London pre-open: Stocks seen muted after Moody's US warning

(Sharecast News) - London stocks were set for a muted open on Tuesday following a downbeat session in Asia, after Moody's warned that a US government shutdown could be bad news for the country's triple-A credit rating. The FTSE 100 was called to open two points lower at 7,622.

CMC Markets analyst Michael Hewson said: "The late rebound in US markets doesn't look set to translate into today's European open with Asia markets also sliding back on the same combination of stagflation concerns and reports that Chinese property company Evergrande missed a debt payment.

"Another warning from ratings agency Moody's about the impact of another government shutdown on the US economy, and its credit rating, didn't help the overall mood, while Minneapolis Fed President Neel Kashkari said he expects another Fed rate rise before the end of the year helping to further boost the US dollar as well as yields."

In UK corporate news, engineering group Smiths hailed a 20% rise in annual operating profit, driven by volume growth and higher prices which offset the impact of inflation.

The company said profit for the year to July 31 came in at £501m as revenue jumped 18.3% to £3bn.

Smiths said it now expects organic revenue growth for 2024 within its medium-term target range of 4-6%, with growth weighted towards the second half of the year.

Fast fashion giant Asos revealed that operating profits for the full year will come in at the bottom end of expectations and free cash flow will be significantly lower than guidance.

In a detailed fourth-quarter trading update, the online retailer said that adjusted like-for-like sales were down 15% in the three months to 3 September, slightly worse than the 14% decline seen in the third quarter.

Adjusted gross margins for the second half as a whole were up just 150 basis points year-on-year, below previous guidance of a 200bp improvement, due to the investment in promotional activity to reduce inventory levels.

As a result, "EBIT is expected around the bottom of the guided £40m to £60m range, with free cash inflow in H2 now expected to be c.£60m excluding refinancing costs (previously £150m), principally as a result of timing effects that will reverse in September and October".