FTSE 100 preview: Index looking up as Fed hikes rates

FTSE 100 preview: Index looking up as Fed hikes rates

The UK benchmark index looks set to open higher this morning, tracking the US higher, after the Federal Reserve raised interest rates as expected. In corporate releases, J Sainsbury (LON:SBRY) is scheduled to update investors on its fourth-quarter performance.

IG’s opening calls suggest that the Footsie will start the day 36 points higher at 7,404. The FTSE 100 is likely to take cues from the US where stocks rallied last night after the Fed raised the target range for the federal funds rate from 0.75 percent to one percent.
“The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate,” the US central bank commented in a statement, adding that “the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run”.

“Most people were expecting a much more hawkish statement,” Diane Swonk of DS Economics told CNBC. “The dissent along with the waffling language on inflation, even though the economic language was strong,” indicated continuation of gradual policy. Asian shares meanwhile have tracked the US higher this morning.
The Footsie closed little changed yesterday, adding 10.79 points to end the session 0.15 percent higher at 7,368.64. Hikma Pharmaceuticals (LON:HIK) was the session’s biggest blue-chip riser, closing 8.04 percent higher at 2,297.0p, with investors welcoming the company’s full-year results which showed a smaller-than-feared drop in profits.

The Bank of England’s rate decision is the main event in today’s macroeconomic calendar. IG notes that while no move on rates or quantitative easing is expected, given the signs of an uptick in pricing pressures the bank may offer some comment on potential policy paths later in the year.
On the corporate front, Sainsbury’s is expected to post a small dip in sales when it updates investors on its fourth-quarter performance this morning.
Blue-chips, whose shares will be trading without the attraction of their latest dividend in today’s session, include British American Tobacco (LON:BATS), Hammerson (LON:HMSO), Direct Line (LON:DLG) and Randgold Resources (LON:RRS). Reuters calculations suggest that ex-divs will knock 9.66 points off the Footsie.

By Alice Young
Alice joined the Invezz team after motherhood convinced her to make a career change from actuary-ing. She brings a forensic eye for detail developed through crunching numbers on underwriting satellite insurance and the like.
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