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London pre-open: Stocks to rise ahead of ECB policy announcement

By Michele Maatouk

Date: Thursday 22 Jul 2021

London pre-open: Stocks to rise ahead of ECB policy announcement

(Sharecast News) - London stocks were set to rise at the open on Thursday as investors eyed the latest policy announcement from the European Central Bank.
The FTSE 100 was called to open 12 points higher at 7,010.

CMC Markets analyst Michael Hewson said: "Today's European open looks as if it could well be a positive one ahead of today's European Central Bank rate meeting, which given recent comments from ECB President Christine Lagarde, could prove much more insight into ECB policy over the next 18 months than had originally been thought two weeks ago.

"We've already heard that the ECB will be changing its inflation mandate to try and give itself more flexibility over monetary policy.

"Its previous mandate was to keep inflation at or below 2% over the medium term. Its new mandate gives the central bank a more flexible and dovish inflation target of 2%, while also adopting a 2% asymmetric inflation target over the medium-term.

"This change will allow the central bank to tolerate temporary inflation overshoots to its policy target, and in turn prevent policy mistakes of the kind that saw the ECB raise rates in 2008 and 2011.

"While an entirely sensible measure on the face of it, this can only be described as a change of style over substance, given the ECB's complete lack of success in meeting its previous mandate.

"We can expect to hear more about how the ECB expects to achieve this when Christine Lagarde gives her press conference later today, along with details on an upcoming policy shift on the forward guidance on the PEPP program which she talked about earlier this month."

In corporate news, consumer goods conglomerate Unilever reported higher-than-expected underlying sales growth for the second quarter but cut full-year operating margin forecasts due to rising costs.

Underlying sales rose 5% in the three months to June 30, beating the 4.8% forecast, according to a company-supplied consensus.

The company said it now expected full-year underlying operating margins to be flat compared to slightly up earlier.

SSE said it was making good progress on disposals, construction was progressing on major projects and was on track to submit proposals to the regulator for SSEN Transmission upgrades.

In a trading update the electricity group said it was committed to its five-year dividend plan but did not give guidance on annual earnings.


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