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London open: Stocks rise ahead of payrolls report
London stocks rose in early trade on Friday as investors mulled UK house price data and eyed the release of the latest non-farm payrolls report.
At 0820 BST, the FTSE 100 was up 0.3% at 7,475.27.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “The FTSE 100 has a spring in its step as we end the week, buoyed by optimism that important jobs data from the US will support the current interest rate playbook.
“Fewer jobs are expected to have been added to the market in what is a crucial dataset for the Federal Reserve’s next interest rate decision. Since global policymakers are increasingly adopting a wait-and-see approach, it’s now time for the economy to prove things are moving in the right – cooler – direction. With this in mind, early indicators suggest the US markets are biding their time, with futures relatively flat.”
The payrolls report, unemployment rate and average earnings are all due at 1330 BST.
On home shores, investors were be mulling the latest data from Halifax, which showed that house prices fell again in September as high borrowing costs continued to dent the market.
House prices declined by 4.7% on the year, following a 4.5% drop in August. On a month-on-month basis, house prices were down 0.4% in September following a 1.8% decline the month before.
The average price of a home now stands at £278,601, which is around the level seen in early 2022.
Kim Kinnaird, director of Halifax Mortgages, said: “Activity levels continue to look subdued compared to recent years, with industry data showing lower levels of new instructions to sell homes and agreed sales. Borrowing costs are the primary factor, given the impact of higher interest rates on mortgage affordability. Against this backdrop, homeowners inevitably become more realistic about their target selling price, reflecting what has increasingly become a buyer’s market.
“However, with Base Rate now likely to be at or around its peak, we are seeing fixed rate mortgages deals ease back from recent highs. Wage growth also remains strong, which has helped with affordability, with the house price to income ratio now at its lowest level since June 2020 (6.2 in September versus 6.3 in August).”
Last month, the Bank of England stood pat on interest rates for the first time in nearly two years, at 5.25%.
Andrew Wishart, senior property economist at Capital Economics, said: “Looking ahead, the rise in long term-interest rates in financial markets has prevented the interest swap rates which fixed mortgage rates are based on from declining further.
“Therefore, we continue to think that mortgage rates will stay around their current high level until next summer. That will mean demand stays weak at the same time as the amount of homes up for sale is rising to more normal levels. The result will be further house price declines, of 5-6% on top of the 5% we have had already.”
Elsewhere, industry research showed that retail footfall eased in September as the unseasonably warm weather put off shoppers.
According to the latest BRC-Sensormatic IQ Monitor, total UK footfall decreased by 2.9% year-on-year in the five weeks to 30 September, further adding to August’s 1.9% decline.
Within that, footfall on high streets fell by 1.7% and by 2.4% in retail parks. The heaviest fall was seen in shopping centres, where footfall was 4% lower year-on-year.
Helen Dickinson, chief executive of the British Retail Consortium, said: “During the warmer-than-expected weather, footfall slowed in September, with fewer shoppers across all locations.
“High streets and retail parks held up slightly better as the returns to school helped increase the number of shopping visits at the start of the month.”
In equity markets, Aviva surged amid speculation that two potential suitors were running a slide rule over the business, attracted by its excess capital and strong cash flow. According to The Times, there is talk that the likes of Germany’s Allianz, Intact Financial Corporation of Canada and the Scandinavian group Tryg are considering their options, with at least one mulling a £6 a share proposal.
An American insurer is also rumoured to be interested in Aviva.
Pub chain JD Wetherspoon gained after saying it swung to a full-year profit as sales rose by over a tenth, though underlying growth has eased somewhat in the first quarter of the new financial year.
Shell was a little higher after the oil giant said its earnings from gas trading bounced back in the third quarter.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Aviva Plc | +9.58% | +37.20 | 425.50 |
| 2 |  |
Legal & General Group Plc | +3.28% | +6.90 | 217.30 |
| 3 |  |
Prudential Plc | +2.53% | +21.60 | 876.80 |
| 4 |  |
Direct Line Insurance Group Plc | +2.36% | +3.80 | 165.00 |
| 5 |  |
Halma Plc | +2.04% | +39.50 | 1,977.50 |
| 6 |  |
Crh Plc | +1.90% | +85.00 | 4,561.00 |
| 7 |  |
Phoenix Group Holdings Plc | +1.68% | +7.70 | 465.90 |
| 8 |  |
Melrose Industries Plc | +1.63% | +7.30 | 454.70 |
| 9 |  |
Hargreaves Lansdown Plc | +1.48% | +11.20 | 769.60 |
| 10 |  |
Lloyds Banking Group Plc | +1.43% | +0.61 | 42.78 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Coca-cola Hbc Ag | -2.70% | -59.00 | 2,124.00 |
| 2 |  |
Rentokil Initial Plc | -2.06% | -12.40 | 590.80 |
| 3 |  |
Unilever Plc | -2.01% | -81.00 | 3,949.50 |
| 4 |  |
Compass Group Plc | -1.13% | -23.00 | 2,020.00 |
| 5 |  |
National Grid Plc | -1.03% | -9.80 | 937.80 |
| 6 |  |
Severn Trent Plc | -0.95% | -22.00 | 2,286.00 |
| 7 |  |
Associated British Foods Plc | -0.90% | -18.00 | 1,972.00 |
| 8 |  |
Diageo Plc | -0.79% | -24.00 | 3,031.50 |
| 9 |  |
Smith & Nephew Plc | -0.62% | -6.00 | 959.20 |
| 10 |  |
Flutter Entertainment Plc | -0.60% | -80.00 | 13,200.00 |
US close: Markets tread water ahead of non-farm payrolls
US stocks finished flat to slightly lower on Thursday as investors chose to tread cautiously ahead of the much-anticipated non-farm payrolls report.
