UK stocks are set to claw back much of yesterday's losses this morning, tracking modest gains seen in the US overnight ahead of the release of UK inflation figures today.
City sources predict the FTSE 100 will open around 18 points above yesterday's close of 6,754.64.
US stocks closed a choppy session with small gains on Monday, as better-than-expected economic data and M&A activity outweighed concerns about the ongoing violence in Iraq.
Alpari UK Analyst James Hughes said: "Despite the continued violence in Iraq and Russia turning off gas supplies to Ukraine, stocks on Wall Street pushed higher at the close yesterday leading many to look towards a stronger open for Europe this morning.
"However, a negative session in Asia has poured cold water on that with the markets now instead focusing on the geo-political uncertainty as well as what could be a pretty busy day of economic data. Markets are also digesting a cut by the International Monetary Fund (IMF) to its US growth forecast, as Christine Lagarde urges the Fed to keep interest rates low and raise the minimum wage in order to kick start the economy."
The IMF yesterday cut its forecast for growth in the US and urged the Federal Reserve to keep interest rates low to boost the economy.
The Washington-based lender said it expects 2% growth this year, down from its April projection of 2.8%, citing the effects of a harsh winter on the first quarter. It predicts 3% growth in 2015.
In Britain, today's inflation figures are expected to show prices fell in May, supporting the Bank of England's (BoE) argument to keep interest rates at a record low.
Analysts predict consumer prices fell to 1.7% in May from 1.8% a month earlier, drifting further away from the central bank's target of just under 2%.
The BoE's forecasts published in May showed that inflation will remain close to the 2% target over the next few years.
In this morning's company releases, oil major Royal Dutch Shell revealed it is to raise around $5bn after tax through the sale of a hefty chunk of its stake in Australian energy group Woodside Petroleum. The Anglo-Dutch group said it would sell a total of 156.5m shares, equal to a 19% stake, to take its holding in the company from 23.1% to 4.5%.
Engineering firm Weir Group said its guidance for the full year remains unchanged despite growing currency headwinds and mixed trading conditions in the second quarter. In a capital markets presentation to shareholders and analysts today, the company is expected to confirm that overall trading in April and May was in line with expectations and consistent with its recent outlook.
A buoyant hotel market has helped Premier Inn owner Whitbread to book a 6.9% rise in like-for-like sales in the first quarter of the year.
Surrey based house builder Crest Nicholson said business has continued to flourish in a good housing market and, with an improving economic backdrop, it remains confident for the full-year. Pre-tax profit rose to £38.4m for the six months ended April 30th from £28.1m, while revenue for the period advanced to £241.1m from £192.0m a year earlier. An interim dividend of 4.1p has been proposed compared to no payment in 2013.
Industrial rental group Ashtead reaped the benefits of heavy investment in its fleet as profits hit record levels in the year to April 30th, helping earnings beating expectations comfortably. The FTSE 100 company, which is seen as a play on the slow-burning US non-residential construction recovery, lifted underlying revenues 24% to £1.48bn and earnings before interest, tax, depreciation and amortisation 34% to £685.1m.