London pre-open: Stocks seen up ahead of Fed policy announcement

London stocks were set to rise at the open on Wednesday as investors mulled more key US earnings and eyed the latest policy announcement from the US Federal Reserve.

The FTSE 100 was called to open 25 points higher at 7,331.

CMC Markets analyst Michael Hewson said: "European markets had a predominantly negative tone yesterday, driven by rising concern that the uncertainty over reduced Russian gas flows is likely to lead to a European recession as we head into year end.

"US markets also underwent a negative session after US retailer Walmart issued a profits warning, and US July consumer confidence fell to its lowest levels since February last year.

"To cap it all off the latest earnings numbers from Google owner Alphabet and Microsoft both came in below expectations. Microsoft blamed a strong US dollar and a slowing PC market, although it should be noted that Q4 revenues were still a record $51.87bn, and 12% up over the same period a year ago.

"As for Alphabet, advertising revenues were also good, but again below expectations. YouTube revenue came in at $7.34bn, below $7.52bn, while advertising revenues rose 12% to $56.3bn.

"As we look ahead to today’s European open the main focus will be on this evening’s Fed meeting.

"It’s certain that the Federal Reserve will be hiking rates again today by another 75bps, with the only question being what comes next, and whether we see 50bps or another 75bps in September. Two weeks ago, there was some speculation that we might see a 100bps move today, however that seems much less likely now.

"An aggressive 100bps is by no means off the table, but it has become less probable after two of the most hawkish Fed members, Christopher Waller, and St. Louis Fed President James Bullard pushed back, saying that 75bps remained their favoured option, which prompted a modest retreat in the US dollar, which hit a 20 year earlier this month."

In corporate news, Lloyds Bank lifted annual guidance after a rise in net income for the half-year due to rising interest rates, and despite a fall in pre-tax profits.

The lender said net income surged 65% to £7.2bn for the six months to June 30. Pre-tax profits fell 6% to £3.6bn, after the previous year’s earnings were boosted by the release of cash set aside to cover bad debts anticipated during the Covid pandemic.

Lloyds said its net interest margin, the difference between savings and lending rates, was now expected to be greater than 280 basis points.

Healthcare group Haleon said that revenues had climbed in the six months ended 30 June, driven by organic revenue growth and an improved price and volume mix.

Haleon, which was spun off from GlaxoSmithKline earlier in July, posted interim revenues of £5.18bn, up 11.6% year-on-year, with organic revenues advancing 11.6%, prices rising 3.7% and volume mix increasing 7.9%.