London pre-open: FTSE expected to open lower

2nd Oct 2012 07:30

City sources predict the FTSE 100 will open down 29 points from yesterday's close of 5,820, despite positive data from the US giving a boost to state-side stocks last night. European markets also performed well yesterday, driven by better-than-expected manufacturing data, but investors are likely to be cautious this morning following a negative report out from Moody's overnight which put the total capital shortfall faced by Spanish banks at between €70bn and €105bn, well above the €53.7bn announced at the end of last week. At 9:30 we receive the construction PMI survey for September. The consensus expects the headline index to rise to 49.9 from 49.0. House prices declined by 0.4% month-on-month in September (Consensus: 0.0%, Last 1.1%), according to the latest Nationwide house price data. In terms of quarterly rates of change prices fell by 0.4%, continuing a trend of broadly sideways price movement seen since mid-2010, economists at Barclays Research say. Of interest, as a backdrop, some commentators hold that the velocity of money (M2) Stateside is beginning to recover, which has upside implications for commodity inflation, although in the very short term it can be expected to help equities. Hence, perhaps, remarks from ex-Fed Vice-chairman Paul Volcker, overnight, regarding the non-existence of inflationary risks as a result of the central bank's policy of quantitative easing. In company new, rumours of a special dividend from Wolseley have proved to be on the money, with the plumbers' merchant paying 40p on top of the full year divi of 60p. The once debt-laden company is now cash positive, with net cash of £45m at the end of July, compared to net debt of £523m the year before. Reported profit before tax in the year to July 31st fell to £198m from £391m, following a £353m impairment charge relating to acquisitions made between 2003 to 2007.Engineering support firm Babcock said it was enjoying buoyant markets as customers turned to it to make cost savings. The company said it was confident of meeting its expectations for this financial year and delivering strong progress on last year. Both civil and military markets remained strong as current and potential customers continued to seek increased efficiency and improved availability of assets, Babcock said. Gardening products supplier William Sinclair said its results will be even worse than previously warned, thanks to the UK's soggy summer. "The very poor harvest and suppressed consumer activity experienced in the last few weeks will increase the negative impact on the company's 2012 financial performance in addition to that reported previously with the result that the company will miss market expectations for the year ended September 30th, 2012," the company said.Analysts at HSBC have downgraded their coverage of Inmarsat to neutral from outperform. NR