London pre-open: Stocks seen lower as optimism over EU rescue deal fades
London stocks were set to edge down at the open on Wednesday as enthusiasm over the EU’s coronavirus package faded.
The FTSE 100 was called to open 14 points lower at 6,255.
CMC Markets analyst Michael Hewson said: "European markets enjoyed a fairly solid session yesterday, with the German DAX hitting a new five month high, however the progress proved to be hard to sustain with the DAX, CAC40 and FTSE100 all closing well off from their intraday highs.
"The early optimism that came about as a result of yesterday’s eventual agreement on a new EU budget, as well as the make-up of the new pandemic recovery program, soon gave way to the reality that the distribution of any funds still remains some way off.
"Despite the scepticism, and there is plenty to go around, yesterday’s agreement does appear to break a previously important taboo, which is the creation of some form of common debt."
In UK corporate news, engineering company Melrose Industries pulled its interim dividend and said it expected to post a small first-half operating profit, after a slump in revenue due to the Covid-19 crisis.
The company said revenue fell 27% after a “steep decline” in the second quarter as lockdowns shuttered its factories. However, there was a rebound in June as measures were eased and adjusted operating profits were breakeven.
"This means Melrose is likely to make a small adjusted operating profit in the period," the company said.
"While we are encouraged by the strong cash performance in the period, your board does not consider it appropriate to pay an interim dividend to shareholders in 2020."
DIY group Kingfisher said it expected interim pre-tax profits to be higher as strong demand continued across its markets after the lifting of coronavirus lockdowns, but withheld guidance due to continued uncertainty.
The B&Q owner said group second quarter like-for-like sales to July 18 rose 21.6%. For the year to the same date they were down 3.7%.
"Based on the strong sales seen to date in Q2, combined with cost reductions benefiting H1 (some of which are non-recurring), the company anticipates its half year adjusted pre-tax profit to be ahead of prior year," it said.