London pre-open: Stocks seen down as investors mull China inflation

(Sharecast News) - London stocks were set to fall on Thursday following mixed Asian and US sessions, as investors mulled the latest Chinese inflation figures. The FTSE 100 was called to open down around 18 points at 7,384.

Data released earlier by the National Bureau of Statistics showed that China fell back into deflationary territory in October.

The consumer price index fell 0.2% versus the same month last year, and compared to expectations for a 0.1% decline. The data showed that pork prices tumbled 30.1%.

Meanwhile, the producer price index fell 2.6% on the year in October following a 2.5% drop in September.

Core inflation - which excludes volatile elements such as food and fuel - fell to 0.6% from 0.8%.

Robert Carnell, regional head of research, Asia-Pacific, at ING, argued that China is not dealing with deflation, but rather "low underlying inflation".

He said: "Let's be very clear about what deflation is and what it isn't. It is a very pernicious situation, where the 'general price level' which includes consumer prices, but also other prices such as real and financial assets and money wages decline. And it leads to a sharp slowdown in economic activity as it deters consumer spending and investment.

"What China has right now, is a low rate of underlying inflation, which reflects the fact that domestic demand is fairly weak. What today's data show is that it doesn't take much of a negative shock from one of the components to push a low underlying headline inflation rate below zero on a year-on-year basis.

"If you want to use any term 'disinflation' would be my preference, but what we are seeing today is mainly the result of a supply excess, rather than a collapse in demand."

On home shores, the latest survey from the Royal Institution of Chartered Surveyors showed that the decline in house prices was showing signs of steadying in October.

The net balance of surveyors reporting that house prices have risen over the last three months ticked up to -63 from -69 in September, coming in above consensus expectations of -65.

In corporate news, Taylor Wimpey said it now expects full-year operating profit to be at the top end of its guidance range of £440m to £470m, thanks to its "focus on optimising price and sharp cost discipline".

The housebuilder said in a trading statement that it continues to expect to deliver full-year UK volumes of between 10,000 and 10,500 homes,

UK and Europe-focused value retailer B&M raised its guidance for profits and store openings after a strong first half, with double-digit growth in both revenues and earnings. The company, which operates as B&M and Heron Foods across over 1,100 stores in the UK and France, said revenues were up 10.4% on last year at £2.55bn in the six months to 23 September.

Adjusted EBITDA rose by 16.1% to £269m, as profit margins improved to 10.5% from 10%.

Full-year adjusted EBITDA is now expected to come in at £620m-630m, "materially higher" than last year's £573m. Previous guidance was simply for profits to be "higher".

AstraZeneca reported strong financial results for the first nine months of 2023, with total revenue reaching $33.8bn, a 5% increase despite a decline in revenue from Covid-19 medicines.

Excluding Covid-19 medicines, both total revenue and product sales saw robust 15% growth.

The company increased its guidance for 2023, expecting total revenue excluding Covid-19 medicines to grow by a low-teens percentage and core earnings per share to increase by a low double-digit to low-teens percentage, both at constant currency.