London pre-open: Stocks seen muted as Fed meeting gets underway

London stocks were set for a muted open on Tuesday as the US Federal Reserve’s two-day policy meeting kicks off.

The FTSE 100 was called to open just five points higher at 7,311.

CMC Markets analyst Michael Hewson said: "There was a distinct lack of direction for European markets yesterday, with a weaker US dollar helping to act as a modest support for stocks more broadly, with the exception of the DAX which fell back on reports that Gazprom had reduced gas flows through Nord Stream 1 due to a turbine problem.

"This move by Gazprom prompted European gas prices to spike higher and shifting the focus back to yesterday’s German IFO business survey for July which slipped to a two-year low, with the head of the Institute saying that the German economy is on the cusp of recession.

"US markets also experienced an underwhelming session, having hit six-week highs last week there appears to be a reluctance to push things too much higher, as we gear up for a big week of earnings, with the Nasdaq taking the brunt of the declines yesterday, as today’s Fed meeting gets underway.

"This weak finish looks set to translate into a lower open for European markets."

In corporate news, budget airline easyJet said it currently expects fourth quarter capacity to be around 90% of pre-Covid pandemic levels with load factors above 90% as it narrowed third-quarter losses.

The company reported a group headline loss before tax for the three months to June 30 of £114m, down from the £318m last year.

Catering group Compass said that underlying revenues had more than doubled in three months ended 30 June, with all three of the company's trading regions operating above 2019 levels.

Compass said third-quarter underlying revenues were up 109%, with North American revenues up 112%, while revenues from Europe and the rest of the world were 104% and 106% stronger, respectively.