London pre-open: Slow start expected as oil slumps, US earnings ahead

Markets were also treading lightly ahead of the unofficial start of US fourth-quarter earnings season, with aluminium giant Alcoai releasing its results after the closing bell on Wall Street. JPMorgan Chase & Co, Goldman Sachs and Well Fargo will also report this week.

City sources predict the FTSE 100 will open just five points higher than Friday’s close of 6,501.14.

Brent crude was down 1.8% at $49.23 a barrel early on, extending losses from the lowest level in over five and a half years.

Goldman Sachs cut its forecast for Brent in three months’ time to just $42 a a barrel, and said that prices will “need to stay lower for longer”.

“Brent may have recovered to close back above $50 at the end of the week but with prices opening lower overnight […] I think we're going to see plenty more volatility in the coming days as pressure mounts on oil producers to scale back production before prices get dangerously low,” said analyst Craig Erlam from Alpari UK.

Stocks to watch

Biopharmaceutical group Shire has announced it will acquire NPS Pharmaceuticals for $5.2bn in cash, in a deal which Shire says will boost its revenue and earnings growth profile, while creating new business opportunities worldwide. The $46.00 per share price in the transaction represents a 51% premium to NPS Pharmaceuticals's share price of $30.47 on 16 December and Shire said the deal will be entirely funded by the firm's cash resources, as well as existing and new bank facilities.

Oil and gas group Afren said it is looking at its “strategic options” for its 60% interest in the Barda Rash field, after analysis of the Kurdistan project showed a “material reduction” in reserve estimates. “Overall, the reservoirs have not performed according to previous expectations and the approved field development plan,” Afren said.

Housebuilder Taylor Wimpey said trading stabilised somewhat in the second half of 2014 as house-price growth eased, but painted an upbeat picture of the UK housing market as it lifted its margin guidance slightly. “As we enter 2015, we are encouraged by the more balanced market conditions, with a lower rate of price growth, which should create a healthy and more sustainable housing market,” said chief executive Pete Redfern.