AUS
NZ
UK
CA
USA
IND
London stocks were set for a modest rise at the opening on Monday as attention turns to key interest rate decisions this week from the Bank of England (BoE) and the US Federal Reserve (Fed).
The FTSE 100 was expected to open around 10 points higher.
Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, highlighted the busy week ahead, with major central banks announcing their latest policy decisions. Both the BoE and the Bank of Japan are anticipated to keep rates steady, while the Fed is expected to lower its rates. However, the exact size of the reduction remains a point of debate.
A rate cut from the Fed is seen as certain, though opinions differ on how much the reduction will be. Ozkardeskaya suggests a 25 basis points (bp) cut could be appropriate, given cooling inflation. Yet, with core inflation slightly higher than expected last month and solid corporate earnings, some are calling for a 50bp cut, especially as the Fed refrained from cutting rates earlier this year.
US GDP showed 3% growth in Q2, and Atlanta Fed’s GDP Now forecast suggests Q3 growth will likely exceed 2%. While the US labor market is cooling, the situation is not alarming, according to Ozkardeskaya, unless there is a series of non-farm payroll (NFP) readings between 50,000 to 100,000, and the unemployment rate approaches 4.5%. A 50bp cut, she argues, might signal that the Fed is catching up after holding rates steady in July, to avoid accelerating economic slowdown.
Meanwhile, in the UK housing market, prices strengthened in September, according to Rightmove (LSE:RMV). Average new seller asking prices rose 0.8% this month, twice the long-term average, with a 1.2% year-on-year increase. The national average asking price now stands at £370,759. Sales activity saw a strong rebound, with agreed sales jumping 27% in September and new sellers rising by 14% year-on-year. The number of available homes per estate agent also reached its highest level since 2014.
Rightmove’s Tim Bannister noted the rebound in activity from both buyers and sellers, suggesting that momentum from the stronger-than-expected summer market had carried through into autumn. However, he warned that market uncertainties, such as high mortgage rates and the upcoming Budget on 30 October, could ease current activity.
In corporate updates, ABC Technologies confirmed two rejected approaches for TI Fluid Systems (LSE:TIFS) but remains interested in a potential deal. Meanwhile, Phoenix Group (LSE:PHNX) reported a 15% rise in operating profits for the first half and reaffirmed its medium-term targets, while also announcing it had withdrawn its plan to sell its SunLife division due to current uncertainty in the protection market.
