FTSE 100 preview: Index to open lower amid US and Germany concerns

The FTSE 100 index looks set to start the week on the back foot, pressured by worries over political uncertainty in Germany and concerns over the US tax reform. Rolls-Royce Holdings (LON:RR) will be in focus today amid reports that it is planning to sell its diesel parts maker L’Orange.

Downbeat start ahead

IG’s opening calls suggest that the Footsie will start the day 0.22 percent lower at 7,364. Sentiment is likely to be subdued today following news that Germany’s Chancellor Angela Merkel failed to reach an agreement to form a coalition government. In the US, stocks closed lower on Friday, amid ongoing concerns over the country’s tax reform.

“Tax reform is the big macro story that’s driving everything,” said Luke Bartholomew, investment manager at Aberdeen Standard Investments, as quoted by CNBC. There is “cautious optimism at the moment,” about tax reform getting done this year. Asian shares have also slipped into the red this morning, with investors digesting the news out of Germany.

“It’s not a total surprise, and this kind of political change will not derail the German economy,” Masafumi Yamamoto, chief currency strategist for Mizuho Securities, told Reuters. “We are seeing this kind of reaction in the Asian session, but we need to see how Europe will react to this news later.”

In the UK, the FTSE 100 closed little changed on Friday, shedding 6.26 points to end the session 0.08 percent lower at 7,380.68.

Today’s agenda

Today’s macroeconomic releases include Germany’s producer price index due out at 07:00 GMT. There are no blue-chip companies scheduled to update investors on their recent performance this morning. In company news, The Sunday Times reports that Rolls-Royce boss Warren East is ramping up his revival plan for the company after putting a German components business on the auction block.