Hot Features
Premium
Trade like a pro: Leverage real-time discussions and market-moving ideas to outperform.
London open: Stocks fall after FOMC and BoJ policy decisions
London stocks dropped on Thursday after the Federal Reserve left the door open to an interest rate hike in June and the Bank of Japan decided against fresh stimulus.
The Federal Open Market Committee kept interest rates unchanged at 0.25% to 0.50% on Wednesday following a two-day policy meeting, as expected by analysts. Policymaker Esther George, however, voted to raise rates for a second month in a row.
In the FOMC statement, the central bank also hinted at the possibility of a rate increase at the next meeting on 14-15 June. The Fed said labour market had “improved further even as growth in economic activity appears to have slowed”.
The Fed also softened its tone on concerns of external risks, withdrawing its previous reference to the possible impact from “global economic and financial developments”.
However, chief market economic at Markit, Chris Williamson, said: “Unless there’s a robust pick up in the data for May, Fed policymakers are likely to be looking at some gloomy economic trends at the June meeting, making a rate hike hard to justify.
“The Fed may also not want to unsettle markets with a rate hike just days before the UK’s 23 June referendum on remaining in the EU.”
In Japan, the central bank shocked the market by voting to refrain from any extra stimulus measures to bolster the stagnant economy.
The BoJ decided to keep its negative interest rate of -.10% in place and voted to continue its asset purchase programme.
Alongside the BoJ’s policy announcement was consumer price index data which showed annualised deflation of 0.1% in March, compared to inflation of 0.3% the previous month. In better news, the jobless rate unexpectedly fell to 3.2% in March from 3.3% in February.
Turning to Thursday’s agenda, Eurozone consumer confidence data is due at 1000 BST, followed by Eurozone inflation at 1300 BST, US initial jobless claims at 1330 BST and US gross domestic product at 1330 BST.
Meanwhile, oil prices were volatile after official data showed US crude oil inventories rose more than expected last week.The US Energy Information Administration said domestic crude inventories rose by 2.0m barrels to 540.6m barrels in the week to 22 April, more than the 1.7m increase expected by analysts.
At 0913 BST, Brent crude rose 0.16% to $47.26 per barrel and West Texas Intermediate climbed 0.04% to $45.35 per barrel.
On the company front, shares in Lloyds Banking Group slumped after the lender reported a 6% fall in underlying profit to £2.05bn due to the sale of TSB.
Taylor Wimpey gained after the company said the prospect of a British exit from the EU had not affected trading in the first four months of the year.
Tullow Oil rallied after saying 2016 capital expenditure would be cut by $100m to $1bn “with further savings expected”.
Weir Group jumped as it reported trading that was “slightly ahead” of expectations in its first quarter on Thursday.
Schroders was in the red as it said first quarter pre-tax profits fell to £137.9m from £141.7m.
Anglo American advanced as it agreed to sell its niobium and phosphates businesses in Brazil to China Molybdenum for a cash consideration of $1.5bn.
