London pre-open: Stocks seen up on US gains

London stocks were set to rise at the open on Tuesday following solid gains on Wall Street.

The FTSE 100 was called to open 44 points higher at 7,676.

CMC Markets analyst Michael Hewson said: "We saw a cautious start to the week for European markets yesterday with the CAC 40 and DAX both treading water close to last week’s record closing highs, and today’s economic numbers expected to show further evidence of weak economic activity in Europe.

"US markets were slightly more upbeat with the S&P500 setting fresh record highs ahead of tomorrow’s Fed rate meeting and today’s earnings numbers from Microsoft, Alphabet and AMD all of which will be reporting after the closing bell, while the other three from this week’s big cap earnings releases from Amazon, Apple and Meta are all due to report Thursday.

"The strong finish in the US could see European markets open at, or close to recent record highs themselves later this morning."

Industry data out earlier showed that shop price inflation saw a notable slowdown at the start of the year, s price growth reached its lowest level since May 2022.

The British Retail Consortium (BRC) and NielsenIQ shop price index for 1 January to 7 January showed a significant drop in annual shop price inflation to 2.9%, from 4.3% in December.

Within the index, non-food inflation saw a substantial decrease, falling to 1.3% in January from 3.1% in December.

That marked a sharp drop below the three-month average rate of 2.4%, and positioned non-food inflation at its lowest point since February 2022.

Food inflation experienced a deceleration as well, declining to 6.1% in January from 6.7% in December.

The reduction in food inflation was part of a consistent trend, with January marking the ninth consecutive month of deceleration in the category.

It also brought food inflation to its lowest level since June 2022.

"Some New Year cheer as January shop price inflation slid to its lowest level since May 2022," said British Retail Consortium chief executive officer Helen Dickinson.

"Non-food goods drove the fall, as many retailers offered heavily discounted goods in their January sales to entice consumer spend amidst weak demand.

"Good news for the morning brew as the price of tea and milk fell, while evening tipples remained more expensive on the back of increased alcohol duties."

Looking at the specific fresh food and ambient food categories, both also demonstrated notable declines in inflation rates.

Fresh food inflation slowed to 4.9% in January from 5.4% in December, with that rate being below the three-month average of 5.6%.

Similarly, ambient food inflation decelerated from 8.4% in December to 7.7% in January, falling below the three-month average rate of 8.5%.

The current ambient food inflation rate represented the lowest level recorded since July 2022.

In corporate news, first-half profits at Diageo fell by more than a tenth as weakness in the Latin American and Caribbean (LAC) regions persisted, but the drinks giant pointed to improving trading conditions in the latter part of the financial year.

Reported operating profit fell by 11.1% to $3.3bn, with the operating profit margin shrinking by 329 basis points to 30.3%.

Organic operating profits were down 5.4%, but if LAC was excluded they would have grown by 0.9%.

Looking ahead, despite "continued global economic volatility", Diageo said the rate of profit decline would ease compared with the first half, while organic sales growth would pick up.

Travel food outlet operator SSP Group held full-year guidance after a strong rise in first-quarter sales as rail and air passenger numbers continued to recover after the Covid pandemic.

The Upper Crust and Ritazza coffee chain owner said like-for-like sales for the three months to December 31 rose 14.3% to £788m. On a total basis they were up by 21%.

“While we face into macroeconomic and political uncertainty, we believe that demand for travel will remain resilient and the industry is well set for both short-term and long-term structural growth,” SSP said in a trading update.

“The new financial year has started well, with revenue momentum being maintained and inflationary pressures on operating costs being mitigated through our ongoing productivity and pricing initiatives.”

SSP still expects like-for-like sales growth for the full year of between 6% - 10%, net contract gains in the region of 5% (with a further contribution of around 2% from acquisitions), underlying core earnings of £345-£375m and underlying operating profit within the range of £210-235m.