London pre-open: Stocks seen up as investors eye US inflation

(Sharecast News) - London stocks were set to gain at the open on Thursday following an upbeat session on Wall Street, as investors eyed the latest US inflation reading. The FTSE 100 was called to open around 27 points higher.

Kathleen Brooks, research director at XTB, said: "US stocks rose to fresh record highs on Wednesday, which has boosted overall market sentiment on Thursday. The S&P 500 and the Dow Jones Industrial index both closed at records on Wednesday. The driver of the gains include optimism ahead of earnings season. Average earnings growth for the S&P 500 has been scaled back in recent weeks, and the growth rate is currently below 5%. However, far from deterring investors, the downgrade to earnings expectations could be perceived as a lower bar for companies in Q3, which may boost the chance of upside earnings surprises."

All eyes will be on the US consumer price index for September, due at 1330 BST.

Brooks said: "The FOMC minutes dovetail nicely with today's US CPI report, which is the highlight of the economic data calendar on Thursday. The gist of the FOMC minutes were that Jay Powell strong-armed his colleagues into voting for a 50bp rate cut last month, but don't expect more of the same.

"There appears to be a bias in the minutes towards cutting rates in smaller increments going forward. In the aftermath of the minutes, the market is expecting an 84% chance of a 25bp rate cut in November, with a 15% chance of no cut.

"The market is expecting US CPI for September to moderate to 2.3% from 2.5% in August, the core rate of inflation is expected to remain steady at 3.2%. If there is an upside surprise like there was to payrolls, then we could see a bigger chance of no rate cut from the Fed next month. However, a reading in line with expectations, would suggest that the goldilocks scenario for the US economy carries on, which is good news for both bonds and equities, which could both rally on a sanguine US CPI report later."

In corporate news, GSK was likely to be in focus after agreeing to pay $2.2bn to settle about 80,000 Zantac lawsuits.

Elsewhere, Canadian investment firm Brookfield trumped Segro's effort to buy warehouse owner Tritax Eurobox with an agreed £557m offer.

Brookfield is offering 69p a share, a 6% uplift on Segro's offer of 65.1p.

Volution Group reported a 6% increase in full-year revenue to £347.6m, with 1.5% organic growth offset by a 2% foreign exchange impact.

The FTSE 250 company said its adjusted operating profit margin rose to 22.5%, driven by strong UK residential demand and operational improvements, while adjusted basic earnings per share increased 8.5% to 28p. It maintained a high return on capital and announced a 12.5% dividend increase to 9p per share, as it completed key acquisitions including DVS in New Zealand and an agreement to acquire Fantech in Australasia.