London pre-open: Stocks seen up on positive US cues

London stocks were set to rise at the open on Wednesday following gains on Wall Street, as investors welcomed upbeat comments on the economic outlook from Federal Reserve chair Jerome Powell.

The FTSE 100 was called to open around 42 points higher.

At an event in Sintra, Portugal, Powell said the Fed had made "quite a bit of progress" in fighting inflation and that it could hit the central bank’s target as soon as next year.

"We've made quite a bit of progress in bringing inflation back down to our target, while the labour market has remained strong and growth has continued," he said.

Market participants will also be mulling the latest data out of China, which showed that service sector growth eased to an eight-month low in June.

The Caixin services purchasing managers’ index fell to 51.2 from 54.0 in May, missing expectations for a reading of 53.4 but above the 50.0 mark that separates contraction from expansion.

Zichun Huang, China economist at Capital Economics, said: "The sharp fall in the Caixin services PMI is another sign that China’s economy lost some momentum last month. Its official counterpart also declined, with the average of the two dropping to its lowest level since August.

"But the manufacturing sector continued to make steady gains, and we still expect economic activity to hold up relatively well in the coming months, supported by fiscal stimulus and strong exports."

On home shores, investors were looking ahead to the UK election on Thursday amid expectations the Labour party will be voted into power for the first in 14 years.

In corporate news, Vodafone UK and Virgin Media O2 have agreed to extend and enhance their existing mobile network sharing agreement for more than a decade, forming a new company that will invest £11bn in the project.

The agreement is subject to the planned merger of Vodafone and Three. If that deal goes through then Virgin Media O2 will buy spectrum “establishing three scaled mobile network operators each with better alignment of spectrum holding”, the companies said in a statement.

Elsewhere, Keywords Studios has agreed to be taken over by private equity firm EQT in a £2.1bn deal.

Under the terms of the agreement, EQT will pay 2,450p per share in cash, which is a premium of around 66.7% to the closing share price on 17 May, the last day before the start of the offer period.