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London open: FTSE gains after landslide Labour victory; housebuilders rally
London stocks rose in early trade on Friday, with housebuilders pacing the gains as Brits woke up to the first Labour government in 14 years.
At 0820 BST, the FTSE 100 was up 0.3% at 8,268.04, while the FTSE 250 was ahead 0.2% at 20,659.20. Sterling was 0.1% firmer against the dollar at 1.2767 and flat against the euro at 1.1803.
At 0754 BST, with eight seats left to declare, Labour had a confirmed 410 seats, up 211, while the Tories were on 119, down 246. The Liberal Democrats were on 71, a gain of 63 and the SNP held on to eight seats, a loss of 37, in a shocking night where it surrendered seats to a resurgent Labour north of the English border in a voter backlash over scandals within the SNP.
At the 2019 general election the Conservatives had a majority of 80, with 365 seats to Labour’s 203, illustrating the startling decline of the Tories and how Starmer turned around his party’s fortunes around.
Chris Beauchamp, chief market analyst at IG, said: “Labour will form the next government in the UK, but compared to 2019 it has been accompanied by little fanfare on financial markets.
“This moment has been on the cards since Liz Truss’ short-lived premiership, and the lack of movement overnight in sterling is a testament to how much of a foregone conclusion this has been.
“There has been some buying of the pound among IG clients over the past 24 hours, but the lack of movement overnight in FX markets meant interest was limited as the news came in. The new PM has his work cut out for him, but for the moment financial markets are prepared to give him the benefit of the doubt.”
On the macroeconomic front, the US non-farm payrolls report for June is due at 1330 BST, along with the unemployment rate and average earnings.
On home shores, data from Halifax showed that house prices remained largely unchanged in June, reflecting a subdued market.
Average house prices edged down just 0.2% on a monthly basis in June. On an annual basis, growth was unchanged on May, at 1.6%. As a result, a typical UK house now costs £288,931.
Amanda Bryden, head of mortgages at Halifax, said: “This continued stability in house prices – rising by just 0.4% so far this year – reflects a market that remains subdued, though overall activity has been recovering.
“For now, it’s the shortage of available properties, rather than demand from buyers, that continues to underpin higher prices.
“Mortgage affordability is still the biggest challenge facing both homebuyers and those coming to the end of fixed-term deals.”
In equity markets, housebuilders gained following Labour’s landslide victory, with Vistry, Persimmon, Taylor Wimpey, Barratt and Crest Nicholson all up.
RBC Capital Markets said in a research note that the Labour Party has “big plans” for the sector.
“If election pledges turn into policy, today is more than just a new day in housebuilding, it is the dawning of a new age,” it said.
“In the next 100 days we are likely to see the reinstatement of housing targets, the refining of greenbelt and the reform of planning, and by the end of the year the newest version of Labour may have announced a new generation of new towns.
“Over the last few years housebuilders’ potential has been hamstrung, but over the next few this potential is likely to be unleashed. If the new Government’s walk matches its talk we expect the sector to re-rate, and in the very short term we suspect that the talk alone will be enough to lift share prices. In our view, whilst all housebuilders benefit from the anticipated changes the biggest winners will be Taylor Wimpey, Persimmon and Vistry.”
Elsewhere, Shell nudged higher as it said in a second-quarter update note that it would take a hit of up to $2bn after it paused construction work on a biofuels plant in Rotterdam and sold a refinery in Singapore.
It also said that integrated gas production would be within expectations of 940,000 to 980,000 barrels of oil equivalent per day.
In broker note action, Lloyds was boosted by a rating upgrade at BNPP Exane, while Close Brothers was higher after an initiation at ‘buy’ at Deutsche Bank.
Softcat was hit by a downgrade to ‘underperform’ at Jefferies.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Ocado Group Plc | +5.11% | +15.60 | 321.10 |
| 2 |  |
Persimmon Plc | +4.50% | +64.50 | 1,496.50 |
| 3 |  |
Taylor Wimpey Plc | +4.20% | +6.25 | 155.05 |
| 4 |  |
Barratt Developments Plc | +3.37% | +16.60 | 508.60 |
| 5 |  |
Direct Line Insurance Group Plc | +2.97% | +5.80 | 200.80 |
| 6 |  |
Smurfit Kappa Group Plc | +2.94% | +104.00 | 3,636.00 |
| 7 |  |
Berkeley Group Holdings (the) Plc | +2.75% | +130.00 | 4,854.00 |
| 8 |  |
Fresnillo Plc | +2.52% | +14.50 | 591.00 |
| 9 |  |
Centrica Plc | +2.28% | +3.20 | 143.65 |
| 10 |  |
Kingfisher Plc | +2.20% | +5.60 | 259.90 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Bhp Group Limited | -1.40% | -33.00 | 2,322.00 |
| 2 |  |
Hsbc Holdings Plc | -1.27% | -8.80 | 682.50 |
| 3 |  |
Rio Tinto Plc | -1.18% | -63.00 | 5,296.00 |
| 4 |  |
Bp Plc | -0.89% | -4.35 | 485.95 |
| 5 |  |
Standard Chartered Plc | -0.60% | -4.40 | 734.80 |
| 6 |  |
Shell Plc | -0.53% | -15.50 | 2,884.50 |
| 7 |  |
Barclays Plc | -0.27% | -0.60 | 223.75 |
| 8 |  |
International Consolidated Airlines Group S.a. | -0.14% | -0.25 | 174.40 |
| 9 |  |
Aviva Plc | -0.10% | -0.50 | 480.50 |
| 10 |  |
Shell Plc | -0.00% | -0.00 | 1,894.60 |
US close: Stocks finish shortened session with gains after poor data
US stocks finished mostly higher after a shortened trading session with the S&P 500 and Nasdaq both hitting yet more record highs following a flurry of weak economic data which raised hopes that the Federal Reserve may start loosening monetary policy in September.
