(Alliance News) - Stocks in London are set to open slightly lower on Tuesday, with markets tentative as a week centred around interest rate decisions begins to heat up.
IG says futures indicate the FTSE 100 to open just 3.09 points lower on Tuesday at 7,675.50. The index of London large-caps closed up 14.86 points, or 0.2%, at 7,678.59 on Monday.
The US Federal Reserve is set to start its two-day policy meeting later today. The central bank is widely expected to lift interest rates by 25 basis points.
"But what Fed officials will also do is to remind investors that the tightening cycle is probably not over and that there will probably be another rate hike on the US' horizon. So yes, there is a great chance that the Fed will spoil your mood if you are among those thinking that this week's rate hike will be the last for this tightening cycle in the US," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
In the US on Monday, Wall Street ended higher, undeterred by a slowdown in economic activity in July and the upcoming rate decision. The Dow Jones Industrial Average closed up 0.5%, the S&P 500 up 0.4%, and the Nasdaq Composite up 0.2%.
Growth in the US private sector faded in July, data showed, with the service sector losing some steam.
S&P Global's latest flash purchasing managers' index reading fell to a five-month low of 52.0 points, from 53.2 in June. The figure moved closer to the 50.0 no-change mark, suggesting growth has slowed.
The composite PMI is a weighted average of the services and manufacturing readings. The services PMI slipped to 52.4 points in July, from 54.4 in June, while the manufacturing PMI rose to 49.0, from 46.3, a three-month high.
The report reflected similar slowdowns in Europe and the UK.
Craig Erlam at Oanda said: "The PMIs from the eurozone, the UK, and the US today all tell a pretty similar story. Manufacturing is continuing to struggle - although not as much as expected in the US - while services growth expectations are slowing. There are clear signs in the surveys of more cooling on the horizon, fewer inflationary pressures, and weaker hiring."
The dollar was largely unchanged on Tuesday morning as nerves built ahead of Wednesday's interest rate decision.
Sterling was quoted at USD1.2836 early Tuesday, up from USD1.2816 at the London equities close on Monday. The euro traded at USD1.1074 early Tuesday, virtually unchanged from USD1.1073 late Monday. Against the yen, the dollar was quoted at JPY141.44, higher versus JPY141.27.
In China on Tuesday, the Shanghai Composite was up 1.9%, while the Hang Seng index in Hong Kong was up 3.4%.
Chinese leaders on Monday pledged fresh measures to boost the nation's stuttering economy, building on optimism that central banks were nearing the end of their rate-hiking cycle.
With data in recent months showing growth stuttering and business activity slowing, Beijing has come under pressure to provide much-needed support, particularly for the vast property sector.
Despite a series of announcements and minor interest rate cuts, investors have been largely disappointed by the policy response from authorities, with very few concrete measures being unveiled.
However, top leaders on Monday signalled a fresh push to get the post-Covid recovery back on track, particularly the troubled property sector, which accounts for a major part of the world's number-two economy.
After a meeting, the 24-person Politburo recognised "the current economic operation is facing new difficulties and challenges" and agreed they must "implement precise and effective macroeconomic regulation, strengthen countercyclical regulation and policy reserves".
The meeting, headed by President Xi Jinping, also called for efforts to expand domestic consumption and "adjust and optimise real estate policies in a timely manner", according to state broadcaster CCTV.
In Tokyo, the Nikkei 225 index was down 0.3%. The S&P/ASX 200 in Sydney was up 0.4%.
Gold was quoted at USD1,961.09 an ounce early Tuesday, up from USD1,958.30 on Monday. Brent oil was trading at USD82.70 a barrel, up from USD82.23 late Monday.
In Tuesday's corporate calendar, there are half-year results from Unilever, Reach and Croda International.
The economic calendar has a US consumer confidence reading at 1500 BST.
By Heather Rydings, Alliance News senior economics reporter
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