London open: FTSE feeling the heat ahead of inflation data

London stocks opened lower on a sweltering Tuesday morning as the market felt the heat from geopolitical worries and traders sweated on the looming release of UK inflation data.

At 0840 BST the FTSE 100 was down 0.32% at 6,673.83 as its cabal of miners led the index lower, while commodities focused stocks also helped push the mid-cap index down 0.25% to 16,825.91.

Sentiment was also reflecting global concerns about a new round of central bank intervention, though this did not prevent US markets delivering fresh all-time highs overnight after decent second-quarter scorecards from the major banks.

A mixed session in Asia could reflect that markets "might actually be starting to worry about the prospect of more central bank intervention", said analyst Mike van Dulken at Accendo Markets, citing Australia and New Zealand as possible new additions to the equation.

"When added to existing expectations (BoJ, BoE, ECB) it begs the question about whether we are facing a potential race to the bottom in terms of stimulus and more currency wars. A weaker oil price is not helping either on oversupply concerns despite output cuts."

Investors will be looking out for UK inflation data, with UK CPI, RPI and PPI numbers scheduled for release at 0930 BST.

"Today’s figure is an important one as it will provide one of the first indications as to Brexit’s effect on the real economy and will be of importance to the Bank of England as they look to release their inflation report and rate decision on August 4th," said market economist Ana Thaker at PhillipCapital.

While the price indices will only factor in one week of a post-Brexit economy, Thaker said that given the fall in sterling since the referendum result, this decline is likely to have a material impact on the figure.

"A weaker currency would stimulate inflation, and a higher headline figure could be a result of the sharp drop in the value of Sterling we saw following the Brexit vote. Whatever the figure is, the Bank of England will focus on it in their August report and policy decisions are highly likely to be based on the release," she said.

In other macro news, the Bank of England’s Deputy Governor Ben Broadbent may give clues about what can be expected from the UK central bank in terms of stimulus in early August. In the US, housing starts are expected to show a rise on their release at at 1330 BST with building permits due at the same time. Before that Germany's ZEW surveys will show how sentiment has reacted to Brexit.

On the corporate front, mining giant Rio Tinto said second quarter iron ore production from its mines in Western Australia's Pilbara rose 8% to nearly 81m from the same time a year ago. Pilbara iron ore shipments rose 6% to 82.2m tonnes.

Over the six month period, shipments of iron ore increased 8% to nearly 159m tonnes, while production rose 10% to almost 161m tonnes. Rio Tinto will produce nearly 330m tonnes of iron ore this year, in line with production forecasts.

Russian steel maker Evraz said consolidated second quarter crude steel output fell 9.9% to 3.2m tonnes against the previous three months, primarily due to planned capital repairs at a blast furnace. Production of steel products, net of re-rolled volumes, fell to 2.9m tonnes quarter on quarter, due to planned capital repairs at the same blast furnace and a higher share of intragroup re-rolled volumes at EVRAZ North America.

Polymetal International posted its production results for the second quarter and six months to 30 June on Tuesday, with quarterly production in line with the company’s plans at 262 Koz of gold equivalent. The FTSE 250 firm said that amounted to a 12% year-on-year reduction, primarily due to the planned grade declines at Okhotsk and Omolon as well as traditionally volatile quarterly grade performance at Dukat.

Royal Mail said trading for the three months ended 26 June was in line with its expectations, with group revenue up 1% and UK revenue down 1%. Chief executive Moya Greene said: “We continue to face the challenges caused by the current low inflationary environment and our highly competitive markets. We remain, however, very focussed on operational and financial efficiency and delivering a high quality service for all our customers."

IG Group posted full year results on Tuesday that beat market expectations, with earnings breaking higher after a four-year stagnation. The spread-betting, contracts for difference and forex trading provider increased trading revenue 14% to £456.3m in the year ended 31 May, ahead of the company-complied consensus analyst estimate of £448m. Slightly more than 100,000 new accounts were opened in the year, 42% ahead of the prior year, and the second half of the year was 35% ahead of the first half, with the new share dealing service in the UK gaining 11,000 funded accounts of which around 2,900 were active clients by year end.

Market Movers

FTSE 100 (UKX) 6,686.69 -0.13%
FTSE 250 (MCX) 16,843.25 -0.14%
techMARK (TASX) 3,368.13 -0.18%

FTSE 100 - Risers

Coca-Cola HBC AG (CDI) (CCH) 1,551.00p 1.97%
Provident Financial (PFG) 2,614.00p 1.24%
Randgold Resources Ltd. (RRS) 8,905.00p 1.19%
Sky (SKY) 890.00p 1.14%
Burberry Group (BRBY) 1,279.00p 1.03%
Royal Dutch Shell 'A' (RDSA) 2,090.00p 0.89%
Royal Dutch Shell 'B' (RDSB) 2,128.50p 0.85%
TUI AG Reg Shs (DI) (TUI) 950.00p 0.80%
Merlin Entertainments (MERL) 474.10p 0.70%
Dixons Carphone (DC.) 335.00p 0.60%

FTSE 100 - Fallers

Rio Tinto (RIO) 2,411.50p -2.07%
Anglo American (AAL) 817.60p -1.73%
Tesco (TSCO) 163.35p -1.60%
BHP Billiton (BLT) 962.60p -1.45%
BT Group (BT.A) 389.75p -1.33%
Ashtead Group (AHT) 1,106.00p -1.16%
Glencore (GLEN) 184.35p -1.10%
Antofagasta (ANTO) 497.80p -1.03%
Travis Perkins (TPK) 1,533.00p -1.03%
Barratt Developments (BDEV) 413.40p -1.01%

FTSE 250 - Risers

Metro Bank (MTRO) 1,936.00p 2.06%
Hastings Group Holdings (HSTG) 194.90p 2.04%
Tullow Oil (TLW) 228.10p 1.69%
Dechra Pharmaceuticals (DPH) 1,224.00p 1.58%
Daejan Holdings (DJAN) 5,600.00p 1.54%
Thomas Cook Group (TCG) 64.20p 1.50%
IP Group (IPO) 151.20p 1.48%
Countryside Properties (CSP) 236.80p 1.41%
Micro Focus International (MCRO) 1,857.00p 1.36%
Millennium & Copthorne Hotels (MLC) 424.90p 1.17%

FTSE 250 - Fallers

Evraz (EVR) 157.90p -2.77%
Indivior (INDV) 263.10p -2.63%
Electrocomponents (ECM) 260.80p -2.32%
Essentra (ESNT) 633.50p -2.24%
Genus (GNS) 1,715.00p -2.11%
Kaz Minerals (KAZ) 132.50p -2.07%
Cairn Energy (CNE) 196.40p -1.95%
Weir Group (WEIR) 1,519.00p -1.94%
DFS Furniture (DFS) 213.20p -1.62%
Marshalls (MSLH) 259.10p -1.56%