London pre-open: Stocks to edge lower ahead of construction PMI
London stocks were set to fall at the open on Wednesday following solid gains in the previous session, as investors eyed the latest reading on the UK construction sector.
The FTSE 100 was called to open 25 points lower at 5,824.
CMC Markets analyst Michael Hewson said: “Having got off on the wrong foot on Monday, markets in Europe enjoyed a bit of a Tuesday rebound, as the prospect of more lockdown restrictions being lifted, alongside another decent day for oil prices saw some of Monday’s losses reversed. Oil prices in particular have undergone a decent recovery, putting in their best performance since last July, rising for five days in a row.
“For now, markets appear to be pricing in the prospect that economic activity can improve from here on in, and while that may well be true, we still don’t know the extent of the economic damage that has been done already. This is important given that some of the damage could well be very difficult to repair and bounce back from, meaning that instead of a ‘V’ or ‘U’ shaped recovery we could well see more of a gradual, and very long ‘U’.
“This means there is a real risk that markets may well be underestimating the longer-term consequences of the changes that are taking place, and looking past the continued dire data. Jobs are still being lost with further announcements yesterday, as Virgin Atlantic and AirBnB became the latest in a lengthening list of companies that has come to the realisation that social distancing, aircraft and travel aren’t compatible bedfellows, at this time, or in the near future.
“This may help explain why US markets, while having a decent day yesterday closed off their highs, and this lack of follow through, looks set to push European markets lower on the open.”
On the data front, Markit’s construction PMI for April is at 0930 BST.
In corporate news, insurer Direct Line said it expected to take a gross hit of £44m, or £25m net, in travel claims from the impact of the coronavirus pandemic, offset by a 70% fall in motor claims.
The company said that it also expected to incur around £70m of costs including supporting customers in financial difficulty, pausing all redundancies until at least the autumn and providing all NHS workers with free breakdown services.