LONDON MARKET EARLY CALL: FTSE to open below 7000 amid hawkish Fed – Morningstar

(Alliance News) – Stock prices in London are seen opening lower on Monday, amid a weak handover from Asia and after a US Federal Reserve official on Friday cautioned that interest rates may need to be raised sooner rather than later.

IG futures indicate the FTSE 100 index is to open 52.3 points lower at 6,965.17. The blue chip index closed down 135.96 points, 1.9%, at 7,017.47 on Friday.

James Bullard, president of the Federal Reserve Bank of St Louis, told CNBC that “I think it’s natural that we’ve tilted a little bit more hawkish here to contain inflationary pressures.”

Bullard tipped an interest rates hike in 2022.

“That sparked a run for the exit door for equity markets and commodities while the US dollar powered higher,” Oanda analyst Jeffrey Halley commented.

“Equity markets in Asia are following Wall Street South in Asia today, notably, Japan, which is down nearly 4.0%.”

The Nikkei 225 index in Tokyo was down 3.6% in late trade. In China, the Shanghai Composite was 0.2% lower, while the Hang Seng index in Hong Kong shed 1.5%. The S&P/ASX 200 in Sydney shed 1.7%.

The People’s Bank of China left interest rates unchanged again, as expected. The one-year loan prime rate was held at 3.85%, the last time the rate was changed was back in April 2020. The five-year rate also was unchanged at 4.65%.

In New York on Friday, the Dow Jones Industrial Average dropped 1.6%, the S&P 500 lost 1.3% and the Nasdaq Composite fell 0.9%.

The dollar, which benefitted from last week’s more hawkish Fed, saw its progress ease early Monday.

CMC Markets analyst Michael Hewson added: “The US dollar had one of its best weeks since April 2020 rising to a two-month high against a basket of currencies as a consequence of last week’s Fed shift of position, with this week’s [personal consumption expenditure] numbers for May likely to reinforce the narrative around last week’s change of tack.”

Core PCE, the Fed’s preferred measure of inflation, for May is due on Friday.

Sterling was quoted at USD1.3802 on Monday morning in London, up from USD1.3799 late Friday. The euro traded at USD1.1866, up from USD1.1854. Against the Japanese yen, the greenback fetched JPY109.82, down from JPY110.26.

In London, shares in FTSE 250-listed grocer Wm Morrison will be in focus after the company rejected a GBP5.5 billion takeover bid from a private equity firm, believing it “significantly undervalued” the company.

Clayton, Dubilier & Rice earlier noted press reports of a potential transaction involving Morrisons and confirmed that it was “considering a possible cash offer”.

CD&R, which has until July 17 to announce a firm intention to make an offer under UK takeover rules, added in a statement that there can be “no certainty an offer will be made”.

CMC’s Hewson added: “The surprise bid could well give the entire sector a boost when the market opens later this morning given the surprising underperformance seen so far this year, despite the resilience shown by all, in their stepping up to the challenges of the pandemic.”

Brent oil was trading at USD73.71 a barrel early Monday, firm on USD73.56 late Friday. Gold was quoted at USD1,768.64 an ounce, down from USD1,775.60.

The local corporate calendar on Monday has full-year results from cybersecurity solutions provider Brandshield Systems and IT services and cloud hosting firm SysGroup.

By Eric Cunha; ericcunha@alliancenews.com

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