FTSE 100 to start sharply lower in wake of Fed"s Wall Street reality check - Proactive Investors UK

The FTSE 100 is set to start Thursday sharply lower as economic projections from the US Federal Reserve gave a reality check to rallying stocks.

In London, the blue-chip benchmark is called 118 points lower with CFD and spreadbetting firm IG Markets making the price at 6,200 to 6,203.

Last night Wall Street stocks turned negative. The Dow Jones shed 282 points or 1.04% to 26,989 while the S&P 500 dipped 0.5% to close at 3,190. At the same time, the Nasdaq was more robust, rising 0.6% to 10,020, and, the small cap Russell 2000 gave up 2.6% to finish at 1,467.

It came as the Fed revealed forecasts seeing a 6.5% contraction in the US economy this year with a recovery coming over a subsequent two year period, with 2021 and 2022 growth pitched at 5% and 3.5% respectively.

According to the Fed, the unemployment rate in America will be around 9.3% at the end of this 2020 before reducing to 6.5% in 2021 and 5.5% in 2022 and 4.1% in 2022.

Fed chair Jerome Powell said it will be “a long road” to economic recovery following the pandemic.

“It is worth remembering the pre-pandemic unemployment rate was 3.5%, so one gets a scale of how the labour market has been impacted by the health emergency,” said David Madden, analyst at CMC Markets. “The economic projections are based on the idea the recovery will begin in the second half of this year and it should last two years.    

“Seeing as the Fed made it clear they will be keeping rates close to zero for a few years, US stocks were initially pushed up by the announcement, but the bullish move didn’t last.”

Emerging statistics meanwhile pointed to rising coronavirus infection numbers which stoked fears of a ‘second wave’ – new case numbers reportedly spiked in Texas and Florida among other states. The number of US cases exceeded 2mln.

The US dollar slumped to a three-month low, before steadying.

In Asia, Japan’s Nikkei fell 533 points or 2.29% to 22,593 while Hong Kong’s Hang Seng was down 1.74% at 24,613 and the Shanghai Composite slipped 0.6% lower to 2,925.

Around the markets

The pound: US$1.2670, down 0.6%

Gold: US$1,727 per ounce, down 0.54%

Brent crude: US$40.27 per barrel, down 2.2%

Bitcoin: US$9,886, up 1.22%

Significant events expected on Thursday:

Finals: Babcock International Group PLC (LON:BAB), Johnson Matthey PLC (LON:JMAT), Talktalk Telecom Group PLC (LON:TALK), Halma Plc (LON:HLMA), CMC Markets PLC (LON:CMCX), JLEN Environmental Assets Group Ltd (LON:JLEN), Syncona Limited (LON:SYNC)

Trading updates: Fuller, Smith & Turner PLC (LON:FSTA)

FTSE 100 ex-dividends to knock 5.43 points off the index: Vodafone Group PLC (LON:VOD), 3i Group plc (LON:III), Severn Trent PLC (LON:SVT)

Economic data: US weekly jobless claims, US PPI

Headlines

Fed warns US faces 'long road' to recovery - BBC News

Global Stocks Slide on Virus Fears - Bloomberg

Monsoon Accessorize and Quiz to close stores and cut jobs – Sky News

Zara owner to close up to 1,200 fashion stores around the world - Guardian

Amazon to ban police use of facial recognition software - Guardian

Coronavirus may have huge impact on property markets - BBC News

Resilient’ subprime borrowers spread cheer in US debt markets - Financial Times

Chinese console market to grow to $2.15bn by 2024 – gamesindustry.biz

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2020-06-11 06:05:45Z
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