London pre-open: Stocks to fall after US bond selloff

(Sharecast News) - London stocks were set to fall at the open on Tuesday following a selloff in the US bond market, and after Prime Minister Boris Johnson scraped through a confidence vote. The FTSE 100 was called to open 23 points lower at 7,585.

CMC Markets analyst Michael Hewson said: "European markets started the week very much on the front foot as did markets in the US, after a positive lead from Asia markets which were boosted by the continued relaxation of Covid restrictions in Chinese cities, which for over two months have acted as a brake on sentiment.

"As the US session progressed, the move above the 3% level on the US 10-year yield, saw the gains in US stocks start to slow, as we got a pull back from intraday highs. This pullback has translated into a softer European open, as once again investors fret about how high rates might go.

"Once again, the sensitivity of US stocks relative to US yields above 3%, has served to temper upside momentum, with markets once again sensitive to the inflation narrative, and how central banks are likely to react to more persistent inflation pressure."

On home shores, Johnson survived a confidence vote on Monday evening, with a margin of 211 to 148.

Kallum Pickering, senior economist at Berenberg, said: "The risk of a worsening economy over the summer, as well as bad results in upcoming by-elections such as in West Yorkshire and Devon on around 23 June could swing the pendulum against Johnson yet.

"Even though Johnson has survived today, it is hard to see how he can recover the erstwhile support of his MPs. Unless Johnson stages a dramatic improvement in the polls in coming months, it is likely that Johnson will face renewed challenges to his leadership."

In corporate news, education publisher Pearson said it had sold its local K12 Courseware businesses in Italy and Germany to Sanoma Corporation for £163m.

Under the terms of the deal, Pearson will also enter into an agreement with Sanoma for it to distribute Pearson's English Language Teaching products in Italy, the company said.

Elsewhere, waste management specialist Biffa said it has given the green light to a proposed £1bn takeover approach.

The FTSE 250 company said it had received series of unsolicited, indicative proposals from affiliates of Energy Capital Partners, and following talks, a possible offer price of 445p per share has been proposed.

Due diligence is now underway, and Biffa said it was "minded to recommend" the offer to shareholders should a firm offer be made.