London pre-open: FTSE to open lower after China inflation misses forecasts

London’s FTSE 100 is expected to open 20 points lower on Thursday after China inflation slowed more than expected in May.

The China government’s consumer price index rose 2.0% year-on-year in May, down from 2.3% growth the previous month, as food prices fell. Analysts had pencilled in a 2.2% increase.

The producer price index remained stuck in negative territory for the 51st straight month, falling 2.8% in May from a year ago, compared to April’s 3.4% dip and analysts’ estimates for a 3.2% decline.

“Looking ahead, we expect consumer price inflation to remain near current levels for the rest of the year,” said Julian Evans-Pritchard, China economist at Capital Economics.

“Admittedly, we expect non-food inflation to rise as the drop in oil prices during the second half of 2015 provides a weaker base for comparison.

“In contrast, we anticipate a further recovery in producer price inflation in the coming quarters as commodity price deflation continues to ease, with a return to positive territory by the end of year now looking likely.”

Still to come, UK trade data at 0930 BST, US initial jobless claims at 1330 BST and US wholesale inventories at 1500 BST.

Meanwhile, oil prices will continue to be monitored after Brent and West Texas Intermediate closed above the $50 a barrel mark on Wednesday following government data which showed a drop in US weekly crude inventories.

The Energy Information Administration said crude inventories fell 3.2 million barrels in the week to June 3, compared with analysts' expectations for a decrease of 2.7 million barrels. At 0733 BST Brent crude rose 0.38% to $52.72 per barrel and West Texas Intermediate increased 0.60% to $51.54 per barrel.

In company news, total first quarter sales at Home Retails Group's Argos chain grew by 2.6% to £868m with net new space contributing 2.5%, mainly as a result of store openings in the previous financial year. The company also warned that it would have to increase redress provisions by £30m for the full year after charging excess fees to late paying customers. It added that it was on track to complete its merger with Sainsbury's in the third quarter. Like-for-like sales grew by 0.1%, although the company said the “cannibalisation impact from the new space added in the previous financial year was around 1% and therefore Argos' underlying like-for-like sales increased by approximately 1%”.

Astrazeneca has entered into a commercialisation agreement with Aspen Global Incorporated (AGI), part of the Aspen Group, for rights to its global anaesthetics portfolio outside the US for an upfront consideration of $520m.

HSBC has been given regulatory approval to sell its entire business in Brazil to Banco Bradesco S.A for $5.2bn.

Vodafone confirmed local rumours surrounding its New Zealand operation, announcing it was merging with local subscription television provider Sky to create an integrated telecommunications and media group. The FTSE 100 firm said once combined with Sky - which is unrelated to the British subscription television firm of the same name - Vodafone will be a 51% shareholder of the combined group as a result of a consideration comprising an issue of nre Sky shares and NZD 1.25bn in cash, equivalent to an enterprise value of NZD 3.44bn.