London pre-open: FTSE set to soar on QE3 decision

14th Sep 2012 07:30

City sources predict the FTSE 100 will open up 85 points from yesterday's close of 5,820, after the US Federal Reserve announced on Thursday that it will launch its third round of quantitative easing, or QE3.The Fed announced that, in order to bolster the economy and make sure that inflation stays close to its target, it would step up "policy accommodation" by buying more mortgage-backed securities at a pace of $40bn per month. The announcement prompted the Dow Jones Industrial Average to rise by 206.51 points to its highest level since late 2007, and the S&P 500 by 23.43 points to its highest closing point since December of the same year. The Fed said it will buy $40bn of agency mortgage-backed securities each month, starting today.It is also sticking with Operation Twist, the programme where it swaps short-dated securities for longer term securities. As expected, there was no change to the Fed's low interest rates policy. Also to be had in account, today will see the release of a barrage of macroeconomic indicators, in the United States, this afternoon. Amongst these will be the latest monthly readings for retail sales and consumer confidence (University of Michigan survey).Judging by market commentary investors are also watching the debate over whether or not Spain ought to ask for a European rescue. The Japanese Cabinet Office has lowered its assessment for its economy. Royal Bank of Scotland is to launch an initial public offering (IPO) of its Direct Line Insurance Group, completing one of the conditions of its 45.5bn-pound bailout from the government in late 2008. RBS, which is 82% owned by the government, agreed to the European Commission to undertake a series of measures following its state aid, including the disposal of its interest in Direct Line. To comply with this, RBS must cede control of the unit by the end of next year and must have offloaded its entire interest by the end of 2014.The wait is over for InterContinental Hotels Group (IHG) shareholders waiting for details of the hotels group's special dividend, with the group announcing it will be paying out 108.4p per share. The Holiday Inns group announced on August 7th that it planned to return $0.5bn of funds to shareholders via a special dividend tied to a share consolidation, plus another $0.5bn through a share buy-back programme, and it has now made good on that pledge. Pubs group JD Wetherspoon's new financial year has got off to a flying start, helped by a strong performance during the Olympic and Paralympic Games. In the six weeks to September 9th 2012, like-for-like sales increased by 8.4%, with total sales increasing by 12.8%. For the 53 weeks to July 29th, the group boasted of record sales, profit and earnings per share before exceptional items.