London pre-open: Stocks seen up ahead of US GDP

(Sharecast News) - London stocks were set to nudge up at the open on Wednesday as investors eyed the latest US growth numbers. The FTSE 100 was called to open around five points higher.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: "Today, the US will reveal its latest GDP numbers. The US economy is expected to have grown 3.3% in Q4. That's lower than the 5% printed in the Q3, but it's still a very strong growth for an economy that underwent the most aggressive tightening cycle of its modern history. And if Atlanta's GDP prediction is an indication, the slowdown will slow in the first quarter of this year.

"Robust growth is good, if it's not accompanied by stronger inflation. Is it possible? Yes, it is possible, if supply grows faster than demand, but I think that's not necessarily the case for the US right now. Demand remains strong despite the latest weakness in consumer spending and durable goods orders. And core PCE - which will be released tomorrow - is expected to print the biggest jump in a year on a monthly basis. Therefore, good news (on GPD data) has the potential to be bad news for market sentiment, provided that strong growth and higher inflation would push the Federal Reserve (Fed) rate cut expectations further down the road.

"Pricing today suggests that the market expects a 75bp cut from the Fed this year - matching what the Fed members plotted on their latest dot plot in December. The probability of a June rate cut slipped just below 60% yesterday. A U-turn in inflation won't only delay the first rate cut but likely slow the pace of the future cuts as well. That's not good news for risk appetite."

In UK corporate news, housebuilder Taylor Wimpey said 2023 profits almost halved as higher mortgage rates hit demand, but added that current trading was showing "some encouraging signs of improvement with reduced mortgage rates positively impacting affordability".

Pre-tax profits fell 42.8% to £473.8m. Group completions, including joint ventures, came in at 10,848 from 14,154 in 2022.

Elsewhere, Vodafone confirmed media speculation that it intends to sell its Italian operations to Swiss telecoms group Swisscom for an enterprise value of €8bn.

The telecoms firm said it had been engaged in talks with several parties to explore market consolidation in Italy, but it was now in "exclusive discussions" with Swisscom. A deal, which is still subject to confirming binding transaction documentation, will "deliver the best combination of value creation, upfront cash proceeds and transaction certainty for Vodafone shareholders", Vodafone said.