London pre-open: Stocks to edge up as investors digest PBoC

by | Aug 21, 2023

(Sharecast News) – London stocks were set to edge up at the open on Monday as investors digested the latest rate cut by the People’s Bank of China.
The FTSE 100 was called to open 10 points higher at 7,272.

CMC Markets analyst Michael Hewson said: “This morning China did announce that they were cutting their one-year lending rate by 10bps to 3.45%, however they left their 5-year loan rate unchanged at 4.20%, having cut the medium-term loan rate last week.

“Unsurprisingly markets were less than impressed by this move, expecting authorities to be much more forceful. This lack of urgency has weighed on Asia markets and is unlikely to spark demand in an economy where loan demand appears to be low anyway.”

On home shores, meanwhile, the latest data from property portal Rightmove showed that asking prices were cut by 1.9% in August – the biggest decline this year as higher mortgage rates weighed on demand for houses.

“The prospect of another rate hike next month is also likely to be affecting confidence, although the fact we are in August, and in the middle of the school holidays probably also has a part to play,” said Hewson.

In corporate news, home builder Crest Nicholson lowered annual profit forecasts after a worsening of the housing market amid rising inflation and interest rates.

The company said it expected annual profits to be around £50m in a “challenging” market, down from prior forecasts of £73m, but predicted a fall in interest and inflation rates over the medium term.

“Against a backdrop of persistently high inflation and rising interest rates, trading conditions for the housing market have worsened during the summer of this year,” the company said.

“While pricing has remained resilient in a market with limited supply and few distressed sellers, the economic uncertainty is deterring prospective home movers”

Addiction treatment specialist Indivior announced that its US division has settled claims made by the end payor class in the Suboxone antitrust litigation.

The FTSE 250 company said it expected to pay $30m, which would be deducted from a reserved $188m for the litigation. Meanwhile, Indivior US was preparing for a 30 October trial related to other claims, but remained open to a settlement there as well.

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