London pre-open: Markets seen lower after Italian downgrade

10th Jul 2013 07:43

Markets are expected to open slightly lower on Wednesday, pausing for breath after recent gains as investors react to an Italian downgrade by S&P. City sources predict the FTSE 100 will open down around 14 points from yesterday's close of 6,513.Ratings agency S&P has cut its sovereign rating for Italy by one notch from 'BBB+' to 'BBB' on the back of weakening economic prospects. "The rating action reflects our view of a further worsening of Italy's economic prospects coming on top of a decade of real growth averaging minus 0.04%," S&P said. Investors were also gearing up to the minutes of the last Federal Open Market Committee meeting due out on Wednesday evening, as they look for indications of when the Fed will begin to taper stimulus. Following the heavy sell-off in June, the strong rebound in markets in parallel with slowly improving US economic data suggests that traders are beginning to feel more comfortable with the notion that quantitative easing will not be around forever."Friday's payrolls data was certainly better than expected and the resultant rise in bond yields did spook investors for a while, however it would appear that the prospects of improving economic data set against a background of gradually slowing asset purchases would appear to suggest that the market is slowly adjusting to this new dynamic," said Senior Market Analyst Michael Hewson from CMC Markets.Stocks to watchLuxury fashion group Burberry reported an 18% rise in retail revenue to £339m in the first quarter, driven by the strong performance of this year's Spring/Summer fashion. In a trading update for the three months to end of June, the company said comparable store sales were up 13%, in line with expectations.Barratt Developments said momentum is continuing to build and with forward sales up substantially, and is confident it can improve its performance still further in the year ahead. In an update for the year ended June 30th ahead of its annual results in September, the house-builder said profit before tax and exceptional items for the full year is expected to be around £192m, ahead of the top end of analysts' expectations.UK food wholesaler Booker Group said total first-quarter sales, including Makro, rose 13.6% and it is on course to meet expectations for the year.Meanwhile, ICAP said it was on track to meet management expectations for full-year profit after activity in US Treasuries helped offset lower demand in other parts of its business.BC