London pre-open: Stocks seen down on US rate worries

(Sharecast News) - London stocks were set to fall at the open on Wednesday following heavy losses on Wall Street and in Asia, amid worries about US rates. The FTSE 100 was called to open six points lower at 7,464.

US and Asian markets slid, and US Treasury yields jumped after better-than-expected JOLTS job openings data on Tuesday.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: "Even a hint of an improving US jobs market sends shivers down investors' spines.

"This is why the stronger than expected job openings data from the US spurred panic across the global financial markets yesterday. Although hirings and firings remained stable, the financial world was unhappy to see so many job opportunities offered to Americans as the data hinted that the US jobs market could be going back toward tightening, and not toward loosening. And that means that Americans will keep their jobs, find new ones, asked better pays, and keep spending.

"That spending will keep US growth above average and continue pushing inflation higher, and the Federal Reserve (Fed) will not only keep interest rates higher for longer but eventually be obliged to hike them more. Alas, a catastrophic scenario for the global financial markets where the rising US yields threaten to destroy value everywhere. PS: JOLTS data is volatile, and one data point is insufficient to point at changing trend. We still believe that the US jobs market will continue to loosen."

On the macro front, the S&P Global/CIPS UK services purchasing managers' index for September is due at 0930 BST, while across the pond, the ADP report for September is at 1315 BST.

In corporate news, Tesco hiked its retail profit and cash flow targets after a strong first half, with sales rising by 9% on the back of easing inflation.

The supermarket giant said, as a result of significant cost reductions from the Save to Invest cost-cutting programme, it now expects to deliver a retail adjusted operating profit of £2.6bn-2.7bn for the 12 months to 25 February. Previous guidance was for no growth. Retail free cash flow is forecast to hit £1.8bn-2.0bn this year, ahead of the medium-term guidance range of £1.4bn-1.8bn.

Spirent Communications cut its near-term outlook as it highlighted an "extremely challenged" telecommunications market and the fact that one of its largest customers has delayed expenditure and technology investments.

"The uptick in demand we witnessed in the second quarter dissipated over the summer months and the anticipated rebound in September has not happened," the company said. "In contrast, we did see strong growth from our non-telecommunications end markets such as Positioning."

Spirent provides automated test and assurance solutions for next-generation devices and networks.