London pre-open: Stocks to rise as investors continue to eye Sino-US relations, Brexit
London stocks looked set to rise at the open on Friday following positive sessions in the US and Asia, with eyes still firmly on Sino-US trade relations and Brexit.
The FTSE 100 was called to open 20 points higher at 7,204.
CMC Markets analyst Michael Hewson said: "The decision by China to hold back on any retaliation in response to last week’s US decision to increase tariffs, appears to, for now, have prompted a cautious rebound in equity markets. The more measured tone in deciding to focus on next month’s meeting to discuss removing the extra duties has seen some optimism start to creep back in.
"Even bond markets, which have a tendency to be slightly more sceptical, saw a little bit of a sell off, along with gold prices and other haven assets, as yields edged higher, though this could also be as a result of some end of month tidying up of positions ahead of the US long Labour day weekend."
On home shores, the latest GfK consumer confidence index released overnight showed a drop to -14 in August from -11 in July amid worries about Brexit. This marked a six-year low but was above analysts’ expectations for a reading of -12.
Joe Staton, client strategy director at GfK, said: "Until Brexit leaves the front pages - whenever that will be - consumers can be forgiven for feeling nervous not just about the wider economy but also about their financial situation. That’s an important distinction because a significant development in August is the sudden drop in views on personal finances ‘over the next 12 months’ after the encouraging jump in this measure last month.
"For a long time, the downward momentum in the Overall Index Score has been associated with our views on economy. But reduced confidence is now affecting how we see our personal finances. If there is a continuation of that dip in our feelings about our ‘future wallets’, we’d quickly see a headline score (the average of our five sub-measures) crash to a level that approaches the worrying figures seen in the worst days of the 2008/2009 financial crisis. We are not there yet, and we may not necessarily get there, but it’s a trend we need to watch carefully."
Elsewhere, the latest survey from Nationwide showed that house prices rose 0.6% year-on-year in August following a 0.3% increase in July. On the month, prices were flat.
North London estate agent and former RICS residential chairman, Jeremy Leaf, said: "Fairly stable house price growth suggests that the market continues to be supported by record low mortgage rates, strong employment and improving affordability irrespective of concerns about Brexit."
In corporate news, half year pre-tax profits at builders merchant Grafton rose 5% to £88.2m as the company said it was exiting the Belgian market and had struck a deal with an unnamed buyer. Revenue rose 2% to £1.4bn despite Brexit uncertainty in the UK as Ireland and the Netherlands both recorded strong results.
The company warned it expected the UK and Irish macroeconomic environment to weaken in the short term if Britain left the European Union without a deal.
An independent review committee established by Ferrexpo has failed to find the ultimate use of money the company donated to the Blooming Land Charity, leaving open the possibility that some of the funds could have been misappropriated.
The iron pellet producer said it remains aware of various tax and other investigations concerning its relationship with the charity, and said the two parties have now terminated their relationship.