London pre-open: Stocks to slide after Fed spooks markets, ahead of BoE

(Sharecast News) - London stocks were set to slide on Thursday following sharp losses on Wall Street, after the Federal Reserve spooked markets with its rate outlook, and as investors eyed the latest policy announcement from the Bank of England. The FTSE 100 was called to drop around 1.1%.

On Wednesday, the Fed cut interest rates by 25 basis points, as widely expected. However, it also signalled there would be just two rate cuts next year, down from a previous forecast of four.

Kathleen Brooks, research director at XTB, said: "The Federal Reserve may have cut rates on Wednesday, but the market thinks it could be a while before they cut again.

"The expectation was for a cut and then a pragmatic pause in the Fed's rate cutting cycle, however, what the Fed delivered was a hawkish cut, which raises the possibility that the next move by the Fed may not be a rate cut."

She said the shift in expectations weighed heavily on US market sentiment.

"There were broad losses for US indices, the Dow Jones slipped 2.5%, extending its losing streak to 10 sessions, its longest losing streak since 1974. The Nasdaq fell by more than 3%, but the biggest loss was for the Russell 2000 index of mid cap stocks, which sank more than 4%.

"The Vix index, Wall Street's fear gauge, surged higher, rising to its highest level since August. The dollar was the top performer in the G10 FX space on Wednesday. The dollar surged against the Kiwi dollar, which fell more than 2% on the back of the Fed meeting, the euro fell by more than 1.3% and the pound fell 1%. EUR/USD sunk below $1.05 and fell to its lowest level in 2 years. This pair has broken below its long-term range, which opens the way to parity. GBP/USD also reversed earlier gains and fell below $1.26, as global currencies faltered at the Fed's renewed hawkishness."

On home shores, the BoE is due to make its policy announcement at midday, with interest rates expected to be left unchanged at 4.75%.

In corporate news, John Wood Group said it had won a contract by OMV Petrom for a major project to boost production of sustainable fuel in Southeast Europe.

After successful delivery of the front-end engineering and design, Wood will now deliver engineering, procurement and construction management to install a new bio-hydrotreater unit and relevant storage facilities at the Petrobrazi refinery in Romania. No financial details were disclosed.

Serco said in a trading update that it was anticipating 2024 revenue of £4.8bn, with organic declines moderating in the second half, as well as a 9% increase in underlying operating profit to £270m, driven by improved efficiency and productivity.

It upgraded its free cash flow guidance to £170m, while net debt was forecast to be £145m. For 2025, Serco said it expected stable revenue and resilient profitability despite challenges in its UK and Australian immigration contracts, supported by a strong pipeline of new business opportunities.