London pre-open: Stocks to nudge up as US avoids government shutdown

London stocks were set to nudge up at the open on Monday after the US narrowly avoided a government shutdown over the weekend.

The FTSE 100 was called to open six points higher at 7,614.

CMC Markets analyst Michael Hewson said: "While European markets managed to finish last week on a positive note it wasn’t enough to prevent a quarterly decline for both the DAX and CAC 40, although the FTSE 100 managed to buck the negative trend, helped by solid gains for the likes of Rolls-Royce, BP, Shell, as well as housing with Taylor Wimpey leading the way in this sector.

"US markets had a similarly disappointing quarter, as well as finishing the week on a downswing as both the Nasdaq and the S&P500 posted their worst monthly performance this year, on concerns that US lawmakers wouldn’t be able to put together a deal to avoid a government shutdown.

"As it turns out a deal was struck over the weekend as Republican and Democrats kicked the can down the road and reset the clock for another 45 days until 17th November when we’re likely to have to go through the same political circus. Nonetheless the fact that US lawmakers have bought themselves more time has come as a relief with markets in Europe set to open higher this morning."

On home shores, the latest survey from Nationwide showed that annual house prices were down 5.3% in September, in line with the decline seen in August. On the month, meanwhile, prices were flat in September, having fallen by 0.8% a month earlier.

The average price of a property now stands at £257,808.

Nationwide chief economist Robert Gardner said: "Housing market activity remains weak, with just 45,400 mortgages approved for house purchase in August, circa 30% below the monthly average prevailing in 2019 before the pandemic struck. This relatively subdued picture is not surprising given the more challenging picture for housing affordability. For example, someone earning an average income and purchasing the typical first-time buyer home with a 20% deposit would spend 38% of their take home pay on their monthly mortgage payment - well above the long-run average of 29%.

"However, investors have marked down their expectations for the future path of Bank Rate in recent months amid signs that underlying inflation pressures in the UK economy are finally easing, and with labour market conditions softening. This in turn has put downward pressure on longer term interest rates which underpin fixed rate mortgage pricing (see chart below). If sustained, this will ease some of the pressure on those remortgaging or looking to buy a home."

In corporate news, United Utilities unveiled its plans for the 2025-2030 period, projecting expenditure of £13.7bn, leading to 8.7% yearly growth in regulated capital value.

The plan would support 30,000 jobs in the north west, including 7,000 new positions, and provide affordability schemes worth £525m, aiding over one-sixth of its customers.

Additionally, the submitted plan emphasised customer, community, and environmental priorities, including significant reduction plans for combined sewer overflow spills and enhanced water supply security for over three million homes.

South West-focused water and wastewater group Pennon said it traded in line with expectations in its first half as it submitted plans to Ofwat to invest £2.8bn in water quality and resilience.

The investment, for South West Water, relates to the K8 period between 2025 and 2030, and will create 2,000 jobs along with 1,000 apprenticeships and graduates.