London pre-open: Flat start expected, Chinese inflation at five-year low

A subdued start was expected for equity markets in the UK on Tuesday as investors focused on economic data and kept an eye on developments in Greece.

City sources predict the FTSE 100 will open five points higher than Monday’s close of 6,837.15.

Figures out overnight showed that the annual rate of Chinese inflation slowed dramatically to a five-year low of 0.8% in January from 1.5% the month before, missing consensus forecasts of a slowdown to 1%.

Analysts at Barclays said “there are a number of reasons to worry that deflation in China could reappear” and the an easing of inflation “should induce the People’s Bank of China to ease monetary policy further”.

UK industrial production figures are due out on Tuesday morning, along with economic growth estimates from the NIESR, while wholesale inventories and small business optimism data is due out later on in the States.

Stocks to watch

In a surprise announcement, paper and packaging group Mondi revealed that its earnings for the full year would be at least 20% higher than the previous year. The FTSE 100 company's unscheduled update reported that basic earnings per share would be between €0.96 and €0.99 in the calendar year, up between 20% and 24% on the €0.80 last year, with underlying earnings also up between 12% and 15% to between €1.06 and €1.09.

UK engineering group Babcock expects to hit forecasts for the full year after strong trading momentum continued into the third quarter, despite the collapse in oil prices causing “uncertainty” in some divisions. The company, which serves markets such as defence, energy, telecommunications and transport, said it “continues to experience strong demand for its services through existing contracts and bidding and business development activities remain buoyant”.

Housebuilder Bellway said market conditions "remain favourable" and as a result of continued demand for new homes across the country it has seen an increased average of reservations per week in recent months.