London pre-open: Stocks seen muted with retailers in focus again as M&S, Tesco update

London stocks were set for a muted open on Thursday following uninspiring sessions in the US and Asia, amid reports that China is thinking of halting its buying of US treasuries.

The FTSE 100 was expected to open two points higher at 7,750.

CMC Markets analyst Michael Hewson said: “While reports like the ones out of China aren’t particularly anything new, it’s been a while since they were last let out for air so to speak. As far back as 2008 there have been concerns that China could use its holdings of US debt as some form of leverage, or as a threat with which to threaten the US, and these threats or concerns have soon passed so it’s hard not to imagine that this time won’t be any different.

“After all its not a zero sum game and China would harm itself as much as the US if they went on a buyers strike, and overnight these reports were denied by government sources in Beijing, as SAFE, China’s State Administration for Foreign Exchange saying, to coin a ‘Trumpism’ that they were probably ‘fake news’.

“It is true that China is one of the biggest external holders of US treasuries, along with Japan, which means that they do have enormous influence over how the market can and does move. With concerns starting to rise about a rise in inflation due to the recent strength in oil prices it is understandable that bond markets might be nervous if a normally large buyer of US treasuries either stops buying them or even starts to sell large amounts.”

On the UK data front, the Bank of England credit conditions survey is at 0930 GMT.

In corporate news, the retail sector was in focus again as Marks & Spencer and Tesco updated the market on their Christmas trading.

Tesco reported strong sales in the run-up to and including Christmas, though fell slightly short of City forecasts. For the third quarter of the 13 weeks to 25 November, Britain's largest grocery group increased like-for-like sales 2.3% in the UK and Ireland, and then for the six-week festive trading period to 6 January, saw LFL growth of 2.0%.

Marks & Spencer reported disappointing sales over the festive period, with UK like-for-like sales down 1.4%. Over the 13 weeks to 30 December, M&S food LFL sales fell 0.4% in what the group blamed on "ongoing trading pressures continued in the lead up to Christmas as consumer spending and choices reflected tighter budgets", though other supermarket groups seemed to do a lot better.

Housebuilder Barratt said it was well positioned for the second half of the financial year after reporting first half forward plot sales up 3.8% at 10,921 plots at a value of £2.38bn.

“Given good demand and our healthy forward order book we continue to expect to deliver modest growth in wholly owned completions in FY18,” Barratt said.