London pre-open: Stocks seen lower after Moody's downgrades US credit rating

(Sharecast News) - London stocks were set to fall at the open on Monday as sentiment took a hit after Moody's downgraded its credit rating on the US.

The FTSE 100 was called to open around 30 points lower.

Moody's announced late on Friday that it was cutting the rating to Aa1 from the highest triple-A rating.

"This one-notch downgrade on our 21-notch rating scale reflects the increase over more than a decade in government debt and interest payment ratios to levels that are significantly higher than similarly rated sovereigns," it said.

Danske Bank said: "This move underscores the grim US fiscal outlook and highlights the absence of political willingness in Washington to tackle the issue."

On home shores, investors will be mulling the latest house price index from Rightmove, which showed that house prices edged higher in May, although the rate of growth was notably smaller than usual for the time of year.

UK house prices rose by 0.6% in May, or by 1.2% year-on-year. That compares to April's 1.4% uplift.

The average house price now stands at a record high of �379,517, while agreed sales were up 5% year-on-year.

However, Rightmove said May's price increase was the lowest for this time of year since 2016, as supply continued to catch up with demand.

The number of available homes for sale is now at a 10-year high, while the amount of new properties coming to market is 14% higher year-on-year.

May also suffered from a dip in demand following changes to stamp duty thresholds in April.

Rightmove's Colleen Babcock said: "It's another new price record this month. But having seen a May price record for the last five years, it appears to be driven more by seasonal factors given that new buyer demand has slowed.

"This month's price increase being the lowest in May for nine years is a sign of a market that favours buyers and is more subdued than usual."

However, Rightmove also acknowledged that the latest cut to Bank Rate could boost both buyer affordability and activity later in the year.

The Bank of England trimmed rates last week by 25 basis points, to 4.25%, the fourth reduction in the current cycle and second so far this year. Analysts expect at least one more cut by the end the summer.

In corporate news, troubled bus and rail operator Mobico reported a 9% rise in first-quarter revenues, driven by a strong performance in Spain, while the UK and Germany reported declines.

Revenue from the ALSA division in Spain surged by 13%, while the UK and Germany were down 2% and 3% respectively. North America, where the group is offloading its school bus operations, rose 13%.

Drinks giant Diageo reiterated guidance for full-year organic sales and operating profits after a solid pickup in underlying growth in the third quarter.

Organic net sales increased by 5.9% in the three months to 31 March, compared with a 1.0% increase in the first half, though this was mainly a result of "significant phasing benefits" which are expected to reverse in the fourth quarter.

The company also gave its first financial estimate of the impact of tariffs on its business, calculating a $150m hit on an annualised basis before any mitigation measures.