London pre-open: Stocks seen lower amid rising bond yields
London stocks were set for sharp losses at the open on Tuesday following a downbeat close on Wall Street, amid rising bond yields.
The FTSE100 was called to open 54 points lower at 7,617.
On Monday, European bond yields rose following comments from Dutch Central Bank president and European Central Bank governing council member Klaas Knot, while in the US, the US 10-year Treasury yield pushed above the 2.7% level for the first time since April 2014 and the two-year yield hit its highest level since September 2008 ahead of this week’s Fed rate meeting.
CMC Markets analyst Michael Hewson said the move higher in bond yields was prompted by the prospect that US policymakers could well revise their forecasts higher for the US economy in light of the recent tax changes brought in by the Trump administration earlier this month.
Meanwhile, eurozone yields were driven by Knot’s comments, after he said the European Central Bank’s asset purchase programme should end "as soon as possible”. He argued that there is not a single reason left to continue the quantitative easing in the euro area and said the ECB’s bond buying programme has already achieved “what could realistically be expected of it”. Some fairly hawkish rhetoric from ECB board member Benoit Coeure also contributed to the move in yields.
Hewson said: “The rise in yields appears to be also being driven by rising inflation expectations after a string of US companies announced that they would be passing on some of the proceeds of the recent tax cuts in the form of bonuses or wage increases. On Friday Fedex became the latest US Company to announce it would be raising wages following on from Starbucks, Wal-Mart and JP Morgan amongst others in recent days.”
On the UK data front, net lending to individuals, consumer credit and mortgage approvals are at 0930 GMT.
In corporate news, Zoopla and uSwitch operator ZPG reported a good start to the financial year across both divisions, with its websites and mobile apps attracting 53 million average monthly visits during the three months to 31 December.
ZPG confirmed a number of the UK's largest estate agents and mortgage lenders had signed long-term contracts with its property division and that with both divisions continuing to perform well into the new year, management were comfortable with market expectations for 2018.
Informa has agreed to buy UBM for £3.9bn to create a business-to-business information giant that will operate as a single business by the start of 2019. Setting out details of a deal initially announced on 17 January, Informa said it expected at least £60m of cost savings from combining the businesses.
Entertainment One, the film and television producer and distributor, confirmed that it had raised £53m in an placing with City institutions at a price of 305p as part of its plan to snap up the rest of US television producer The Mark Gordon Company. The shares will be admitted on Thursday 1 February and the cash will go towards a total acquisition payment of $209m, made up of $160m cash and $49m of shares.
Anglo American announced the value of rough diamond sales for De Beers' first sales cycle of 2018 on Tuesday, amounting to $665m. The FTSE 100 company said the sales, from global sightholder sales and auction sales, were a significant uptick from the final cycle of 2017 where sales totalled $455m, but they were still lower than the first cycle last year when sales reached $729m.