London pre-open: Stocks to slide on Brexit woes
London stocks were expected to open sharply lower on Monday as investors continue to worry about the impact of the UK’s vote to leave the European Union.
The FTSE 100 was set to open 168 points lower at 5,970.
CMC Markets’ Michael Hewson said’ “Despite a late recovery from the lows last week, European markets had already looked as if they would open sharply lower this morning, after US markets rolled over and fell sharply into their close on Friday, with the S&P500 hitting a three month low, only hours after posting its highest close of the year.
“That was even before the events of the weekend, where investors are now having to contend with the additional turmoil of a political class intent on fighting amongst themselves like ferrets in a sack. Having had the weekend to absorb the shock of last week’s Brexit vote, markets are now faced with the prospect of even more uncertainty of the breathtaking incompetence of the incumbent government for not having had a contingency plan in place for such a binary outcome as last week’s vote.”
There are no major UK data due, but in the US, Markit PMI services PMI is at 1445 BST.
In corporate news, Aviva said its Solvency II coverage ratio remained close to the top of its working range of 150% - 180% after the UK's decision to leave the European Union.
The insurer said its capital position was resilient to market stress, adding that Brexit will have no significant operational impact on the company.
“At Aviva's 2015 preliminary results, published in March 2016, Aviva reported a Solvency II ratio of 180% and a surplus of £9.7bn. Aviva has one of the strongest and most resilient balance sheets in the UK insurance sector with low sensitivity to market stress and over the last four years Aviva has tripled its economic capital surplus,” it said in a statement.
“Aviva will continue to monitor the technical implications of the vote to leave, which will only be resolved after several years of negotiating a new relationship between the UK and the EU.”
International defence, security, transport and energy company Ultra Electronics issued a pre-close trading statement on Monday, ahead of its interim results for 2016, and confirmed trading in the first half has been as expected.
The FTSE 250 firm said based on exchange rates on 23 June, before the major weakening of sterling after the EU referendum, its expectations for the full year remain unchanged other than the impact of the disposal of Ultra ID.
“The cash proceeds of this sale will be used to reduce debt,” Ultra’s board said, adding “the group’s performance for 2016 will be second-half weighted, as in previous years.”
EasyJet warned that profits were lower than expected in the third quarter and that UK decision to Leave the EU is likely to mean revenues in the second half of the year will be lower than last year, while costs will be higher due to oil and currency movements.
Following the Brexit vote, the budget airline predicted "additional economic and consumer uncertainty is likely this summer and as a consequence it is expected that revenue per seat at constant currency in the second half will now be down by at least a mid-single digit percentage" compared to the second half of 2015.