London pre-open: Stocks seen lower on Wall Street losses

(Sharecast News) - London stocks were set to fall at the open on Tuesday following losses on Wall Street. The FTSE 100 was called to open around 10 points lower.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: "It feels like there is a moment of calm and silence in the aftermath of major tech earnings, investors will decide whether this rally deserves to continue higher straight away. The week brings some important economic data on the table. The US will release its latest growth and inflation updates this week. And favourable data - meaning resilient but not abnormally strong growth, coupled with softening inflation, would allow the market bulls to surf on the 'goldilocks' wave.

"If that's the case, we could see the stock market rally continue, and to broaden to sectors other than the technology stocks. The equal weigh S&P500 index could make an attempt to catch up the technology-heavy S&P500. If not, if growth is resilient, but inflation ticks higher in a way that's concerning for the Federal Reserve (Fed) expectations, we could see profit taking and a downside correction across major US indices, and selling could spill over to the other major stock markets."

On home shores, data released earlier showed that shop price inflation in the UK fell to its lowest level in 23 months in February.

According to the British Retail Consortium-NielsenIQ Shop Price Index, the annual rate of price growth slowed to 2.5% this month, down from 2.9% in January, as easing supply-chain pressures fed through to food prices.

This was below the three-month average rate of 3.3% and the lowest level since March 2022.

Non-food inflation was unchanged at 1.3% compared with last year, while food inflation eased to 5.0% from 6.1% - marking the tenth straight monthly deceleration.

However, according to BRC chief executive Helen Dickinson, "significant uncertainties remain" as geopolitical tensions increase.

"Prices of non-food goods will be more susceptible to shipping costs, which have risen due to the re-routing of imports around the Cape of Good Hope," said Dickinson.

Meanwhile, Dickinson highlighted that UK retailers are facing a big rise in business rates bills in April, which was "determined by last September's sky-high inflation rate".

"April's rates rise should be based on April's inflation, and the Chancellor should use the Spring Budget to make this correction, supporting business investment and helping to drive down prices for consumers," Dickinson said.

In corporate news, British speciality chemicals company Croda International warned of lower operating margins after posting a slump in 2023 profits due to customers destocking and a weak macroeconomic environment.

Pre-tax profit for the year to December 31 fell 69.7% to £236.3m. The company, which supplies the consumer and life sciences industries, said it expected group adjusted operating margin to be two to three percentage points lower and adjusted profit before tax to be between £260m and £300m in full year 2024.

Student accommodation provider Unite Group announced an 8% increase in its full-year dividend after delivering record adjusted earnings for 2023, though reported profits dropped by more than two thirds as a result of big losses related to changes in property valuations.

Adjusted earnings were up 13% year-on-year at £184.3m, helped by 99.8% occupancy and 7.4% rental growth for the 2023/24 academic year. However, IFRS profit before tax slumped by 71% to £102.5m, dragged lower by a £61.2m revaluation loss compared with a revaluation profit of £119.2m in 2022.

Smith & Nephew's 2023 results showed strong revenue growth, with a 6.4% increase in fourth-quarter revenue, and a 7.2% rise for the full year on an underlying basis to $5.55bn.

The company said its 12-point plan was progressing well, contributing to improved trading profit margins and setting the stage for continued financial success. Looking ahead, Smith & Nephew said it expected positive operating leverage and benefits from its plan to outweigh headwinds, with 2024 guidance anticipating underlying revenue growth between 5% and 6%, and a trading profit margin of at least 18.0%.