London pre-open: Stocks seen lower amid drop in yields
London stocks were set to edge down at the open on Wednesday following uninspiring sessions in the US and Asia amid a slide in bond yields.
The FTSE 100 was called to open eight points lower at 7,081.
Oanda analyst Craig Erlam said: "Europe is currently positioned for a flat start to trading on Wednesday, taking its cue from Asia overnight after the yield curve once again became the talk of the town.
"US stocks reversed earlier gains on Tuesday, as the 2-year yield rose to five basis points above the 10-year for the first time since 2007. I fear yield curve inversions are going to become the dinner table bitcoin chat of 2017 in the coming months as prophecy becomes self-fulfilling and we blindly wander into a recession.
"Obviously the timing of this is no coincidence, coming so shortly the US and China decided to step it up a gear and inflict additional tariffs on one another. Naturally this was accompanied by fighting talk from Trump, the usual bashing of the head of his central bank and then some very mixed messages from both sides regarding a phone call that may or may not have happened.
"With stock markets flat today, we're clearly not yet seeing widespread panic about the latest recession warning but the heightened sensitivity to it may eventually take its toll. In much the way that people are questioning whether talk of recession makes one inevitable, the impact on stocks could become self-fulfilling."
In UK corporate news, oil industry engineer Petrofac reported a fall in interim core earnings due to a decline in contract margins, higher overheads and higher tax as it warned of lower revenues in 2020.Earnings before interest, tax, depreciation and amortisation fell 9% to $305m.
"Overall Group profitability in 2019 is expected to be first half weighted, principally reflecting a decline in EPS margins and lower oil prices in the second half," the company said.
"Looking further forward, revenues are expected to decrease in 2020 reflecting low new order intake in recent years."
Retailer WH Smith said its travel division continues to perform strongly and that results for the year to the end of August will be in line with expectations.
In an update ahead of its preliminary results, the company also said its High Street business continues to perform in line with expectations.