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

(Sharecast News) - London stocks were set to edge down at the open on Wednesday as investors eyed the release of the latest US inflation data. The FTSE 100 was called to open 10 points lower at 7,478.

CMC Markets analyst Michael Hewson said: "European markets underwent a negative session yesterday on reports that oil flows through the Southern Druzhba pipeline, which supplies Hungary, Czech Republic, and Slovakia, had been suspended due to non-payment of transit fees.

"Russia claimed Ukraine was behind the suspension because sanctions had prevented the required payment from going through.

"It's a timely reminder, if any were needed, of how vulnerable Europe is to the continued weaponisation of energy by Russia as we head into winter.

"US markets also came under pressure as weakness in tech acted as a wider drag after another earnings downgrade, this time from Micron, following on from Nvidia on Monday.

"This weakness looks set to translate into a cautious European open as investors look for evidence that inflation is starting to show signs of topping out."

On the macro front, the US consumer price index for July is due at 1330 BST. Hewson said expectations are for a fall to 8.7%, largely due to recent sharp declines in gasoline and other energy prices, however the bigger concern is with core prices which are expected to rise from 5.9% to 6.1%.

"A strong number here could raise concerns about embedded inflation, and as such feed into a narrative that could see the Fed overtighten in an attempt to squeeze inflation out of the system," he said.

In corporate news, insurance firm Aviva said it had witnessed "continuing momentum" in the six months ended 30 June, with both operating profits and own funds generation growing in the half.

Aviva reported a 14% increase in interim operating profits to £829.0m, while Solvency II operating own funds generation surged 46% to £538.0m. The group also declared an interim dividend of 10.3p, in line with its full-year dividend guidance of roughly 31.0p.

Holiday company TUI said the travel chaos seen across Europe this summer had pushed it to a posted a third-quarter operating loss as it incurred extra costs, but added that summer bookings were close to pre-pandemic levels.

The company said it had narrowed underlying operating loss of €27m in the three months to June 30 compared with a loss of about €670m a year earlier.

Flight cancellations due to staff shortages at airports cost TUI €75m.

Excluding those costs, adjusted operating profit came in at €48m, its first positive result since the Covid-19 crisis started.