision from the Bank of England, the Inflation Report and minutes.
The FTSE 100 was expected to open 15 points lower than Wednesday’s close at 7,092.
Oanda’s Craig Erlam said: “The BoE is expected to be forced to swallow some pride again today and take another step down from its pre-referendum position on the economic impact of Brexit and announce upgrades to its growth forecasts following another few months of stronger data. Carney in particular came in for severe criticism for his pre-referendum warnings and that has not eased as the economy has outperformed most expectations in the near term.
“While the BoE will likely announce higher near term growth forecasts in today’s inflation report, I still expect the central bank to stand by its warning that the economy is on the cusp of an inflation-induced slowdown. The CPI inflation numbers are rising fast and the rapid and substantial increase in input prices – up 15.8% year on year in December – are going to put further pressure on businesses to pass on higher costs. The real test of the economy will come from how the consumer responds to higher prices or how businesses manage to absorb them but in the absence of higher wages, the former is not sustainable for too long.”
The BoE is widely expected to leave interest rates and its asset-purchase programme on hold. The minutes, Inflation Report and rate announcement are all at 1200 GMT, while BoE governor Mark Carney’s speech is at 1230 GMT.
Brexit was also likely to be on investors’ minds after a vote in parliament to clear Prime Minister Theresa May to trigger Article 50 won 498 votes to 114. The bill will now have to pass through the House of Lords.
Investors will also be digesting the latest rate announcement from the Federal Reserve late on Wednesday. The bank kept its main policy settings unchanged, as it waited for greater clarity on the new administration's fiscal plans. Since its last meeting, activity in the jobs market had continued to strengthen and economic activity to expand at a moderate pace, the Fed said.
However, unlike at its previous meeting in mid-December, rate-setters pointed out how measures of consumer and business sentiment had improved of late.
Regarding prices, inflation was still below the Fed's 2.0% target, the Fed said, adding that "market-based measures of inflation compensation remain low."
"Near-term risks to the economic outlook appear roughly balanced," the Fed also reiterated in its statement.
Monetary policymakers in Washington DC thus kept the range for the Fed funds rate at between 0.50% and 0.75%, as expected.
In corporate news, consumer goods firm Reckitt Benckiser confirmed that it is “advanced negotiations” to buy US baby food maker Mead Johnson for around $16.7bn, a move which could bolster its health products business.
The Slough-based company which makes Durex, Nurofen, Cillit Bang and Dettol said that it is in talks to by each Mead Johnson share for $90 in cash giving it a share capital of about $16.7bn.
International mobile communications giant Vodafone posted a trading update for the quarter to 31 December on Thursday, reporting 1.7% growth in group organic service revenue, with Europe accounting for 0.7% of that growth and Africa, Middle East and Asia-Pacific (AMAP) 3.9%.
The FTSE 100 firm said its European growth continued as average revenue per user (ARPU) stabilised, with Italy up 3.0%, Germany up 1.8%, Spain 0.8% firmer, and the UK falling 3.2%.
AstraZeneca reported good growth in earnings for 2016 in spite of a 13% decline in revenues in the fourth quarter, as it holds out hopes that 2017 will be "a defining year" for new blockbuster drugs to breathe life back into the business.
The decline in revenue towards the end of the year led to annual turnover falling 7% to £23b, reflecting the rise of generic rivals to its Crestor, its last great blockbuster patent.