London pre-open: Stocks seen lower as oil weakens; construction PMI eyed

London stocks looked set for a negative open on Tuesday amid weaker oil prices.

The FTSE 100 was set to open 12 points lower than Monday’s close at 6,682.

CMC Markets’ Michael Hewson said: “The slide in oil prices since the peaks in June appears to have gone almost unnoticed throughout a lot of July, however the selloff has gained pace in the last week or so with Brent prices down over 15% from their peaks, on the realisation that markets have overestimated the speed that the supply glut would be worked off.

“US prices have lost 9% in the last week alone, as rig counts have continued to rise and gasoline inventories have refused to drift lower.”

On the data front, UK construction PMI is at 0930 BST. In the US, personal income and spending and the PCE deflator are at 1330 BST.

Hewson said Tuesday’s construction PMI numbers are unlikely to be any better than Monday’s manufacturing figures.

In corporate news, insurance company Direct Line Group posted its half year report for the six months to 30 June on Tuesday, with gross written premiums for ongoing operations 3.9% higher, driven by strong growth in motor in-force policies - up 2.5% - and a 9.5% increase in premium rates.

The FTSE 100 firm said its combined operating ratio from ongoing operations continued to be strong at 89.6%, or 0.2pts higher, including the Flood Re levy impact of 1.6pts.

Motor current-year attritional loss ratio improved by 1.0pt, the board reported.

Operating profit from ongoing operations decreased £12.2m to £323.6m, which Direct Line attributed to £18.5m lower investment gains

Its return on tangible equity was 23.1%, up from 21.2%, while profit before tax decreased £16.5m to £298.5m.

InterContinental Hotels booked in a solid first half performance and despite the uncertain environment in some markets, remains confident in the outlook for the rest of the year.

While reported revenues of $838m for the six months to 30 June were down 8% on the previous year's and short of analyst expectations, underlying sales, which excludes the effect of disposals and exchange rates, rose 5% to $771m, with operating profits up 2% at the reported level and 10% underlying to $345m.

First-half silver and gold production rises of 6% and 23% respectively helped to boost Fresnillo EBITDA earnings to $474m from $317.9.

Silver production was 25,212 ounces, while gold was 447,569. The company said it was well-placed to meet 2016 silver production guidance of 49m – 51m ounces, and recently increased 2016 gold production guidance of 850,000 – 870,000 ounces.

Revenues rose 17.9% to $886.9m. The dividend has been ramped to 8.6 cents a share from 2.1 cents.