FTSE 100 preview: Index set to retreat amid ECB speculation

on Oct 5, 2016

The UK benchmark index looks set to open lower this morning, giving up some of the previous session’s strong gains, amid speculation that the European Central Bank (ECB) might slow down the pace of its bond-buying programme. Tesco’s (LON:TSCO) interim results are the main event in today’s corporate calendar.

IG’s opening calls suggest that the FTSE 100 will open 0.25 percent lower at 7,057 points. The Footsie is expected to take cues from Asia, where stocks have retreated following a report in Bloomberg that the ECB will probably gradually wind down bond purchases before the conclusion of quantitative easing. Reuters quoted Citi analysts as saying in a note that the report was a “remarkably hawkish surprise”, given that a consensus “probably viewed an extension of the quantitative easing programme as the more likely outcome”.
US stocks closed lower last night following hawkish comments by Richmond Federal Reserve President Jeffrey Lacker who said that a benchmark of the central bank’s behaviour in past periods of relatively successful monetary policy made “a strong case for raising the Fed’s policy interest rate above its current low level”.
At home, the Footsie jumped 90.82 points to close 1.30 percent higher at 7,074.34, benefitting from a weak pound which fuelled demand for London-listed exporters. A Reuters poll, however, suggested that the index is expected to lose ground over the coming year, amid concerns over Britain’s exit from the European Union and the path of interest rates. Jitters ahead of the US presidential election next month meanwhile are likely to add further pressure to stock markets in coming weeks.
Investors have a lot to look out for on the macroeconomic front today, with the UK services purchasing managers’ (PMI) index for September due out at 09:30 BST. IG reports that the index is expected to have fallen to 52.5 from its 52.9 reading in August, which had been much stronger than forecast. The eurozone retail sales for August are scheduled to be released at 10:00 BST, while on the other side of the Atlantic, the ADP employment report comes out by 13:15 BST, followed by the US trade balance at 13:30 BST and the ISM non-manufacturing PMI for September at 15:00 BST.
In corporate releases, Tesco is expected to unveil a rise in sales and profits when it updates investors on its interim performance today. Analysts, however, have also flagged a rise in the grocer’s pension deficit.

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