London pre-open: Stocks seen lower as traders return from long weekend
London stocks were set for a downbeat open on Tuesday as traders return to their desks after the Bank Holiday weekend, playing catch-up to a negative start to the week in Europe amid political uncertainty.
The FTSE 100 was called to open 35 points lower at 7,695.
CMC Markets analyst David Madden said: "Political uncertainty is weighing on sentiment in Spain and Italy, and the difference between southern and northern Europe is becoming clear once again. To an extent the negative sentiment in the south is weighing on the north. Given that the UK and US markets were shut yesterday for holidays, we could have seen even larger losses in southern Europe.
"The Five Star Movement and Lega party won’t be forming a coalition after the Italian President blocked the nomination for finance minister. Carlo Cottarelli is to be installed as the care-taker Prime Minister. The aim of the move is to provide some political stability to Italy in the short-term. There is talk there could be another general election at the back end of the year, or in early 2019. Opinion polls suggest the Five Star Movement and Lega party would gain more ground as populist sentiment is still growing. Investors are becoming even more nervous about the state of Italian politics, and the government bond yields are rallying, while stocks are under major pressure.
"Mariano Rajoy, the Spanish Prime Minister, is on thin ice, and risks losing his job as a vote of no confidence will be held on Friday. Spain is also enduring political uncertainty, and depending on Friday’s outcome, there could be a snap election in the near-term."
In corporate news, Vedanta has been ordered to permanently close its Tuticorin copper smelter in India, where anti-expansion protestors were killed by police earlier in May.
The FTSE 250 company said the state government of Tamil Nadu directed its pollution control board to seal the smelter and shut the plant for good.
Smiths Group confirmed that it is in very early stage discussions about a potential combination of its medical division with Nasdaq-listed ICU Medial.
Responding to press speculation, the company added that it routinely reviews all options for its portfolio of businesses to maximise value for shareholders.
"There can be no certainty that a transaction will be concluded," it said.
GlaxoSmithKline, along with Innoviva, announced its submission of a regulatory application to the Japanese Ministry of Health, Labour and Welfare for once-daily fluticasone furoate/umeclidinium/vilanterol under the proposed brand name of Trelegy Ellipta on Tuesday, for the treatment of adults with chronic obstructive pulmonary disease.
The FTSE 100 drugmaker said it was the first regulatory filing to be made in Japan for a triple COPD therapy in a single inhaler.