London pre-open: Italian debt, China tensions in focus
Stocks are set for a lower start on the back of renewed tensions around Italy's debt pile and in the geopolitical space, between the US and China.
The Footsie was being called to start the session 20 points lower at 7,475.
In parallel, the yield on benchmark 10-year Italian government notes was jumping eight basis points to 3.38% after Eurozone finance leaders failed to endorse the country's budget plans for 2019 overnight.
Overnight, US markets finished mostly higher, but the Dow Jones Industrials and S&P 500 were unable to notch up fresh record highs while the Russell 2000 of small-cap stocks saw a big drop, continuing its recent trend lower, as Michael Hewson, chief market analyst at CMC Markets UK pointed out.
That was despite news that Ottawa and Washington had agreed on how to move forward on a revamped trade deal together with Mexico.
Commenting on the situation in markets on Tuesday morning, Hewson added: "The downside, if there is one, is that the apparent resolution of one problem usually opens up another front, and President Trump went on to aim a few barbs towards the EU, as well as China, at his press conference yesterday, with no signs of a resolution on the China question, after reports that US defence secretary James Mattis was cancelling his trip to China later this month.
"This appears to have weighed on markets in Asia, as Hong Kong shares slid back, though on the plus side the Nikkei continues to remain well supported."
On that note, overnight the US Navy accused China's military of "unsafe and unprofessional" behaviour at the weekend around one of the reefs occupied by the Asian giant in the South China Sea.
Against that backdrop, both Asian stockmarkets and emerging market currencies saw selling pressure overnight with the Indonesian rupiah falling past the 15,000 mark against the Greenback - for the first time since 1998.
The economic calendar was light on Tuesday, although Bank of England chief economist, Andrew Haldane, was set to chair a session at the Rebuilding Macroeconomics Annual Conference on "Bringing Psychology and Social Sciences into Macroeconomics", at 0945 BST, in London.
Earlier, mortgage lender Halifax had reported that UK house prices rose at a 2.0% pace year-on-year in September (consensus: 1.9%).
Still ahead for later in the day, US Federal Reserve vicechairman Randal Quarles and his boss, Jerome Powell, were set to deliver speeches later in the day.
Back in the UK, investors would also be keeping an eye out for any potentially market-moving headlines out of the Conservative party conference in Birmingham.
In corporate news, Ferguson said it was proposing to 're-base' its dividend upwards 10% and so lift its final payout 21% ahead of last year, after the plumbing products supplier continued to enjoy excellent cash generation and a strong balance sheet. In the year to 31 July, the US-focused group increased revenues 8% to $20.75bn and ongoing trading profit by 15% to $1.5bn.
Shell said it had given the green light to proceed with a major liquified natural gas (LNG) project in Canada where it has a a 40% working interest. Construction will start immediately with first LNG expected before the middle of the next decade, the company said, adding that it forecast an integrated internal rate of return of around 13%, with “significant, long life and resilient” cash flow.
Meggitt has won a $323m new contract with the US Defense Logistics Agency to supply wheels, brakes and related spare parts for fighter jets and combat helicopters. The five-year agreement covers the F-16 Falcon jet and H-60 Blackhawk and CH-47 Chinook choppers allows for indefinite demand and indefinite quantity of spare parts.