LONDON MARKET MIDAY: Investors await speech from US Fed Chairman Powell

Alliance News) – Stock markets were effectively suspended in Europe on Friday, ahead of a speech by US Federal Reserve Chairman Jerome Powell.

Despite positive days in Asia on Friday and New York on Thursday, European investors were unwilling to take risks ahead of the week’s key event.

Powell will deliver the keynote on Friday from 1500 BST at the annual gathering of top central bankers in Jackson Hole, Wyoming. Powell is expected to confirm that more interest rate hikes are on the way as Fed officials try to bring inflation down to four-decade highs.

The main issue facing investors is how much the bank will tighten over the next few months. Markets are pricing in a 41.5% chance of a 50 basis point interest rate hike at the Fed’s September meeting and a 58.5% chance of a 75 basis point hike baseline, according to the CME’s FedWatch tool.

The last two rate hikes by the US central bank were 75 points.

Markets have been optimistic about a “pivot” to lower interest rate hikes, in anticipation of the Fed starting to cut rates next year.

However, Fed speakers such as James Bullard reiterated the need to accelerate rate hikes, with a year-end federal funds rate of 3.75% to 4.00% deemed necessary.

“Last year, Fed Chairman Powell said inflationary pressures were temporary – a comment he later regretted,” Lloyds Bank commented. “This time, markets will be looking for signals on how big the likely US rate hike will be in September, indications of whether he thinks inflation has now peaked, and what evidence he and his colleagues will want to see before they go. put an end to monetary tightening.”

Western Union analyst George Vessey commented: “Powell should reaffirm his resolve to fight inflation and push back on bets that the Fed will cut rates next year.

“Powell may not want to shock markets and therefore reiterates the importance of data dependency. This could delay any meaningful market reaction until next week’s US payrolls data. Nonetheless, if US interest rate expectations move closer to 4%, expect a moderately positive impact on the dollar as yields at the front and back of the yield curve rise and equities rise. sell.

The FTSE 100 rose just 1.17 points to 7,480.91 at midday Friday. The FTSE 250 index rose 63.42 points, or 0.3%, to 19,321.29. The AIM All-Share Index fell 0.59 points to 900.17.

The Cboe UK 100 index was flat at 747.00. The Cboe 250 rose 0.3% to 16,601.40. The Cboe Small Companies fell 0.1% to 14,043.40.

In Paris, the CAC 40 stock index was down 0.3%, while the DAX 40 in Frankfurt was down 0.2%.

In the FTSE 100 in London, InterContinental Hotels Group lost 2.5% after JPMorgan downgraded the owner of Crowne Plaza and Holiday Inn from “overweight” to “neutral”.

In the FTSE 250, Micro Focus International stood out, up 93% at 518.00 pence, after the enterprise software provider agreed to be taken over by Ontario-based OpenText.

Under terms of the deal, Micro Focus shareholders will receive 532 pence per share, valuing the Newbury, Berkshire-based company, including its debt, at around £5.1 billion.

Shares of OpenText closed at $37.27 in New York on Thursday and were down 8.5% in premarket trading.

Micro Focus said its directors intend to unanimously recommend that shareholders vote in favor of the takeover at a court meeting and resolutions to be proposed at a general meeting. The transaction is expected to be finalized in the first quarter of 2023.

The deal comes five years after Micro Focus acquired the software arm of Hewlett Packard Enterprise in 2017 in a reverse takeover for $8.8 billion. The stock has fallen 75% since then.

The loss of another UK tech slate comes as London struggles to retain tech companies amid foreign interests.

Earlier this week, London’s largest listed software company, Aveva, was taken over by majority shareholder Schneider Electric, although Aveva has yet to receive a formal approach. of French society.

Aveva shares rose 1.0% on Friday. Schneider was down 0.8% in Paris.

London also looks set to miss out on a potential slate from SoftBank Arm’s chip designer, with New York the likeliest destination for Britain’s unique tech slate.

Meanwhile, UK energy regulator Ofgem said it would raise the annual energy price cap on default tariffs by 80%.

From October 1, energy suppliers in Britain can charge up to £3,549 a year for energy bills, up from the previous cap of £1,971.

In August 2021, Ofgem set the price cap at £1,277 from October 2021, which means the cap has almost tripled over a period of one year.

The cap for households on prepaid meter bills will rise by 79% to £3,608 from £2,017. In August 2021, Ofgem set this cap from October 2021 at £1,309.

Ofgem regulates energy prices for England, Scotland and Wales, while Utility Regulator sets the price cap in Northern Ireland.

On Thursday, Centrica’s British Gas announced it would donate 10% of its profits made during the energy crisis to subsidies for customers who are under pressure from rising energy bills. British Gas generated a pre-tax profit of £98m for the first half of 2022, meaning the initial contribution to the British Gas Energy Support Fund is expected to be £9.8m.

However, British Gas said it would increase its contribution to £12million, to ensure there is enough for winter when energy consumption is at its peak. From then on, British Gas will pay 10% of its interim profit into the fund, which will provide customers with subsidies estimated at an average of £750 per household.

Centrica shares rose 1.4%. Electric utility SSE fell 0.2%.

New York was pointed to a lower open after Thursday’s strong rally.

The Dow Jones Industrial Average was called down 0.3%, the S&P 500 down 0.4% and the Nasdaq Composite down 0.6%. The indices closed up 1.0%, 1.4% and 1.7% respectively on Thursday.

On Wall Street, Workday shares were up 11% in premarket trading. The enterprise software company on Thursday evening said it posted a loss in the second quarter of its fiscal year, but maintained a strong outlook for the year.

In the three months ended July 31, the Pleasanton, Calif.-based enterprise software company posted a net loss of $64.2 million compared to a profit of $105.7 million a year earlier. . Revenue climbed 22% to $1.54 billion from $1.26 billion.

Looking ahead, Workday maintained its fiscal 2023 revenue guidance, anticipating subscription revenue of between $5.54 billion and $5.56 billion. If achieved, this would represent growth of 22% over the previous year.

The pound was listed at $1.1830 at midday Friday, down from $1.1815 at the London stock close on Thursday.

The euro continued to move above and below parity against the dollar. It was priced at $1.0002 on Friday midday in London, down from $0.9975 on Thursday night. Against the yen, the dollar was trading at JP¥136.92, up from JP¥136.72.

Brent oil was quoted at $100.65 a barrel at midday Friday, down from $100.48 a barrel when London shares closed on Thursday. Gold settled at $1,748.14 an ounce, down from $1,756.33.

In the economic calendar other than the Jackson Hole event, there is personal consumption expenditure data from the United States as of 1:30 p.m. BST.

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