London pre-open: Stocks to start lower as markets digest Fed move

Overnight, the US central bank kept rates as many observers - but by no means all - had been expecting but left the door open to an interest rate hike come October, leaving almost everyone in equity markets dissatisfied.

That saw Wall Street close on a mixed note in hectic trading in the second-half of Thursday's session, with a sharp spike in stocks following the somewhat unexpected announcement followed by an abrupt decline after Fed chair Janet Yellen said an October hike was still a "a possibility".

Traders in the Fed funds futures market however were more skeptical. At the closing bell on the NYSE that market was pricing in only a 57% probability of a hike in January 2016, according to Bloomberg data.

Against that backdrop, the top flight index was expected to begin three points lower from Thursday's close of 6,186.99.

The Shanghai Stock Exchange Composite index was up 0.02% to 3,086.71 as of 07:45.

"So having teased the markets for over a month, the question is what happens now and it seems that in the absence of a press conference in October it seems unlikely we will see any move on rates then which suggests a December move at the earliest, and even that might not happen as the Fed would need to give indications of a change in its inflation forecasts and it can only do that at the December meeting," said Michael Hewson, Chief Market Analyst at CMC Markets UK.

"Last night’s move certainly caught the bond markets off guard as well as the FX markets, sending the 2 year yield tumbling sharply by 13 basis points. It also saw the US dollar fall back sharply, while US stock markets didn’t know what to make of it, closing mixed," Hewson added.

No economic data was scheduled for release in the UK on Friday.

Poundland merger cleared by regulator

Poundland’s merger with 99p Stores is set to go ahead, after being cleared by the Competition and Markets Authority (CMA) Friday. The merger was announced in February, with the low cost supermarket coughing up £55m for their competitor. The CMA concluded that the merger shouldn’t result in a “substantial lessening of competition”. It said that consequently, customers would not face a reduction in choice, value or quality of service as a result of the merger.

Petra Diamonds said full year revenues fell 10% to $425m on the back of lower diamond prices. Adjusted EBITDA was down 26% to $139.3m and adjusted net profit after tax off by another 33% to $62.8m. The company expected fiscal year 2016 production of 3.3 - 3.4 Mcts, an increase of 3 - 6% on fiscal year 2015 production. Undiluted ore from the new mining areas will start to contribute meaningfully to the Group's production profile starting from the second half of fiscal year 2016.

Pace said its recommended combination with Arris Group continues to progress in line with expectations, as it announced that revenue for 2015 is likely to be a little lower than last year. The company, which develops technologies and products for Pay TV and broadband service providers, now expects revenue for the year of around $2.55bn compared with $2.62bn in 2014. Adjusted earnings before interest, tax and appreciation is still expected to be around $255m from $241.1m.