London pre-open: Stocks to edge down as energy worries persist
London stocks were set to edge lower at the open on Tuesday following a mixed Asian session, as investors continue to fret about the energy crisis and assess the appointment of Liz Truss as the next UK prime minister.
The FTSE 100 was called to open around 10 points lower at 7,277.
CMC Markets analyst Michael Hewson said: "European markets got off to a poor start to the week yesterday in the wake of last week’s announcement that Gazprom wouldn’t be reopening its Nord Stream 1 pipeline as was expected over the weekend.
"Russia blamed the pipeline problems on EU sanctions for the sustained closure, and that unless these were lifted the closure was likely to remain permanent.
"This shouldn’t have been a surprise to most people, given that it was widely expected that Putin would play this card at some point. Now that he has, Russia doesn’t really have anywhere else to go, and while natural gas prices did shott higher, they closed well off the highs of the day.
"That doesn’t mean that the upcoming winter won’t be difficult, it will be but the focus now appears to be on trying to reduce energy usage, as well as diversifying to other fuel sources.
"Yesterday also saw the confirmation of Liz Truss as the new UK Prime Minister as she heads to Balmoral and her audience with the Queen. Once that is done, the next focus will be on the fiscal response to protect consumers as well as businesses from the sharp rise in energy prices that is coming our way in October.
"The pound managed to recover off its intraday lows yesterday in the aftermath of yesterday’s news, however the key test will be on how markets view the government's next steps when it comes to dealing with the current crisis. Opinion appears mixed on whether all of the bad news is currently priced in to the pound, however it does appear to have squeezed quite a bit higher after the lows of yesterday.
"While some short-term borrowing is unavoidable given the current challenges, the main focus will be on what steps the government intends to take to keep energy prices down and deal with the UK’s longer term energy security."
In corporate news, equipment rental company Ashtead said both revenue and profits had grown in the three months ended 31 July, driven by "ongoing momentum" in supportive end markets.
Ashtead said revenues were up 25% in the first quarter at $2.25bn, with rental revenues improving 26% to $2.07bn, while operating profits increased 26% to $594.0m and underlying earnings improved 22% to $1.03bn.
Berkeley Group is on track to meet full-year profit guidance, the house builder said, despite a “volatile” operating environment.
Updating on trading ahead of its annual general meeting, Berkeley said it had continued to trade “well” during the first four months of the current financial year.
“The good level of demand continues to support pricing above business plan levels, which is sufficient to cover cost increases on a blended basis across Berkeley’s developments,” it noted.
As a result, the firm said it was on track to meet pre-tax profit guidance of £600m for the current year, and £625m in the year to 30 April 2024.