London pre-open: Stocks seen up as Fed hikes rates; BoE eyed next

London stocks were set for a stronger start on Thursday as investors digested news that the Federal Reserve has hiked rates by 25 basis points as expected, and looked ahead to the latest policy announcement from the Bank of England.

The FTSE 100 was expected to open 30 points higher than Wednesday’s close at 7,401.

On Wednesday, the Fed lifted the funds rate to between 0.75% and 1.00%. It indicated that further rate rises would be “gradual” and officials stuck to their outlook for two more rate hikes this year and three the next.

Ipek Ozkardeskaya, senior market analyst at London Capital Group, said: “Janet Yellen delivered a dovish accompanying statement. She said that the Fed is moving closer to its policy targets, adding that the policy remains accommodative and the Fed rates should be gradually increased to reach a neutral stance.

“However, the US dollar sold off across the board as she didn’t hint at the next rate hike, nor showed too much concern regarding Donald Trump’s fiscal plans.”

Meanwhile, the Bank of Japan’s policy announcement also went as expected, as it maintained its short-term interest target of -0.1 and a pledge to guide the 10-year government bond yield at around 0% through aggressive asset purchases.

The Bank of England is up next, with its policy announcement due at midday. Analysts expect the Bank, which cut interest rates to a record low of 0.25% and expanded its asset purchase programme to £435bn in the aftermath of the Brexit vote, to stand pat on policy.

HSBC said the Bank was “decidedly neutral” in its February Inflation Report, revising growth up sharply, but also insisting that the forecast overshoot in inflation was entirely due to the currency, and not domestically generated pressures.

It expects the BoE to remain neutral this month, voting unanimously to keep policy unchanged.

In corporate news, infrastructure group Balfour Beatty returned to the black on Thursday, posting full year pre-tax profits of £8m from a loss of £199m.

Underlying pre-tax profits came in at £60m against a loss of £123m in 2015. Shareholders have been rewarded with a 1.8p a share final dividend for a total of 2.7p.

Sainsbury’s like-for-like retail revenue fell in the fourth quarter but total group sales rose thanks to a strong showing from Argos.

Sainsbury's retail revenue for the quarter ended 11 March was up 0.1%, excluding fuel sales, compared to last year, but LFL retail revenue fell 0.5%.

International services company Serco Group announced that it was named ‘preferred bidder’ to operate the New Grafton Correctional Centre (NGCC) in New South Wales, Australia.

Serco's contract for operation, expected to commence in 2020, carried an estimated total contract value to Serco over a 20-year term of AUD2.6bn (£1.6bn).

One Savings Bank hiked its dividend 21% as it reported a 29% increase in profit before tax as its loan book accelerated growth in the second half alongside an improvement in the net interest margin.

The challenger bank delivered a 29% return on equity despite the impact of the bank corporation tax surcharge and an improvement in the capital ratio to 13.3%.