London pre-open: Stocks seen lower as inflation unexpectedly falls

London stocks were set to fall at the open on Wednesday as investors mull the latest UK inflation data, amid ongoing worries about a third wave of Covid-19.

The FTSE 100 was called to open 29 points lower at 6,670.

CMC Markets analyst Michael Hewson said: "The optimism that had characterised the rebound in travel and leisure stocks these past few weeks, appears to be slowly bleeding away, against a backdrop of rising concern that a European third wave is likely to delay any sort of return to normal when it comes to international travel this year.

"Adding to the uncertainty around the progress in vaccination is EU threats to limit exports of vaccination supplies to countries they deem as not playing fair when it comes the production of vaccine.

"With European countries trying to get on top of a rise in their own infection rates, and the extension of restrictions well into April, it is slowly becoming apparent that even if the UK and the US succeed in achieving their goal of a successful vaccination program, it's highly unlikely that international travel will be able to return in any meaningful way while a large part of Europe remains behind the curve in inoculating its populations."

Figures released earlier by the Office for National Statistics showed inflation fell to 0.4% in February from 0.7% in January, versus expectations of 0.8%. Meanwhile, core inflation declined to 0.9% from 1.4% in January, coming in below consensus expectations for no change.

ONS deputy national statistician for Economic Statistics, Jonathan Athow, said: "A fall in clothing prices helped to ease inflation in February, traditionally a month where we would see these prices rise, but the impact of the pandemic has disrupted standard seasonal patterns. Elsewhere there were falls in the price of second-hand cars.

"However, prices at the pump rose this month, compared with a fall this time last year."

In corporate news, housebuilder Bellway reinstated its dividend as it reported a slight fall in interim profits and a strong forward order book.

The company said pre-tax profits for the six months to January 31 fell 4% to £280.2m. The forward order book at 14 March was 8.4% ahead at £1.64bn comprising 6,028 homes, up from 5,772 homes a year ago.

A dividend of 35p a share was declared.

Halma said annual profit would beat expectations as revenue continued to improve and rose in all its major regions. The safety and protection company said adjusted pre-tax profit for the year to the end of March would be similar to a year earlier - up from previous guidance for a decline of about 5%. This includes a small adverse effect from movements in exchange rates.

Order intake from 1 October to now is ahead of revenue and of the same period the year before. The FTSE 100 group also said Louise Makin, who joined as a non-executive director in February, will replace chairman Paul Walker in July.