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Stocks subdued ahead of central bank meetings

Equity markets are mildly in the red this morning after the US Federal Reserve raised interest rates last night, although they weren’t overly hawkish in their outlook. This has led to subdued trading this morning.

Lonmin shares are up 22.7% after the company has agreed to a takeover by Sibanye-Stillwater for £285 million. The troubled miner had to raise funds from shareholders several times in recent years, and last month the company said it would delay publishing its full-year figures – which was a warnings in itself.

Capital Group shares are down 13.9% after the company stated the market was ‘subdued’. The company warned on profits several times last year and the business is clearly finding trading tough. The amount of work in the pipeline is down 19% from September, and while it doesn’t; look too bright, investors will steer clear.

EUR/USD was helped along by strong manufacturing reports from France and Germany. The two largest economies in Europe have seen sizeable increase in economic activity in recent months. The European Central Bank (ECB) is tipped to keep interest rates on hold at 12.45pm (UK time) and the press conference at 1.30pm (UK time) will be closely watched. The ECB’s loose monetary policy has spurred growth in the eurozone, so the central bank president, Mario Draghi, isn’t likely to say anything that will drive the euro higher.

GBP/USD was boosted by the strong retail sales from the UK today. The report for November showed a 1.6% increase on an annual basis, while the consensus was for a rise of just 0.3%. The surge in retail sales is a sign consumers are keen to spend, which is crucial for economic growth. The Bank of England are expected to keep UK rates on hold at their meeting at 12pm (UK time).

At 1.30pm (UK time) the US announces the latest retail sales figures, with a consensus for an increase of 0.3%, up from the 0.2% rise in October.

Adobe Systems and Costco will announce their quarterly figures later.

We are expecting the Dow Jones to open up 70 points at 24,655, and we are calling the S&P 500 up 5 points at 2667.


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