London pre-open: Stocks seen down as BoJ ends negative interest rates

19th Mar 2024 07:33

(Sharecast News) - London stocks were set to fall at the open on Tuesday as investors mulled policy announcements from the Bank of Japan and Reserve Bank of Australia, and looked ahead to a key UK inflation reading this week.

The FTSE 100 was called to open around 10 points lower.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: "We expected - at the start of this year - that March would bring a Fed rate cut. It brought a BoJ rate hike instead.

"Yes, the Bank of Japan (BoJ) scrapped its negative rate policy, raised the rates from -0.10% to 0%, ditched its YCC policy and ended the purchases of ETF and Japanese real estate investment trusts. However, the bank said that it will continue to purchase sovereign bonds with 'broadly the same amount' and that the policy will remain accommodative for now.

"The latter caught traders' attention more than the rest. While you would've clearly expected to see the Japanese 10-year yield and the yen to rally on the back of such hawkish shift, the USDJPY spiked above 150, the EURJPY rallied past 163 and the 10-year JGB yield is down by almost 3.5%.

"The price action suggests a 'one and done' action from the BoJ. Governor Ueda hasn't spoken just yet, but if he doesn't say that the BoJ will continue to hike rates, the yen bulls will apparently not come back. Note that today's decision was supposed to send the yen on a rising path. At this point, I don't see what would make long the yen the best trade of the year."

Also on Tuesday, the Reserve Bank of Australia left rates unchanged, as expected.

In UK corporate news, AstraZeneca said it had agreed to buy biopharmaceutical company Fusion Pharmaceuticals for up to $2bn.

Fusion specialises in radioconjugates, which combine the precise targeting of antibodies, small molecules or peptides with potent medical radioisotopes to deliver radiation directly to cancer cells.

AstraZeneca will acquire all of Fusion's outstanding shares for $21 each in cash at closing plus a non-transferable contingent value right of $3 per share.

Diageo announced that non-executive director and former Cabinet Office official Sir John Manzoni will step in as its new chair when Javier Ferrán retires from the head of the board next year.

Manzoni joined Diageo four years ago, after working as the chief executive of the UK Civil Service and permanent secretary for the Cabinet Office until 2020, but holds more than 30 years' experience in the private sector, having served on the boards for SSE, KBR, SAB Miller and BP. He was also president and chief executive of Canadian oil firm Talisman Energy.

Unilever announced plans to expedite its growth action plan (GAP) by separating its ice cream business and launching a significant productivity programme.

The consumer products giant said the decision was designed to streamline its focus on a portfolio of high-performing brands in key categories, facilitating innovation and growth.

It said the separation of ice cream would enable it to operate as a more focussed company with four distinct business groups, while the productivity programme would generate €800m in cost savings over the next three years.