London pre-open: Stocks to nudge up ahead of busy week for central banks

16th Sep 2024 07:30

(Sharecast News) - London stocks were set to nudge up at the open on Monday as investors eyed rate announcements this week by the Bank of England and the US Federal Reserve.

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

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: "We are heading into a busy week with major central bank decisions. The Federal Reserve (Fed), the Bank of England (BoE) and the Bank of Japan (BoJ) will announce their latest policy verdicts this week. The Brits and the Japanese are expected to remain seated on their hands and the Fed will certainly lower its rates this week. But by how much - is the million-dollar question!

"A Fed rate cut is fully priced in, but investors can't agree on the size of the cut that the Fed should deliver this week. Some - including myself - think that a 25bp cut would be appropriate to start cutting rates as inflation is cooling - but core inflation came in slightly higher than expected last week on a monthly basis.

"Corporate earnings last quarter were robust, growth in Magnificent 7 earnings slowed but remained very strong and the remaining S&P493 earnings growth turned positive for the first time since 2022. US GDP printed a 3% growth in Q2 and Atlanta Fed's GDP Now forecasts suggests that the Q3 growth will likely be above 2%. The US labour market cools, but the cooldown doesn't look alarming (alarming would be a series of NFP read between 50 and 100K and unemployment rate near 4.5%.)

"But wagers for a 50bp cut are rising into Wednesday's decision, as some investors think that the Fed should've cut rates already in July and that it may have fallen behind the curve by not doing so. Therefore, to make up for the delay, they should deliver a 50bp cut, otherwise the economic slowdown will accelerate and push the economy into a recession. I believe that if that's the case, there is something that the Fed knows that we do not know."

On home shores, industry research released earlier showed the UK housing market strengthened in September, as prices ticked higher and the number of agreed sales jumped.

According to the latest house price index from Rightmove, average new seller asking prices rose 0.8% this month, double the long-term average. Year-on-year, prices rose 1.2%.

The national average asking price is now £370,759.

The number of agreed sales also rose in September, jumping 27%, while the amount of new sellers increased by 14% year-on-year.

The average number of available homes for sale per estate agent is now its highest since 2014.

Autumn is traditionally a busy period in the housing market, but Rightmove said it appeared to have started early this year.

Tim Bannister, director of property science, said there had been a "strong rebound in activity from both buyers and sellers compared to the subdued market at this time last year, continuing the momentum from the better-than-expected summer market".

"The certainty of a new government followed by the first Bank Rate cut in four years invigorated the market, opening a window of opportunity for movers to act," he added.

However, he also sounded a note of caution: "Windows of opportunity tend to need a momentum of good news to stay open, and there are still uncertainties ahead which would cause some of the current market activity to ease."

In particular, Rightmove flagged mortgage rates still being high, despite recent falls, and the upcoming Budget on 30 October.

In corporate news, auto parts engineer ABC Technologies confirmed it had two approaches for TI Fluid Systems rejected over the past month but was still interested in a deal and was "considering its position".

ABC made an initial proposal of 165p a share on August 22 and a revised 176p-a-share offer on September 4 - a 20.7% premium to TI Fluid's closing price on September 13.

In response TI Fluid said the bid "significantly undervalued" the company and its prospects.

Pensions, savings and life insurance provider Phoenix reported a 15% increase in operating profits in the first half and reiterated its medium-term targets for earnings and cash generation.

The company also announced it was pulling the disposal of its SunLife division, which sells financial products to the over-50s, just three months after putting it up for sale given "current uncertainty in the protection market".