London pre-open: Stocks seen lower amid Covid worries, ahead of Fed

London stocks were set for a weaker open on Wednesday amid concerns about a second wave of Covid-19, as investors eye the Federal Reserve meeting later in the day.

The FTSE 100 was called to open 19 points lower at 6,110.

CMC Markets analyst Michael Hewson said global stock markets appear to be getting a little "wobbly" as the latest earnings numbers paint a picture of a global economy that could start to face a challenging time in the weeks and months ahead.

"For all the optimism about a new US stimulus programme, the rising hopes of a vaccine, and the likelihood of central banks keeping monetary policy extraordinarily loose, the resurgence of coronavirus cases that are starting to get reported across the world is prompting the realisation that hopes of a v-shaped recovery is starting to look like pie in the sky," he said.

"A resurgence of Covid-19 cases in Xinjiang in China, Hong Kong, and Australia, as well as spikes in Spain and Belgium, along with other localised outbreaks across Europe has prompted concerns about a second wave, and thus jeopardising further lockdown relaxation measures as we head into August.

"US stocks finished the day lower last night, led by weakness in the tech sector, while markets in Europe had a rather more mixed session. As a result of the late slide in US markets, we look set to see a similarly weak start here in Europe, as we get set for the beginning of an earnings bonanza over the next three days, starting with Barclays and the UK banking sector today, followed by the tech titans of Apple, Amazon, Alphabet and Facebook later this week."

Investors will also be watching out for the latest Federal Reserve policy announcement. No change is expected is against this backdrop that today’s latest Fed meeting is set to take place with no changes in policy expected, however the virus outlook looks a lot different at this meeting than when the FOMC last met.

In corporate news, Barclays took a £3.7bn hit in coronavirus-related charges as interim profits more than halved and it warned of headwinds continuing into 2021. Pre-tax profits fell to £1.2bn from £3bn a year earlier, with net operating income down 20% to £7.8bn.

The bank said that second-half impairment charges were expected to remain above the level experienced in recent years, but below the interims "assuming no change in macroeconomic forecasts". It added that a decision on any dividend payments would be made at full year results.

French pharmaceutical giant Sanofi and GlaxoSmithKline have agreed to provide the UK with as many as 60m doses of their Covid-19 vaccine candidate, subject to final contract.

The vaccine candidate employs a combination of Sanofi's recombinant protein-based technology and GSK's pandemic adjuvant technology. Both firms also reiterated their commitment to making both drugs available globally.