London pre-open: Stocks seen flat as investors eye US GDP

London stocks were set for a broadly flat open on Friday following uninspiring leads from the US and Asia, as investors looked to some key US growth figures and a meeting between UK Prime Minister Theresa May and US President Donald Trump.

CMC Markets’ Michael Hewson said: “Today’s first iteration of US Q4 GDP will be the final legacy of the Obama Presidency, and the economy that he has left for the new incumbent.

“How the US economy performs from here will largely be down to Donald Trump, even if Obama laid the foundations. Expectations are for a modest slowdown from the 3.5% growth seen in Q3 to 2.2%. A large part of this slowdown is likely to be as a result of lower exports, given that the high Q3 number was boosted by a large jump in soybean exports, due to a shortage in South America. This isn’t likely to be repeated, while personal consumption is also expected to come in lower.

“On a side note UK Prime Minister Theresa May is in Washington hoping to knock off some of the rougher edges of the new US President when it comes to some of his recent foreign policy announcements. Initial discussions may also take place on the framework for a future trade deal, which could well strengthen the Prime Ministers hand in her upcoming Brexit negotiations, particularly if she is able to act as a bridge between the US and the EU.”

There are no major UK data releases due, but investors will eye the release of fourth-quarter US gross domestic product figures at 1330 GMT.

In corporate news, BT’s third quarter revenue increased but earnings were down as the telecoms giant deals with an accounting scandal at its Italian business, while it also faces a “challenging” outlook in the UK.

For the quarter ended 31 December 2016, revenue was up 32% to £6.12bn, compared to the previous year, while pre-tax profit fell 37% to £526m and basic earnings per share were down 59% to 3.8p.

The boards of food retailer Tesco and wholesaler Booker Group announced on Friday that that they have reached an agreement on the terms of a recommended share and cash merger to create the UK's leading food business.

In their joint statement, the boards said the combined group would bring benefits for consumers, independent retailers, caterers, small businesses, suppliers, and colleagues, as well as delivering significant value to shareholders.

Under the terms of the merger, each Booker scheme shareholder would receive 0.861 new Tesco shares and 42.6p in cash, representing a value of £3.7bn for Booker’s ordinary share capital.