London pre-open: Stocks to edge higher as investors digest Yellen testimony

London stocks were set to edge a little higher at the open on Thursday after Federal Reserve Chair Janet Yellen struck a dovish note in her congressional testimony a day earlier.

The FTSE 100 was expected to open six points higher at 7,423.

CMC Markets analyst Michael Hewson said it seems that for now, the Fed’s focus is likely to be on balance sheet reduction where there is more of a consensus amongst FOMC policymakers.

“Equity markets jumped sharply yesterday with the Dow hitting a new record high, while the US dollar slumped after Fed chief Janet Yellen caught investors by surprise by leaning back from the prospect of multiple rate hikes in the coming months.

“Her focus of appearing to lean more towards reducing the size of the Fed’s balance before the end of this year was always the more likely outcome given recent comments from other senior Fed officials and this belief was reinforced in yesterday’s comments with some speculating that we could see action as soon as the September meeting.

“Market reaction was also reinforced by her comments that inflation was running below target and that rates wouldn’t need to rise much further to get back to neutral. This comment in particular suggests that the Fed believes that a lot of the heavy lifting on rates may well have been done in the short term, which may help explain why we saw long term yields slip back down to a one-week low, and certainly takes a September rate rise off the table.”

Investors will also be digesting news that British house price inflation slowed to its weakest in June since the aftermath of the Brexit vote as political worries took their toll.

The Royal Institution of Chartered Surveyors’ monthly house price index fell to +7 from +17 in May.

In corporate news, Babcock, the marine and aerospace engineer, said its new financial year has begun well, with 82% of revenues for the full year already booked.

In a statement ahead of its annual shareholder meeting, the FTSE 100 group said its outlook for the year remained unchanged.

LondonMetric Property has acquired two Marks & Spencer stores in Newport, Isle of Wight and Kendal, Lancashire for £24.6 million.

The two edge of town centre properties are let to M&S at a total rent of £1.4m a year, subject to annual rental uplifts of 2% and the existing lease runs for a further 10 years.

Investors in global specialist healthcare company BTG were preparing for the firm’s annual general meeting on Thursday morning, with chief executive Louise Makin confirming the group’s strong performance in the 2017 financial year had carried over into the start of the 2018 year.

The company was on track to achieve double digit sales growth in the 12 months to 31 March 2018, Makin said in a statement, which was being driven by growth in its international medicine business.

On the data front, the Bank of England credit conditions survey is at 0930 BST. In the US, the producer price index and initial jobless claims are at 1330 BST.