London pre-open: Stocks set for lower start despite better than expected China PMI

Stocks in London are set for a slightly lower start to the trading session, tracking losses seen at the end of last week on Wall Street, despite the release of a stronger-than-expected reading on China's manufacturing sector overnight.

Weighing on investor sentiment, the recent ratcheting up of tensions in the US-China trade war was leading economists to pare their forecasts for growth in the US, with other geographies unlikely to fare much better.

Against that backdrop, the FTSE 100 was being called to start the session down by 35 points to 7,126.

"For most of this year the assumption had been that, for all the sound and fury around the imposition of tariffs, they wouldn’t last that long and any damage could be easily mitigated. Now it seems that tariffs are likely to last a lot longer and be more wide ranging than originally thought, and investors seem to be now slowly waking up to this," said Michael Hewson, chief market analyst at CMC Markets UK.

"Let’s not forget the US President still has the option in reserve to add tariffs to the remaining $325bn of Chinese imports, and he’s yet to get started on the EU, and this is likely to keep investors on the back foot as we enter the last month of Q2, with European markets set to open lower this morning."

Overnight, Caixin's factory sector PMI for the month of May printed at 50.2, unchanged from the month before and ahead of the consensus forecast for a reading of 50.0.

Nevertheless, for Julian Evans-Pritchard at Capital Economics: "overall, the downbeat PMI readings for April and May suggest that economic growth has not yet bottomed out and is consistent with our view that there are still some downside risks to near-term activity.

"Further ahead, we expect renewed policy easing and the lagged impact of faster credit growth to support the economy."

At 0930 BST, IHS Markit will release its UK manufacturing sector Purchasing Managers Index for the month of May.

For later in the day, in the States, the ISM institute's factory sector PMI was scheduled for release at 1500 BST.

Two top Fed officials, the head of the Richmond Fed, Tom Barkin, and his opposite number at St. Louis Fed, James Bullard, were set to take to the podium after the close of trading in London.

Kier's full-year operating earnings disappoint

Troubled construction company Kier said full year underlying operating profit would be £25m lower than previous expectations with higher net debts. Kier, which had reported debt at the end of 2018 of £180.5m, down from £624m said it was likely to report a net debt position as at 30 June 2019, which would have an adverse impact on its FY2019 average month-end net debt position. Net costs from a strategic review of the company were also expected to be £15m than previously forecast.

Smith & Nephew has completed its acquisition of orthopaedic joint reconstruction outfit Brainlab, whose technology is used in more than 500 hospitals worldwide. The FTSE 100-listed global medical technology business said the transaction continues its strategy of investing in best-in-class technologies that enhance its portfolio of digital and robotic surgical products.