London pre-open: Stocks seen lower ahead of inflation data
London stocks were set for a weaker open on Wednesday after the top-flight index closed at another record high the day before, with all eyes on the latest inflation readings for the UK.
The FTSE 100 was called to open 19 points lower at 7,858, taking its cue from losses in the US after President Trump said on Tuesday that he was not happy with the progress being made on trade talks with China. He also said that there is a "very substantial chance" a historic summit with North Korea's Kim Jong-Un next month may not happen.
London Capital Group analyst Jasper Lawler said: "Trump’s expression of disappointment over the progress of the US Chinese trade talks, not only led investors to sell out of US equities, giving back some of the gains from the previous day, but also raised questions over the mixed messages coming from Trump’s administration."
The retail price index, producer price index and consumer price index are all due at 0930 BST, while the CBI distributive trades survey is at 1100 BST. Investors will also eye the release of the latest FOMC minutes in the US at 1900 BST.
Lawler said: "Traders will now look for inspiration from today’s inflation figures. Last month inflation unexpectedly fell to 2.5% igniting a selloff in the pound as investors slashed the odds of the BoE hiking rates at the May meeting. Whilst CPI is expected to remain constant in April at 2.5%, core inflation which removes the more volatile items, such as food and fuel is expected to tick lower to 2.2% from 2.3% in March.
"Should we see another undershoot by inflation this month, optimism of a late summer rate hike would be dented, pulling the pound lower towards $1.33. Given the pound’s inverse relationship with the FTSE, a weaker pound could help the FTSE on its way to fresh unchartered territory on target to 8,000. On the contrary, a surprise to the upside could be enough to boost the pound back towards $1.36, which would bring the FTSE back from its current lofty levels and record highs."
In corporate news, Marks & Spencer’s annual profit fell 5.4% as margins at the retailer’s food business were squeezed by the rising cost of ingredients.
Pre-tax profit before items such as store closures dropped to £580.9m from £613.8m in the year to the end of March. The result outstripped analysts’ consensus forecast of £573m.
Severn Trent increased its dividend 6% after the water and sewage group received an £80m incentive payment for outperforming on customer 'outcomes' and said it would invest £100m of savings gained from efficiencies back in the business.
Turnover of £1.69bn in the year to 31 March was up 3% on the prior year, with underlying profit before interest and tax up 4% to £541m and underlying earnings per share rising 5% to 121p.
Rio Tinto confirmed it is in discussions to sell its entire interest in the Grasberg copper mine in Indonesia to Inalum.
Rio Tinto said that discussions between it, Indonesia’s Inalum and Freeport are ongoing, "including as to price", amid reports that it could fetch $3.5bn.
"No agreement has been reached, and there is no certainty that binding agreements will be signed," it said.