London pre-open: Strong start expected ahead of construction PMI
London stocks are expected to open higher on Monday, as markets shrug off trade war concerns.
The FTSE 100 is seen climbing 28 points on the open, according to spread-betting prices, having ended last week at 7,701.77. Sterling was consolidating its slight recovery from the end of last week, up 0.1% against the dollar to 1.3364, flat on the euro at 1.1441.
Trade talks between the US and China broke down over the weekend with a warning from Beijing that all agreements could be voided if the US moves ahead with plans to level import tariffs against $50bn worth of Chinese goods.
"Markets remain surprisingly sanguine despite trade war fears ramping up," said market analyst Jasper Lawler at London Capital Group as Asian markets rose. "Trade tariffs had already been confirmed against the EU, Mexico and Canada prior to the weekend. The third round of US – Chinese trade talks breaking down over the weekend indicate that a $100bn trade war between the two powers could begin as soon as this month.
"Yet the markets are reacting with the same indifference with which they responded to the tariffs being levied on the US’s closest allies last week, in a sign that traders are becoming increasingly accustomed to Trump’s heavy-handed negotiating tactics."
"There remains a certain level of optimism that this aggressive posture from Trump is a positioning that will quickly blow over, rather than result in the actual application of US tariffs and the application of threatened retaliatory measures from the targeted countries."
Proving the point for Lawler, the traditional safe havens of gold and the Japanese yen both remained largely unmoved.
In what is a fairly quiet week for major economic data, purchasing managers' index reports will be the main points of interest. The UK construction PMI is due at 0930 BST ahead of the key services report the following day.
Construction activity is expected to have eased off, giving back some of the rebound in April that followed a weak March, with economists forecasting the PMI will drop to 52 from 52.5.
In company news, DS Smith said it was buying Spanish packaging firm Europac for €1.67bn (£1.45bn). The acquisition, transaction expenses and the refinancing of Europac debt will be financed from a £1bn rights issue and a new committed debt facility of €740m (£645m), the company added.
Rolls-Royce confirmed that it has completed the sale of its fuel injector business, L'Orange, for net proceeds of €673m after costs.
CYBG, the owner of Clydesdale and Yorkshire Bank, has upped the price of its proposed takeover approach for rival Virgin Money, which has agreed to push back the bid deadline. CYBG would offer 1.2125 new shares for each Virgin Money share, potentially giving Virgin Money shareholders a 38% stake in the combined group, up from the 1.1297 original offer made last month that would have led to a 36.5% ownership.
Wizz Air said its passenger numbers grew once again in May, as the airline's route network continued to expand, with capacity for the month rising 17.1% year-on-year to 3,086,626, and passengers up 18.1% to 2,836,380. The FTSE 250 low-cost carrier said its load factor grew by 0.8 percentage points for the month to 91.9%.