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London open: Stocks drop ahead of US data, Yellen speech
The FTSE opened in the red on Thursday ahead of a slate of US data that may provide clues on the first interest rate hike in almost a decade. A Commerce Department report at 1330 BST on US durable goods orders is forecast to show a 2.3% drop in August, compared to a 2.2% increase a month earlier.
Separately, the Commerce Department’s new home sales data at 1500 BST is expected reveal a 1.6% rise in August after a 5.4% gain a month earlier.
Initial jobless claims are projected to increase 275,000 in the week to 19 September, according to analysts’ estimates ahead of the Labor Department’s figures at 1330 BST.
After the markets close Federal Reserve Chair Janet Yellen will speak in Massachusetts at a lecture.
Last week, Yellen said she was taking into account a wide range of economic data in determining when to raise rates. Her remarks came as the Federal Open Market Committee decided to hold rates at 0.25% amid weak inflation and market volatility in the wake of heightened concerns on how China’s slowdown will impact the US economy.
“We believe that the zero interest-rate policy and quantitative easing approach has proven inefficient,” said SwissQuote Research market strategist, Arnaud Masset. “We predicted that no rate hike would happen as data has been coming in mixed and still believe that quantitative easing 4 is not far off.”
Craig Erlam, senior market analyst at Oanda, said the Fed has left the market “more confused than ever” on when it will raise rates.
“It’s as though a straitjacket has been applied to the markets,” he said “We’re seeing the occasional struggle but ultimately the energy that was helping sustain markets at the elevated levels earlier this year is being drained. With so many markets in correction territory now I’m sure we’ll soon break free from this and I think that would have happened last week had the Fed hiked rates.”
Meanwhile in the Eurozone, GfK’s forward-looking index on German consumer confidence fell to 9.6 in October from 9.9 a month earlier, missing forecasts of 9.8.
The IFO’s business confidence index, however, rose to 108.5 from 108.3, beating estimates of 107.9.
In company news, Poundland plunged after making an application to place new shares on the market and raise approximate £50m ahead of its acquisition of 99p Stores.
Smiths Group was on the back foot as CEO Philip Bowman prepared to step down after announcing the full-year results.
Rolls Royce jumped on news it will take a major share of £100m worth of contracts to supply the new nuclear power plant at Hinkley Point.
Royal Dutch Shell and BP rallied as Brent and West Texas Intermediate crude ticked higher.
