London pre-open: Stocks to fall after US selloff

Pre-open Market Report
06:39, 13th May 2021

(Sharecast News) - London stocks were set to fall at the open on Thursday, taking their cue from a weak US session after higher-than-expected inflation.

The FTSE 100 was called to open 32 points lower at 6,972.

CMC Markets analyst Michael Hewson said: "It was a day of divergent fortunes yesterday with European markets reversing some of their early week losses, and closing higher on the day, while US markets continued to get pummelled.

"As a result of the accelerated sell-off in the US after Europe had closed, we can expect to see European markets give back some of yesterday's gains as we look to open lower, while markets in Asia have also seen more big falls today.

"The jump in US headline CPI to 4.2%, the biggest rise seen since 2008, was the catalyst for another big day of losses for US stocks with the Russell 2000 and the Nasdaq once again leading the way.

"The larger than expected rise in headline CPI was largely driven by a 10% rise in the prices of used cars and trucks, but nonetheless, even when base effects are taken into account, was a much bigger jump in prices than most had expected. Nonetheless the base effects still made a good chunk of yesterday's big rise with gasoline and other crude oil derivatives adding a decent percentage to the numbers as well."

In corporate news, UK telecoms operator BT said it was extending its full-fibre broadband network to 25m premises by the end of 2026, and would aim to fund the 5m extra premises through a joint venture.

The company also reported a 7% fall in revenue and a 6% fall in adjusted earnings for the year to end-March, reflecting the impact of Covid-19.

Rolls-Royce said engines flew at 40% of 2019 levels in the first four months of this year as the Covid-19 pandemic continued to impact the airline industry.

The company, which is paid for the number of hours its engines fly, said it was largely driven by demand for cargo flights and the maintenance of key routes with and "broadly unchanged from the run rate at the end of 2020 and consistent with our planning assumptions".

"While the timing of the recovery remains uncertain, the progress of Covid-19 vaccination programmes in a significant number of countries, particularly the US and UK, is encouraging. Combined with increased testing, vaccination programmes are key enablers of further recovery in international air travel."

Burberry reported a decline in full-year sales and operating profits, but took the decision to reinstate its dividend on the back of strong cash generation.

Sales at constant exchange rates declined 10% from their year earlier level to reach £2.34bn, while the luxury fashion retailer's operating profits shrank 8% to £396m. Nevertheless, full-price sales jumped by 12% in the last quarter of its financial year, led by mainland China, South Korea and the US.

On a comparable basis, sales for those same three months were off by 5%, despite 16% of its stores remaining shut. The full-year payout was reinstated at 42.5 per share.

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