London pre-open: Stocks to bounce ahead of two-day Fed meeting

Investors are expecting a bounce early on in stocks following Monday’s heavy losses which wiped out the year-to-date gains in the top flight index.

Financial spread-betters are calling for the FTSE 100 to begin the session 27 points higher to 6,532 points, with slightly larger gains for the likes of the Dax-30 and Cac-40.

That comes amid simmering worries over the situation in Greece but above all the outlook for the Chinese economy.

Ahead of the start of the US Federal Reserve’s two-day policy meeting some observers believe the latter is weighing on global commodity prices enough for central banks to sit up and take notice.

“Successive easing measures since November don’t appear to be filtering down into the real economy and this is raising concerns about the ability of the Chinese economy to sustain the growth target set by Chinese authorities at the beginning of this year. This concern about a much slower growth path for the world’s second largest economy has also fed into a negative feedback loop on commodity prices.

As the Federal Reserve starts its two day policy meeting it seems quite likely that these events are likely to play a part in the US central banks thinking with respect to its policy stance,” Chief market Analysts at CMC Markets UK.

Presciently perhaps, in a speech on 23 July Monetary Policy Committee member Ian McCafferty said the BoE should not let strength in the pound deter it from raising rates.

However, the well-known rate hawk added a caveat: “It is always possible that both positive and negative shocks come out of left field that we hadn't fully expected [...] Which is why anybody who is absolutely certain about when interest rates are going to start that process of normalisation is more certain about it than I am.”

Traders will also be focusing on the release of second quarter UK GDP data at 09:30, with consensus forecasting a rise of 0.7% quarter-on-quarter and 2.6% year-on-year.

BP results fall short of forecasts

Second-quarter profits from BP missed analysts' forecasts, with adjusted profit of $1.31bn falling 63% on the previous year and short of the $1.66bn expected. A dividend of 10c arrived as predicted.

First-half profits from Mondi will be well ahead of those from last year, the paper and packaging maker said in a short trading statement. Basic underlying earnings per share will be up roughly 25-35%, with headline EPS up around 18-28%.

Clothing retailer Next has raised its sales and profit guidance for the year as warmer weather at the end of the season boosted second-quarter sales. The company raised its full-year pre-tax profit guidance to between £805m and £845m from a previous range of £785m to £835m and lifted its sales guidance range to between 3.5% and 6% from previous guidance of between 1.5% and 5.5%.