London pre-open: Sharp drop expected as US stocks fall overnight

8th Nov 2013 07:26

City sources predict the FTSE 100 will open around 42 points lower than yesterday's close of 6,697.22, tracking some sharp falls on US markets overnight as economic data prompted concerns about a scaling back of monetary stimulus. The Dow Jones Industrial Average pulled back by 1% after hitting a fresh all-time high on Wednesday, suffering its worst point drop since October 8th.Investors were choosing to take profits after the recent strong run in markets as caution set in ahead of Friday's all-important jobs report, which will be a major factor in the Federal Reserve's decision over tapering quantitative easing.The US non-farm payrolls for October is expected to rise by 125,000, compared to an increase of 148,000 in September.The unemployment rate is expected to rise to 7.3% in October from 7.2% after a partial government shutdown hurt the jobs market and economic growth. The central bank has vowed to keep interest rates near zero until after the jobless rate drops below 6.5%, as long as inflation doesn't exceed 2.5%. Investors are closely watching economic data to weigh whether the Fed might announce a tapering of its monthly $85bn bond buying programme this year.Also acting as a backdrop to today will be the release of the University of Michigan's sentiment index for November which is expected to rise to 74.5 from 73.2 the prior month.In the UK, and on the company front, Balfour Beatty, the FTSE 250 infrastructure group, has announced that its 50%-owned joint venture, Gammon Construction, has won two significant rail contracts in Singapore. The Land Transport Authority has awarded an £87m contract for the design and construction of the Mayflower Station on the underground Thomson Line, while SMRT Trains has awarded a £61m contract for track system replacement on the North-South Line.Rolls-Royce expects the full year to achieve modest growth in underlying revenue and underlying profit with cash flow around breakeven, according to a trading update out this morning. However, the engine manufacturer has changed its underlying profit guidance in its Defence Aerospace business from broadly flat to modest growth and in Marine from modest growth to broadly flat.International Consolidated Airlines Group (IAG) delivered a "strong" set of third quarter results which showed British Airways performance had taken off aided by the bounce back from the Olympics effect last year. The airlines group reported three month pre-tax profit had soared to €609m from €237m last time after revenues rose 6.9% to €5.4bn and costs fell 1.5%. Third quarter passenger unit revenue was up 6.7%.NR