London pre-open: Stocks seen lower ahead of services PMI

(Sharecast News) - London stocks were set to fall at the open on Tuesday following downbeat US and Asian sessions, as investors eyed the latest UK services data. The FTSE 100 was called to open 15 points lower at 7,498.

CMC Markets analyst Michael Hewson said: "European markets got off to a rather lacklustre start to the week, weighed down by a rebound in the US dollar as well as weakness in basic resources and energy prices, as investors took a pause after the gains of the past couple of weeks.

"US markets fared little better, sliding back in the face of a modest rebound in yields as investors hit the pause button ahead of this week's jobs data, which is due at the end of the week, with markets in Europe set to open slightly weaker this morning."

Investors will be mulling the latest figures from KPMG and the British Retail Consortium, which showed that retail sales grew by an underwhelming amount in November despite shops stepping up their discounts leading up to Black Friday, as cautious consumers chose to delay their Christmas spending.

The BRC-KPMG retail sales monitor for November showed that total retail sales increased by 2.7% in November. This was above the three-month average growth rate of 2.6% but below the 12-month average of 4.1%. In November of 2022, sales were up 4.2% on the month before.

In the three months to November, food sales growth slowed to 7.6% from 7.9% a month earlier and under the 12-month average of 8.4%.

Meanwhile, non-food sales were down 1.6% in the three-month period, compared with an average of 0.5% over the past 12 months.

"Black Friday began earlier this year as many retailers tried to give sales a much-needed boost in November. While this had the desired effect initially, the momentum failed to hold throughout the month, as many households held back on Christmas spending," said Helen Dickinson, chief executive of the BRC.

"Retailers are banking on a last-minute flurry of festive frivolity in December and will continue working hard to deliver an affordable Christmas for customers so everyone can enjoy some Christmas cheer."

Dickinson painted a gloomy picture for retailers heading into 2024, as they have to deal with a rise in business rates and costs from other new regulations.

"These combined with the biggest rise on record to the National Living Wage will mean retailers will have less capital to invest in lowering prices for their customers," Dickinson said.

Still to come, the S&P Global/CIPS services PMI for November is due at 0930 GMT.

In corporate news, FTSE 250 engineering and manufacturing group Senior has won a contract with United Arab Emirates-based Strata Manufacturing worth $12m.

The deal, for the supply of Boeing 787 vertical fin detail parts, has a seven-year term with work being undertaken at Senior Aerospace's facility in Chonburi, Thailand.

"Strata is a new customer for Senior, and we are delighted that Senior Aerospace Thailand has been selected for this important contract," said Launie Fleming, chief executive of Senior Aerospace.

Equipment hire specialist Ashtead delivered flat second-quarter profits, but said demand in the US remained "robust".

The company, which last month cut annual profit and revenue forecasts, said pre-tax profit for the three months to October 31 were $666m, up 1%. First-half earnings were up 5% to $1.2bn.

Shares in Ashtead slumped in November as the company lowered full-year forecasts after a quieter hurricane season and the writers' and actors' strike in the US and revealed it would take a $2bn depreciation charge.

It now expects both group and US rental revenue growth in the range of 11% to 13%, down from previous guidance of 13% to 16% for both, which will result in core profit being 2- 3% below current market expectations.

Ashtead added that it also now expected a full-year depreciation charge of around $2.1bn and net interest cost of $540m which will result in adjusted profit before tax being below current market expectations.