(Alliance News) - Stocks in London are set to open slightly lower on Tuesday, after a weak performance on Wall Street following a strong US PMI print that prompted fears about the US Federal Reserve's rate hike trajectory.
IG says futures indicate the FTSE 100 index of large-caps to open down 12.5 points, 0.2%, at 7,555.04 on Tuesday. The FTSE 100 index closed up 11.31 points, 0.2%, at 7,567.54 on Monday.
UK retail sales growth picked up last month, figures on Tuesday showed, as the festive shopping season kicked off. However, sales remained below the current inflation rate, suggesting volumes have weakened on a year before.
According to the latest British Retail Consortium-KPMG monitor, retail sales climbed 4.2% on year in November, topping the three- and 12-month average growth rate of 2.6%.
On a like-for-like basis, sales rose 4.1%, beating the 12-month average of 1.2% and a three-month average of 2.3%.
"Despite facing huge cost pressures, retailers are doing all they can to keep prices affordable for all their customers. But, the cost of living crisis means many families might dial back their festive plans. Yet, with three weeks to go, there is still plenty of time for the Christmas cheer to bring sales home this Christmas," BRC Chief Executive Helen Dickinson said.
The UK grocery market survey for the 12 weeks that ended November 27 is released by Kantar at 0800 GMT on Tuesday.
The dollar was stronger early on Tuesday, with sterling was quoted at USD1.2177, lower than USD1.2189 at the London equities close on Monday. The euro traded at USD1.0479, lower than USD1.0515. Against the yen, the dollar was quoted at JPY137.21, up versus JPY136.42.
Gold was quoted at USD1,769.12 an ounce early Tuesday, lower than USD1,776.79 on Monday, while Brent oil fetched USD83.11 a barrel, lower than USD84.95.
"Gold fell along with the major currency pairs today as the dollar found support on the back of some stronger-than-expected US macro data," City Index and FOREX.com analyst Fawad Razaqzada explained.
Readings of the US service sector painted a mixed picture on Monday. Survey results from S&P Global offered a bleak outlook, though ISM's similar survey of activity was more bullish.
The seasonally adjusted S&P Global US services PMI business activity index registered 46.2 points in November, down from 47.8 in October. At below the 50.0 no-change mark, the score shows the sector remains in contraction.
The fall in business activity was largely linked to lower new orders and subdued client demand. The rate of contraction was the fastest since August and among the sharpest on record, according to S&P Global.
The Institute for Supply Management's tracker picked up, however, leading to investor concern that the Fed may not yet take its foot off the monetary policy tightening pedal. The ISM services index rose to 56.5% last month, well above the 50% threshold indicating growth and defying expectations that activity would ease as US consumers draw down on their savings.
Stocks in New York took fright on Monday, with the Dow Jones Industrial Average ending down 1.4%, the S&P 500 down 1.8%, and the Nasdaq Composite down 1.9%
In Asia on Tuesday, the Japanese Nikkei 225 index was up 0.2%. In China, the Shanghai Composite was down 0.2%, while the Hang Seng index in Hong Kong was down 1.3%.
The S&P/ASX 200 in Sydney closed down 0.5%.
The Reserve Bank of Australia on Tuesday decided to increase its cash rate target by 25 basis points to 3.10%, and signalled more rate hikes are to come. The move was in line with market consensus, as cited by FXStreet. The central bank also increased the interest rate on exchange settlement balances by 25 basis points to 3.00%.
Tuesday's economic calendar has a UK construction PMI at 0930 GMT, and US trade data at 1330 GMT.
The local corporate calendar has half-year results from equipment rental firm Ashtead Group, first-quarter numbers from heating and plumbing products company Ferguson and annual figures from concessions operator SSP Group.
By Elizabeth Winter, senior markets reporter
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