LONDON MARKET EARLY CALL: FTSE To Extend Gains; Fed Decision Ahead

(Alliance News) - The FTSE 100's rally this week looks set to continue on Wednesday as countries across the globe take cautious steps towards the re-opening of their economies following Covid-19 lockdowns.

In focus on Wednesday is a first-quarter gross domestic product reading in the US later in the day, followed by the US Federal Reserve's latest monetary policy decision.

IG says futures indicate the FTSE 100 index of large-caps to open 26.20 points higher at 5,984.70 on Wednesday. The FTSE 100 closed up 111.71 points, or 1.9%, at 5,958.50 on Tuesday.

The US on Tuesday recorded its one-millionth coronavirus case as countries including Spain, Russia and Nigeria took tentative steps back towards normal life by preparing to reopen some businesses.

France said Tuesday that shops, markets and selected schools could reopen next month, with face masks required on public transport and work-from-home orders staying in place for several more weeks. Spain said restrictions would be slowly lifted over the next two months, while Italians will be able to exercise outdoors and visit relatives from next week – but only if they wear masks and refrain from hugs and handshakes.

Italy, Spain and France have been the worst affected countries in Europe, with each reporting more than 23,000 deaths.

The US – where millions of jobs have gone – reached another grim milestone as it registered 58,351 deaths. Sterling was quoted at USD1.2482 early Wednesday, higher than USD1.2436 at the London equities close on Tuesday.

The euro traded at USD1.0854 early Wednesday, up from USD1.0834 late Tuesday. Against the yen, the dollar was quoted at JPY106.54 versus JPY106.89.

Despite Tuesday's upbeat European session, Wall Street ended in negative territory. The Dow Jones Industrial Average ended down 0.1%, the S&P 500 down 0.5% and Nasdaq Composite closed 1.4% lower.

Nasdaq constituent Alphabet ended down 3.0% ahead of the release of its first-quarter results.
The Google parent said that profit rose slightly in the first quarter of this year despite a slowdown in online ads caused by the pandemic. Alphabet reported net income of USD6.84 billion for the three months to March 31, up 2.7% from USD6.66 billion last year, on revenue that grew 13% to USD41.16 billion compared with USD36.34 billion in the same quarter a year earlier.

The stock climbed 7.7% after-hours.
In China, the Shanghai Composite is up 0.2%, while the Hang Seng index in Hong Kong is flat. Markets in Japan are closed for Showa Day.

Gold was quoted at USD1,711.83 an ounce early Wednesday, higher than USD1,701.40 on Tuesday. Brent oil rose to USD21.10 a barrel early Wednesday from USD19.98.

The economic calendar on Wednesday has eurozone consumer confidence at 1000 BST, German inflation at 1300 BST and US gross domestic product at 1330 BST.

"With over 25 million people filing for jobless claims in the past few weeks today's Q1 GDP number will be the first indication of how much economic damage is about to come the way of the US in the coming weeks and months. Even then it will seriously understate what is about to come in Q2 given that the lockdown in the economy only came into effect in the middle of March," commented Michael Hewson, chief market analyst at CMC Markets.

At 1900 BST is an interest rate decision from the US Federal Reserve, followed by a press conference with Fed Chair Jerome Powell at 1930 BST.

From a policy standpoint, no change is expected given the Fed has already slashed the federal funds rate to a range of 0.00% to 0.25% while also launching a number of initiatives to support credit to businesses as well as local governments.

Hewson added: "Today's meeting is unlikely to see anything new announced, though it will be interesting to see how US policymakers flesh out the design and implementation of the raft of new measures they announced recently, as well as how various policymakers view the outlook for the next few weeks and months, in the context of the huge rise in unemployment we've seen since the last emergency rate meeting in March."

Wednesday's UK corporate calendar has first-quarter results from clothing and homewares retailer Next, lender Barclays, housebuilder Persimmon and drugmaker AstraZeneca. At midday is GlaxoSmithKline's first quarter release.

Already out, Standard Chartered reported a sharp drop in first quarter profit - due to rising credit impairments - but has vowed to come through the Covid-19 pandemic "with strength".

In the three months to March 31, the Asia-focused bank's pretax profit plunged 29% to USD886 million from USD1.24 billion in the same period a year before. The lender's credit impairments in the first quarter jumped to USD956 million from just USD78 million in the first quarter of 2019. StanChart expects a "gradual recovery" from Covid-19 - with a "major" contraction in economic growth rates across most of the world in the second quarter, before the global economy moves out of recession in the latter part of 2020.

Source: London South Easth