London pre-open: Stocks seen lower after Wall St slump; US inflation eyed

(Sharecast News) - London stocks were set to fall at the open on Friday following heavy losses on Wall Street, as investors eye the latest US inflation data. The FTSE 100 was called to open 56 points lower at 7,420.

CMC Markets analyst Michael Hewson said: "European markets fell back for the third day in a row, while US markets also fell to their lowest levels this week, wiping out Tuesday's strong rally, as nervousness started to creep in ahead of today's US CPI report for May, with markets here in Europe set to open lower.

"Over the last three months core PCE inflation has shown some signs it may have peaked falling from 5.2% to 4.9% in May. This was the second month in a row it had declined, having hit 5.3% back in February. Of course, no two inflation measures are alike, and PPI has remained resilient, while US CPI did show signs of slowing in April, it didn't slow as much as had been expected.

"Core prices slipped back to 6.2% from 6.6%, while headline prices fell to 8.3% from 8.5%. The increases in prices in other areas of the economy suggest that pricing pressures are much more widespread than just in food and energy, raising concerns that it may take a little longer to get inflation under control, with the one silver lining being that it didn't increase from March.

"This stickiness is expected to prevail in today's May numbers with headline inflation expected to remain unchanged at 8.3%, while core prices are expected to come down from 6.2% to 5.9%.

"We have started to see a decline in PPI in the last two months in a sign that pricing pressures are starting to slow at the coalface so to speak. Today's CPI numbers could go some way to take some of the steam out of the selloff in the US bond market this week, but we'd need to see a move towards 8% for that to happen.

"An increase in headline CPI is unlikely to be well received by equity markets, especially with the Federal Reserve rate meeting next week."

In corporate news, GlaxoSmithKline said its vaccine for respiratory virus had shown "statistically significant and clinically meaningful efficacy in adults aged 60 years and above in a phase 3 trial.

The company said the primary endpoint of the trial was "exceeded with no unexpected safety concerns observed" and would now start talks with regulators to start immediately with anticipated regulatory submissions in the second half of the year.

Investment outfit Apax Global Alpha revealed that the Apax X Fund, in which it is a limited partner, had sold its controlling stake in MyCase to AffiniPay.

Apax said the sale of MyCase, which provides cloud-based legal practice management software and payment services, valued AGA's current look through investment in the portfolio company at approximately €22.5m, representing an uplift of roughly €7.3m in the adjusted net asset value of AGA as of 31 March.