London pre-open: Stocks to drop amid trade war fears; China data in focus
London stocks were set for a downbeat open on Monday amid growing trade warn concerns and following disappointing Chinese manufacturing figures.
The FTSE100 was called to open 36 points lower at 7,600.
London Capital Group analyst Jasper Lawler said: "A ramping up of trade war headlines over the weekend, such as a strong warning of retaliation from the EU and a potential currency war with China (US), will ensure that the fear of an all-out global trade war is central in traders’ mind, as the session begins on Monday.
"Markets have a tendency to normalise risk events that hang around long enough, which could explain the fairly limited moves on the market so far this morning.
"Whilst a weaker pound will offer some support to the FTSE, a decline in the price of oil as Saudi Arabia comes under pressure to up production, combined with an expected fall in mining stocks on the back of weaker Chinese manufacturing data, means the FTSE could struggle to go anywhere but southwards.”
Data released earlier showed that growth in China's manufacturing sector slowed in June. The Caixin-Markit China manufacturing purchasing managers' index nudged down to 51 this month from 51.1 in May, in line with expectations.
On the UK data front, Markit’s manufacturing PMI is at 0930 BST.
Lawler noted that the previous manufacturing PMI indicated a slight acceleration of activity, bouncing back in May to 54.4, after dipping to 53.9 in April.
"However, given the increase was principally down to inventory building, rather than a response to new demand a surprise to the upside this month is looking unlikely. Expectations are for the PMI to have dipped to 54. With manufacturing in April showing its biggest slowdown in 5 years, we are not holding our breath for an impressive figure this morning. The pound is already under pressure at the start of the week; soft PMI data could send sterling back towards $1.31."
In corporate news, Tesco has agreed to form a alliance with French supermarket peer Carrefour to group their buying power together to squeeze prices even lower.
Initially agreed as a three-year partnership, the alliance will cover the "strategic relationship" with global suppliers, the joint purchasing of own brand products and goods not for resale.
Micro Focus has agreed to sell its SUSE software business to Blitz 18-679, a newly incorporated indirectly wholly-owned subsidiary of Swedish private equity group EQT, for $2.5bn in cash.
The company said it would use the proceeds to pay some of its debt and for general corporate purposes, while it might also be used to return to shareholders.
AstraZeneca and its global biologics research and development arm MedImmune announced on Monday that the Japanese Ministry of Health, Labour and Welfare has approved Imfinzi (durvalumab) as maintenance therapy after definitive chemoradiation therapy in locally-advanced, unresectable non-small cell lung cancer.
The company also said in a joint statement with Merck that Japan's Pharmaceuticals and Medical Devices Agency (PMDA) has approved Lynparza (olaparib) tablets for use in patients with unresectable or recurrent BRCA-mutated, human epidermal growth factor receptor 2 negative breast cancer who had received prior chemotherapy. It said patients were selected for therapy based on an approved companion diagnostic.