London pre-open: Stocks seen sharply lower following heavy losses on Wall Street

Stocks in London were expected to open sharply lower on Monday following significant weakness in the US at the end of last week.

The FTSE 100 was set to open 100 points lower than Friday’s close at 6,676.

CMC Markets’ Jasper Lawler said: “European stocks are set to turn sharply lower on the open as they play catch-up with the heavy losses seen on Wall Street. The FTSE 100 is expected to open nearly one-and-a-half percent lower, taking it beneath 6,700 to a five-week low.

"Friday was the worst day for US stocks since June 24, the results day for Britain’s EU referendum. Sticks in the United States might have sold off the most on Friday but the trigger seems to have been European. Global bond markets, including US treasuries jolted on Thursday when ECB president Mario Draghi said the governing council did not discuss extending its asset purchase program. Bondholders suddenly didn’t like the idea of holding onto a negative-yielding asset which could fall in price if there’s no central banking buying alongside them."

There are no major data scheduled for release on either side of the pond on Monday but investors will eye speeches from Fed governors Lockhart and Brainard, particularly following comments by Fed governor Tarullo, Boston Fed President Rosengren and Dallas Fed President Kaplan last Friday.

In corporate news, the Financial Conduct Authority hiked the minimum amount of regulatory capital required of Aberdeen Asset Management, in effect raising its total regulatory requirement to roughly £475m.

Following the FCA's periodic review, the regulator decided to eliminate the benefit of insurance mitigation when modeling operational risk for Pillar 2 purposes while adding an allowance, or so-called scalar, to cover any unsighted and unquantifiable risks that might emerge.

However, Aberdeen´s available capital was already comfortably above the new requirement, the fund manager said in a statement.

Indeed, the fund manager had already been applying its own self-imposed scalar, equal to £100m, which it would now deduct from that imposed by the FCA.

Associated British Foods said it expected full year earnings to be slightly ahead of last year's, with revenues from its Primark retail business up 11% and sales from the grocery and sugar arms modestly higher.

Although a previous surplus has morphed into a £200m pension deficit and currency moves had a mixed effect, the 53 weeks to 17 September were mostly rosy for AB Foods, with operating profit ahead of last year and earnings per share marginally ahead.

Property developer John Laing Infrastructure Fund said it expects to see a slowdown in market activity due to the Brexit vote, as the company reported a rise in profit due to international expansion and project divestments.

For the six months ended 30 June, profit before tax rose significantly to £72.3m from £14.5m last year, due to an increase in the company’s portfolio, positive exchange rate movements, a reduction in discount rates and profits from disposals of two projects.