London pre-open: Stocks seen down after jobs data, ahead of BoE
London stocks were set to fall at the open on Thursday as investors digested the latest policy announcement from the Federal Reserve and looked ahead to the Bank of England’s turn.
The FTSE 100 was called to open down around 20 points.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: "US markets breathed a sigh a relief following the Federal Reserve (Fed) decision. The Fed kept its policy rate unchanged as expected, cut the growth forecast and lifted its inflation outlook quite notably but Chair Jerome Powell stressed out that the potential impact of tariffs on inflation would be ‘transitory’ - implying that the Fed could continue to ease policy to support growth. And more importantly, the Fed decided to reduce the pace of Quantitative Tightening (QT) - a move that eases the tightening of the financial conditions.
"As such, the Fed elegantly downplayed the long-term impact of rising inflation while cutting its growth forecast. The dot plot showed that the Fed officials continue to foresee two rate cuts on average this year, and activity on Fed funds futures now gives around 70% chance for the next cut to land in June. The decision was more dovish than expected."
The bank of England decision is due at midday, with no change to rates expected.
"Investors are feeling dovish regarding the upcoming BoE meeting given that the British growth numbers have taken a hit from the governments’ tax raising plans while the rising gilt yields decreased the spending potential," Ozkardeskaya said.
On the macro front, figures released earlier by the Office for National Statistics showed that the unemployment rate was unchanged in January, while wage growth slowed slightly.
The unemployment rate came in at 4.4%, unchanged from December, while total pay including bonuses rose 5.8% in the three months to January, down from 6.1% a month earlier.
Capital Economics said: "With the labour market cooling rather than collapsing and wage growth stuck in the 5.5-6.0% range, we doubt the Bank of England will cut interest rates from 4.50% today. The next cut will probably be in May and, ultimately, we think rates will be cut further than most expect."
In corporate news, Prudential hiked its dividend by 13% and accelerated its share buyback plan after profits rose by a tenth in 2024, with financial results in line with group guidance.
The insurance and asset management company returned $785m to shareholders in 2024, as part of its $2bn repurchase plan that will now complete by the end of 2025, ahead of the original mid-2026 schedule.
The firm reported an adjusted operating profit before tax of $3.13bn for 2024, up 10% on a constant currency basis.
Food company Cranswick upgraded medium-term targets and said the current year outlook was unchanged, with robust demand for its core pork and poultry products continuing throughout the fourth quarter.
The company said it was now aiming for mid single-digit organic revenue growth, 7.5% adjusted operating margin, increased from 6% and upper teens return on capital employed, up from mid-teens. Cranswick is still targeting mid single digit adjusted EPS growth.