London pre-open: Small rise expected at opening bell

11th Jul 2014 07:40

After a week of losses, investors are expected to jump in and buy stock at their lower prices today, despite widespread concerns about the economic stability of the Eurozone. City sources predict the FTSE 100 will open around 13 points higher than yesterday's close of 6,672.37.The renewed worries about the euro-area countries came mainly as a result of the parent company of Portuguese bank Banco Espirito Santo (BES) announcing its intention to postpone the repayment of a debt. BES, the second-largest lender in Portugal, saw its stock drop sharply yesterday before the suspension of trading of its shares and prompted the country's benchmark PSI 20 Index to suffer its biggest seven-day drop since August 2011. CMC Markets UK's Michael Hewson this morning commented that since July 2012, when European Central Bank President Mario Draghi said it was necessary to do "whatever it takes to preserve the euro and believe me it will be enough", markets and investors alike have be lulled into a false sense of security as capital began to flow back into the euroarea and confidence slowly grew. "This is because none of the underlying problems that served to create the crisis have been dealt with, namely the sovereign debt feedback loop between banks and the governments they fund," he explained. "The crisis in Portugal is a direct consequence of this failure, along with an almost shocking complacency on the part of investors who have driven bond yields in countries like Greece, Portugal, Spain and Italy to, in some cases, record lows." Here in the UK, investors are likely to today continue to digest data which yesterday showed that the trade deficit had widened to £9.2bn in May, due to lower shipments from manufacturers into the European Union and rising overall imports, both likely to be caused as a stronger sterling makes British goods less competitive around the globe.It is now unlikely that trade will make a positive contribution to gross domestic product (GDP) growth in the second quarter, economists warned.In this morning's company news, Imperial Tobacco announced it would float shares representing 27.3% of its subsidiary Logista at €13.00 per share. The offer price is at the lower end of the €12.50 to €15.50 proposed, and implies a market cap of around €1,859m. The group is offering 36.2m shares, which would generate gross proceeds of €470.7m.That came just a few hours ahead of a further announcement by the group tht confirmed it is discussions with Reynolds American and Lorillard about the potential acquisition of some of their assets and brands.A committee of MPs has claimed that the government and its advisers in the City underpriced the flotation of Royal Mail by £1bn. A report by the Business, Innovation and Skills (BIS) Committee said that the privatisation of the postal service group was undervalued and mispriced.Credit-checking group Experian said that organic revenues were unchanged in the first quarter after a number of "one-off headwinds", though it expected a return to normal levels of growth later on in the year. NR