Investment market update
UK stocks are expected to open higher on Thursday following confirmation of the expected increase in US interest rates.
US and Asian stocks climbed after the first US interest rate increase in almost a decade. The reaction in financial markets reflected conviction among investors that the US economy is strong enough to withstand higher borrowing costs, even amid lacklustre inflation. Comfort was taken from Janet Yellen emphasising that future tightening would be slow.
UK and European stocks rose for a second day before the Federal Reserve meeting at which officials ultimately raised interest rates in the US. Glencore Plc and BHP Billiton Ltd. added more than 2% as miners extended a rebound. Pearson Plc gained 5.2% after Exane BNP Paribas raised its rating to outperform, citing an “all-time low” valuation. The stock had fallen 41% this year up to yesterday.
Federal Reserve Chair Janet Yellen delivered a two-pronged message that stock market investors cheered: The US economy is performing well and the central bank is in no rush to raise interest rates again. She told a news conference that the central bank had put itself in a position to nurture the 6 1/2-year-old expansion by raising rates a bit now to avoid having to increase them a lot later. That will enable the Fed to tighten policy gradually, moving rates up in fits and starts to keep the economy on track. While US exports had been hurt by weaker overseas growth and a stronger dollar, Yellen said these headwinds were being offset by a solid expansion in domestic spending.
AstraZeneca Plc agreed to buy a 55% stake in Acerta Pharma BV for an upfront payment of $2.5 billion that will give the UK drug-maker a potential blockbuster medicine for blood cancers as well as diseases in which the body attacks itself. AstraZeneca will pay another $1.5 billion when Acerta’s experimental drug is approved by a regulator or at the end of 2018, whichever comes first, AstraZeneca said in a statement Thursday.