London pre-open: Stocks seen up ahead of US inflation data

(Sharecast News) - London stocks were set for a positive open on Wednesday as investors eye the latest US inflation reading. The FTSE 100 was called to open 33 points higher at 7,276.

CMC Markets analyst Michael Hewson said: "After a strong start yesterday, European markets gave back a lot of their early gains, although they still managed to finish the day modestly higher.

"The ebb and flow of US markets continues to be the main driver, with the S&P500 making a new one year low at 3,958, before recovering back above 4,000, to eke out a modest gain, while the Nasdaq 100 closed higher, and the Dow closed lower.

"This slightly more positive turn should help markets here in Europe open modestly higher this morning."

Commenting on the US inflation figures, he said: "Whatever today's number comes in at, there seems little prospect that we won't see another 50bps rate rise in June, even if the numbers come in below expectations.

"This seems likely given Powell's recent comments about inflation being too high, which were reinforced by Loretta Mester yesterday in remarks that suggested that the Fed would run the risk of tipping the economy into recession to bring inflation lower.

"In March, US CPI rose by 8.5%, slightly above expectations, while core prices rose by 6.5%, slightly below expectations, in a sign that inflation pressures could well be close to easing, although this remains unclear given that subsequently PPI in March rose to 11.2% and another record high, as core prices rose to 9.2%.

"With ISM prices paid data in both services and manufacturing jumping higher in April, any signs of a peak in headline inflation still seems some way off, with US 10-year yields rising to 3.2% earlier this week, although we have since slipped back. Today's headline CPI numbers could go some way to determining whether we've started to see a plateauing in inflationary pressures, or whether we get a further lift in inflation expectations."

Expectations are for headline CPI to slip back to 8.1%, and core prices to 6.1%, Hewson said.

In corporate news, holiday giant TUI said it was confident bookings for this summer would be close to 2019 pre-Covid pandemic levels after first-half losses were more than halved.

The company posted an operating loss of €603m, down 54%, and added that the Ukraine war had not impacted its key markets of the UK, Germany and Benelux, with only Poland and the Nordic countries "subdued".

Broadcaster ITV reported "strong" first-quarter revenues on Wednesday, driven by a "robust" operational and financial performance throughout the period.

ITV said Q1 revenues grew 23% year-on-year to £458.0m, with total advertising revenues rising 16% to £468.0m, as expected, and digital revenues increasing 24% to £82.0m. The FTSE 100-listed firm added that its ITV Studios unit was "performing strongly" and was on track for the year as it continued to take advantage of "strong global demand" for content.