London pre-open: Stocks seen up after S&P 500 hits fresh high

(Sharecast News) - London stocks were set to gain at the open on Friday after the S&P 500 hit a fresh high as another inflation reading eased concerns about a rate hike in September.

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

Ipek Ozkardeskaya, senior analyst at Swissquote, argued that optimism over the latest inflation readings in the US looks "somewhat disconnected from reality".

She said: "The S&P 500 traded at a fresh record high as this week's US inflation data showed easing in the July numbers. On Wednesday, the consumer price index showed a retreat in headline and core CPI to 3.4% and 2.5% y-o-y, respectively, while Thursday's producer price index showed that headline PPI fell sharply to 4.7% y-o-y in July, down from 5.5% a month earlier and lower than the 4.9% pencilled in by analysts. Core PPI came in at 4.2%.

"I see two issues with the numbers. First, they remain consistent with inflation running comfortably above the Federal Reserve's (Fed) official 2% target. No one knows if the Fed under its new Governor Warsh will continue to look at the traditional metrics to gauge where rates are going, but at current levels, US inflation remains too high to ignore. Kevin Warsh himself had expressed concern about US inflation running persistently above target for half a decade in his first press conference (although I reckon that things may have changed since then!)

"And two, the easing in price pressures was clearly driven by a sharp retreat in oil prices on Middle East hopes that month. Since then, tensions have flared up, pushing oil prices higher.

"As such, this week's optimism looks somewhat disconnected from reality. If the reason we see the market rally is that US inflation eased in July, optimism could fade away quickly. (Good news is that inflation is not the only reason! Keep reading)."

In corporate news, Aviva posted a strong set of interim results, with operating profits rising 24% to £1.33bn as it continued to build momentum across its core markets and benefited from the integration of Direct Line.

Operating earnings per share increased 10% to 31.8p, while IFRS return on equity improved to 20.3%, up from 18.2% a year earlier. However, IFRS profits for the period fell to £418m from £819m, reflecting negative investment variances linked to hedging and integration. Aviva declared an interim dividend of 14p - up 7% year-on-year.

Diversified Energy confirmed it has had preliminary discussions about a possible acquisition of oil and gas company Birch Resources. Talks are ongoing and remain at an early stage and no agreement has been reached, it said.

It added that there is no certainty any transaction will occur, nor as to the terms on which any transaction might proceed.

The statement came after Bloomberg reported that Diversified was in advanced talks to buy Elliott Investment Management-backed Birch for more than $1.7bn in cash.

Identity verification tech provider GBG lowered revenue guidance after secondquarter trading in its Americas Identity unit weakened, with higherthanexpected volume attrition at several key customers holding back growth.

The company now expects FY27 revenuegrowth guidance of 1-3%, down from midsingledigit expectations and warned that, given normal salescycle timing, the shortfall is unlikely to be recovered within the current financial year.