London pre-open: Stocks seen up as rate hike fears ease

London stocks were set to rise at the open on Friday as worries about more aggressive rate hikes by the US Federal Reserve eased.

The FTSE 100 was called to open 52 points higher at 7,092.

CMC Markets analyst Michael Hewson said: "With the Federal Reserve July meeting less than two weeks away, and the unwelcome nature of the stronger than expected inflation numbers, markets had increasingly convinced themselves that instead of raising rates by 75bps that the Fed might be tempted to go further by 100bps. This view was reinforced by Atlanta Fed President Raphael Bostic when he said ‘everything is in play’ for July 27th.

"The risk of this outcome was tempered by comments from Federal Reserve governor Christopher Waller, who said that he thought the market was getting ahead of itself by 100bps. This appeared to be a softening of his tone from his comments a few weeks ago when he said the Fed was ‘all in’ on inflation. This was followed by comments from St. Louis Fed President James Bullard that he wasn’t in favour of a 100bps move at this time, which in turn helped pull US markets off their lows of the day, even though they still finished the day lower.

"This shift of tone looks set to translate into a more positive tone for European markets this morning, as we look to open higher.

"These interventions by two of the Fed’s most hawkish members appear to reduce the likelihood that the Fed will do 100bps at this point, but one can never say never. These interventions do appear to have reduced the risk of such an outcome."

In corporate news, luxury fashion house Burberry said first-quarter same-store sales increased just 1% year-on-year as revenues were impacted by lockdowns across mainland China.

Burberry said retail revenues for the 13 weeks ended 2 July came to £505.0m, up 5% at reported currency and unchanged at constant exchange rates. The company added that it continues to target high-single digit revenue growth and 20% margins in the medium-term and also expects a full-year currency tail wind of roughly £190.0m on revenue and approximately £90.0m adjusted operating profit.

Sales, marketing and support services group DCC said it delivered "strong growth" in the "seasonally less significant" first quarter of its new trading year.

DCC said group operating profit was in line with expectations and well ahead of the prior year, driven by strong growth in DCC Energy. The FTSE 100-listed firm added that its DCC Healthcare unit traded "robustly and in line with expectations", while its DCC Technology wing also recorded strong growth, benefitting from its recent acquisition of Almo.