London pre-open: Stocks seen up ahead of BoE rate announcement
By Michele Maatouk
Date: Thursday 05 May 2022
(Sharecast News) - London stocks were set to rise at the open on Thursday following a strong finish on Wall Street, as investors eye the latest policy announcement from the Bank of England.
The FTSE 100 was called to open 80 points higher at 7,573.
CMC Markets analyst Michael Hewson said: "As expected, the Federal Reserve raised rates by 50bps pushing the upper bound of the funds rate to 1%. There had been talk that some on the committee were keen on a 75bps move, however these concerns came to nought with all on the FOMC agreeing to a 50bps move.
"With the Federal Reserve decision firmly in the rear-view mirror, Fed policymakers now have the freedom to start articulating their own version of last night's events, with some of the more hawkish members like St. Louis Fed President James Bullard likely to pour cold water on some of last night's positive narrative.
"Until then we can look towards the Bank of England later today, with the hope that they won't derail the rebound we saw in the pound last night as the US dollar slid back.
"With UK inflation already at 7% in March and set to go even higher the Bank of England hasn't got an easy task, especially given the plunge seen in retail sales during the same month.
"Some may argue that the Bank of England could get away with raising rates by 25bps incrementally, and that might work given the dovish reaction to last night's Fed decision, but it would need to be combined with firm forward guidance, along with a commitment to continue raising rates in subsequent months, along with a timetable for quantitative tightening.
"A tentative and weak approach would not work and would only send a signal that the central bank is weak in undertaking to meet its inflation target.
"The bigger risk for today is if the central bank does nothing, with a minimum expectation of a 25bps rise to 1%, but an outside chance we could see a 50bps move to 1.25%.
"Before the Bank of England decision, April services PMI for the UK is expected to be confirmed at 58.3, a sharp slowdown from March's 62.6."
In corporate news, Shell reported record first-quarter profits driven by surging oil and gas prices.
Adjusted earnings rose 43% from the previous quarter to $9.13bn, beating average analyst forecasts provided by the company of $8.67bn and treble the $3.13bn reported a year earlier.
Aerospace company BAE Systems said that first-quarter trading was in line with expectations, with strong order intake and good operational performance being maintained throughout the period.
BAE Systems stated full-year 2022 guidance across all metrics was unchanged despite ongoing pressures on its supply chains, delivery lead times and people resourcing. Sales were projected to rise 2-4% year-on-year, while underlying earnings were seen growing 4-6% on 2021.
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