London pre-open: FTSE to jump after Turkish interest rate decision

29th Jan 2014 07:14

- Turkish central bank ups interest rate to 12 per cent- Fed announcement due later today- German consumer confidence risesCity sources predict the FTSE 100 will open 39 points above yesterday's close of 6,572.33, boosted by the Turkish central bank's decision to increase interest rates last night.The move, which saw the overnight funding rate lifted from 7.75% to 12% and the one-week lending rate hiked from 4.5% to 10%, helped to drive Asian stocks higher, recovering somewhat from the recent heavy sell-off on the back of significant concern over emerging market currencies. According to Alpari Market Analyst, Craig Erlam, "the action taken by the Turkish central bank should significantly reduce the capital outflows and even draw some money back into the country". He explained that if other countries follow suit, "this should re-stabilise the markets at a time when further Fed tapering is widely expected". The Fed, which began scaling back its monthly asset purchases in December from $85bn to $75bn, is expected make another $10bn cut this month, according to the consensus forecast.Over in the US last night markets also advanced, with the Dow Jones Industrial Average snapping a five-day losing streak as investors reacted to upbeat earnings from Ford, Pfizer and DR Horton, as well as a rise in consumer confidence. The US will be very much in focus today, with the decision about the potential cut due to be announced. "The recent market turbulence has fuelled some speculation that the FOMC will hold back from announcing a further reduction in its monthly asset purchases today," Capital Economics said."However, we expect the US central bank to trim its purchases by another $10bn."The analysts said they believed the Fed will be keen to show "continuity and stability" in its policy making and doubted the central bank would be swayed by the recent short-term market volatility in its decisions over the medium term", expecting the authorities in the emerging countries concerned to take their own policy decisions to forestall possible risks.In other macro-related news, GfK's consumer confidence survey for Germany showed confidence in the economy will rise to 8.2 in February, a level not seen since August 2007, up from the revised 7.7 for January. In this morning's company news announcements, Anglo American reported an increase in fourth quarter iron ore, copper, nickel and thermal coal production. Output from the company's South African-focused business Kumba Iron Ore increased 25% to 11.3m tonnes as a 39% jump in production at the Sishen mine offset a 2% fall at the Kolomela mine. Export thermal coal production increased by 8% to 7.9m tonnes, copper production rose by 24% to a record 214,400 tonnes and nickel production climbed by 38% to 10,200 tonnes.Trading in the first few weeks of the second quarter at Britvic was ahead of last year, and the drinks giant said it remained confident that earnings before interest and tax this year will be within the range of £148m to £156m. Chilean copper miner Antofagasta reported a record year of production for 2013 supported by a strong output performance in the fourth quarter. Copper production in the last three months of the year rose 4.9% from the third quarter to 182,900 tonnes. This pushed full-year copper output to 721,200 tonnes, an all-time high and 1.6% ahead of 2012.NR