The Dow closed just 0.06% lower, but the S&P 500 rose 0.51% to a new high of 5,537.02 and the Nasdaq gained 0.88% to 18,188.30. The New York Stock Exchange closed at 1300 EDT and will remain closed on Thursday for Independence Day.
Investors were focusing on a continued increase in jobless claims and lower-than-expected private-sector payrolls on Wednesday.
“Overall, there is a growing body of evidence that the US economic data is turning lower and could point towards a potential recession later this year,” said Kathleen Brooks, research director for XTB.
“It also puts the spotlight firmly on the September Fed meeting, when the market seems to think that the Fed could cut rates.”
Economic data misses the mark
Private sector employment in the US rose less than expected in June, according to figures released on Wednesday by ADP. Employment increased by 150,000 from May, versus expectations for a 165,000 jump. May’s gain was revised to 157,000 from 152,000.
The Institute for Supply Management’s service-sector purchasing managers’ index fell from 53.8 for May to 48.8 in June, well below the 52.5 expected by the market.
Jobless claims rose 4,000 last week to 238,000 from the previous week’s upwardly revised level of 234,000, remaining near the ten-month high of 243,000 earlier in June, according to the Labor Department.
Mortgage applications fell 2.6% in the week ended 28 June, according to the Mortgage Bankers Association of America.
Job cuts fell 23.6% in June to 48,786, but remained 19.8% higher than June 2023, according to Challenger Gray & Christmas. It was the highest tally for a June since 2020.
America’s trade deficit in goods widened to $100.62bn in May, according to the Census Bureau, the largest reading in two years and following a downwardly revised print of $97.95bn in the previous month.
Market movers
Paramount Global jumped 7% on the back of reports that Skydance Media has struck a preliminary agreement to snap up controlling shareholder National Amusements.
Amazon.com finished lower on the back of a recent filing that revealed founder and executive chair Jeff Bezos intends to sell $5bn of shares this year.
Quest Diagnostics rose strongly after agreeing to buy LifeLabs, a Canadian provider of community laboratory tests, for about $985m including debt.
Friday newspaper round-up: Co-op ad, British Gas, Tata Steel
Publicans have called on the Co-op to pull a “disgraceful” TV advert that urges the supermarket’s customers to watch the Euro 2024 football tournament at home rather than going to the pub. The Co-op Food ad says it is hard to see the TV screen in the pub and suggests customers instead “stay in” and take advantage of a beer and pizza deal the supermarket is promoting. – Guardian
British electricity prices were double those paid in France and Spain in the spring, with the steel industry saying the disadvantage could hinder UK efforts to switch to greener technology. UK companies paid nearly £66 per megawatt hour (MWh) for wholesale electricity in the second quarter of 2024, well over double the French and Spanish equivalents in the same period, according to analysis of industry data by the lobby group UK Steel. – Guardian
British Gas has filed a record number of winding-up petitions against small businesses, threatening to tip restaurants and care homes into bankruptcy. British Gas Trading sought winding-up orders against 111 companies in 2023 and a further 60 were filed so far this year. It marks a significant increase on previous years, with just 38 filed in 2022 and 13 in 2021. – Telegraph
Tata Steel has snubbed unions and closed one of two blast furnaces at its biggest plant under plans to switch to a greener form of production. The company said it had ceased operations of blast furnace 5 in Port Talbot, south Wales, as part of its restructuring programme to stem “unsustainable” losses of more than £1 million a day. The decommissioning of the blast furnace and associated facilities started immediately after the last liquid iron had been produced. The second blast furnace is due to be shut down in September. – The Times
Two of the biggest hitters in private equity, KKR and CVC, are among the bidders to have put forward offers of more than €3 billion for B&B Hotels. Goldman Sachs’ investment division, which is looking to offload the hotels chain, is understood to have received a handful of proposals pitched between €3.2 billion and €3.3 billion. – The Times
