London pre-open: FTSE set to edge lower in early trading

16th Nov 2012 07:14

City sources predict the FTSE 100 will open down three points from yesterday's close of 5,678, as investors process the news that the Eurozone has re-entered recession, and worries over the looming 'fiscal cliff' persist. The US President is meeting with Democratic and Republican congressional leaders today to initiate discussions over a deal that would negotiate a reduction to the deficit in a bid to avoid the so-called US 'fiscal cliff'.The so-called 'fiscal cliff' is a series of tax increases and cuts to spending that are currently due to take effect on January 1st in the US, unless the White House and Congress can come to an agreement to bring the deficit under control through alternative measures. Acting as a backdrop, Italy's Finance Minister has told Bloomberg he is optimistic that Europe can reach an agreement on Greece next week. The International Monetary Fund's Managing Director, Christine Lagarde, on the other hand, has been cited in a slightly more sceptical vein. International economic announcements due out today include the EU Balance of Trade, the EU Current Account, EU New Car Registrations, and US Industrial production.Japan has dissolved its lower house of Parliament ahead of snap elections called for December 16th. That is the reason behind the rise seen in the Nikkei 225 overnight, even as the government's Cabinet Office downgraded the country's growth outlook for a fourth consecutive month. In company news, Serco has delivered the anticipated pick-up in performance in the second half and is on track to meet full year expectations. The outsourcing specialist expects conditions to remain challenging in the US but further improvement is expected in its UK markets, while strong performances from its Africa, Middle East, Asia and Australia (AMEAA) and Global Services Business Process Outsourcing (BPO) operations are anticipated to continue.A red flag has been raised at industrial turnaround specialist Melrose, with the group saying some of its businesses have seen a slow-down in business in recent weeks. Notwithstanding the above, the group is trading in line with expectations. Stripping out the contribution from the recently acquired Elster Group, revenue from Melrose companies at constant exchange rates since July 1st have been up 6% year-on-year, which represents a slow-down from the 10% growth rate in the first half of 2012. For the year-to-date, underlying revenue is up 8%. Engineering giant IMI said that second-half trading has been in line with expectations so far though it did highlight some weakness in its Fluid Power division, owing to a tough US vehicle market. Group organic revenues, which adjust for acquisitions and exchange rate movements, were up 3% in the four months to the end of October and were 4% higher for the first 10 months of the year. Reported revenues meanwhile were up 5% and 6%, respectively.Bank of America and Barclays have both downgraded their view on Pennon this morning.