The Dow Jones Industrial Average finished down 0.03% at 33,120, the S&P 500 fell 0.13% to 4,258 while the Nasdaq slipped 0.12% to 13,220.
“Investors displayed mixed emotions on Thursday, with stocks pulling back while Treasury yields remained relatively stable, suggesting they continued to wear this week’s yield pain on their sleeves,” said Stephen Innes, managing partner at SPI Asset Management.
The yield on a 10-year US Treasury was down 2.2 basis points at 4.714%, as it continued to retreat after reaching a new 16-year high of 4.887% earlier in the week after Tuesday’s JOLTS survey pointed to a strengthening jobs market.
“Higher borrowing costs will likely continue weighing on the return on equity of S&P 500 companies, particularly growth stocks with high ROE, which may struggle in the higher rate environment,” Innes said.
Stocks gained on Wednesday after the ADP Employment Report showed that just 89,000 jobs were created in September, down from an upwardly revised 180,000 the previous month and well below the 160,000 expected by analysts.
However, the ‘official’ non-farm payrolls report, due out on Friday, can often contrast with the ADP figures and is expected to show that job creation eased to 170,000 last month, from 187,000 previously.
In economic data on Thursday, jobless claims edged up to 207,000 in the week to 30 September, from a revised 205,000 the previous week – more or less in line with the consensus forecast (210,000).
“The claims data on their own will not shift the Fed’s views, but we expect officials will need to see further softening in the September employment report due out tomorrow and beyond to prevent them raising rates one more time this year,” said economist Michael Pearce from Oxford Economics.
Carmakers fall
Shares in Rivian plummeted nearly a quarter after the electric carmaker launched a $1.5bn convertible bond offering, following a $1.3bn offering in March. The funds will go towards the launch of its R2 Compact SUV vehicle.
Sector peer Tesla was slightly lower on the same day that the Securities and Exchange Commission sued founder Elon Musk in regards to its investigation into his Twitter takeover. The billionaire failed to appear at the SEC’s San Francisco office three weeks ago and has since refused to appear for testimony.
Meanwhile General Motors was also out of favour on the news that it was heavily exposed to the US auto-safety regulator’s recall of ARC Automotive-manufactured air-bag inflators. GM vehicles account for 20m of the total 52m vehicles affected.
Amazon fell while Microsoft was flat after UK regulator Ofcom requested an antitrust probe from the Competition and Markets Authority over their dominance of the public cloud infrastructure services market.
Friday newspaper round-up: Elon Musk, Metro Bank, Mike Lynch
Elon Musk is under investigation by the US Securities and Exchange Commission over his $44bn takeover of social media giant Twitter, it was revealed on Thursday. The investigation concerns whether Musk broke federal securities laws in 2022 when he bought stock in Twitter, which he later renamed X, as well as statements and SEC filings he made about the deal. – Guardian
Sam Bankman-Fried’s crypto fraud trial gained steam on Thursday when the co-founder of his fallen exchange, Gary Wang, took the stand as a government witness in Manhattan federal court. His testimony came as the highly anticipated trial entered its third day. Bankman-Fried faces seven counts on fraud and conspiracy charges in relation to the implosion of his crypto exchange FTX and its related hedge fund, Alameda Research. – Guardian
Jeremy Hunt must not let Britain’s spending watchdog dictate tax policy, a leading think tank has warned. The Institute for Fiscal Studies (IFS) said the Chancellor should not be bound by the Office for Budget Responsibility’s (OBR) “short-run” forecasts about the cost of the Government’s flagship business investment tax break. – Telegraph
The Bank of England is closely monitoring depositors’ behaviour at Metro Bank for any sign of panic after reports that the lender is trying to raise up to £600 million to shore up a potentially shaky balance sheet. Robert Sharpe, Metro’s chairman, was due to meet senior officials at the Bank’s Prudential Regulation Authority yesterday for a previously scheduled meeting. Analysts said the Bank would be asking for daily, it not hourly, reports on flows, especially as Metro suffered sharp outflows in 2019 after an earlier spell of jitters about its financial strength. – The Times
Mike Lynch, the technology entrepreneur once regarded as a British Bill Gates, is trying to have criminal charges against him dropped in the United States. In May, after a long-running battle, Lynch was extradited to face fraud allegations over Hewlett-Packard’s $11 billion acquisition in 2011 of Autonomy, the software company he founded. – The Times
