London pre-open: Stocks to drop on Asian cues as US outperforms

London stocks were set to drop at the open on Thursday, taking their cue from a negative session in Asia, as US markets continue to outperform.

The FTSE 100 was called to open 10 points lower at 7,500.

London Capital Group analyst Jasper Lawler said: "After hitting a fresh record on Wednesday, the Dow closed off its high but stayed in the green for a fifth straight session. Financials led the way as treasury yields soared and interest rate expectations jumped higher.

"The market is now pricing in an 80% probability of a rate rise in December. Additionally, the markets are reassessing how far the Fed’s tightening cycle will go and expectations are for rate rises to continue for longer."

Lawler noted that the "stunningly strong" US economy is growing at a faster rate than its peers, driving treasury yields to their highest since 2011.

"As economic data from around the world misses expectations, US economic stats are consistently surprising to the upside. US non- manufacturing data proved to be a prime example, with activity in the sector expanding at the fastest pace in 20 years, whilst service sector PMIs from the UK and Europe were lacklustre at best."

In corporate news, Electrocomponents, the electronics and industrial components distributor, reported stronger growth in Europe in the second quarter but this was offset by weaker sales in Asia and the Americas.

Overall, like-for-like revenue growth came out at 10% in the second quarter, the same as the first. Given progress to date, the company expects half-year adjusted profit before tax to grow around 27% to £100m.

Smiths Group said it was buying industrial tube maker United Flexible from Arlington Capital Partners for an enterprise value of $345m.

In the 12 months to 31 December 2018, United Flexible is expected to generate sales of $157m and adjusted EBITDA of $32m, Smiths said, adding that the company would be integrated into its Flex-Tek division.

Budget airline EasyJet posted a 14.2% rise in passenger numbers for September on Thursday, but the load factor ticked lower.

Passenger numbers rose to 8.8m last month from 7.7m in September 2017, while the load factor –-which gauges how full the planes are - declined to 92.8% from 93.6%.