Stocks in London were making little progress on Friday morning, as the market awaited the key catalyst of the afternoon’s US nonfarm payroll data.
‘Today’s jobs data will be very important in providing a final conclusion to the week’s so far stronger-than-expected US jobs figures,’ comments Swissquote’s Ipek Ozkardeskaya. ‘The US economy is expected to have added near 147,000 new nonfarm jobs in September, the unemployment rate may have steadied near 4.2% and wages may have grown slightly slower than they did last month, but still by 3.8% on a yearly basis.
‘A set of soft jobs report from the US has the potential to fuel the doveish Fed expectations, weigh on the US yields, the dollar and perhaps keep appetite in equities robust. A stronger-than-expected set of figures, on the other hand, should bring the Fed doves back on earth, lead to a further rebound in the US yields and the dollar and probably weigh on equity investors’ appetite.’
Ahead of this, the latest construction PMIs for the eurozone painted a gloomy picture.
The HCOB eurozone construction purchasing managers’ index rose to 42.9 points in September from 41.4 in August, but remained firmly in contraction territory.
‘The eurozone’s construction sector shows no signs of easing...There’s no room for optimism right now. Order intakes are shrinking alarmingly, and purchasing volumes are in the doldrums,’ commented Tariq Kamal Chaudhry, economist at Hamburg Commercial Bank.
As Chaudry noted, the ‘red lantern’ from Germany has passed to France, which saw one of its lowest readings in a decade.
The UK’s construction PMI follows shortly.
The FTSE 100 index was down 6.01 points, 0.1%, at 8,276.51 at 0900 BST, having briefly seen slight gains in the first hour of trading. The FTSE 250 was up 81.80 points, 0.4%, at 20,821.86, and the AIM All-Share was up 3.22 points, 0.4%, at 737.06.
Among large-caps, Frasers rose 0.4%.
The Sports Direct owner confirmed that it has successfully applied to luxury fashion retailer Mulberry for a subscription to 4.0 million shares at 100 pence each, and it will consequently hold a 36.9% to 37.3% stake in Mulberry.
Mulberry, famous for its handbags, on Tuesday had rejected a Frasers takeover approach, after receiving the backing from its majority shareholder.
The smaller Mulberry lost 7.5%.
On AIM Versarien was among the winners, rising 5.5%.
The advanced materials engineering company said its pipeline opportunities at October 1 stood at £4.7 million, up from £1.6 million one year prior.
Chief Executive Stephen Hudge also said he was ‘optimistic’ Versarien will be able to progress the sale of Total Carbide.
The Cboe UK 100 was up 0.1% at 828.58, the Cboe UK 250 was up 0.6% at 18287.71, and the Cboe Small Companies was down 0.1% at 16,701.53.
In European equities on Friday, the CAC 40 in Paris was up 0.6%, while the DAX 40 in Frankfurt was up 0.1%.
Meanwhile in France, according to Insee, overall industrial output climbed 1.4% month-on-month in August, after a 0.2% rise in July from June. FXStreet-cited consensus had expected another 0.2% rise for August.
The pound was quoted at $1.3143 early on Friday in London, up compared to $1.3110 at the equities close on Thursday. The euro stood at $1.1027, higher against $1.1013. Against the yen, the dollar was trading at JP¥146.22, down compared to JP¥146.72.
In Asia on Friday, the Nikkei 225 index in Tokyo was up 0.2%. The Hang Seng index in Hong Kong was up 2.3%. The S&P/ASX 200 in Sydney closed down 0.7%. Mainland Chinese markets remain closed for National Day.
In the US on Thursday, Wall Street ended lower, with the Dow Jones Industrial Average down 0.4%, the S&P 500 down 0.2% and the Nasdaq Composite marginally lower.
‘The expectation of another jumbo [US Federal Reserve] rate cut is melting by the day,’ Swissquote’s Ozkardeskaya said. ‘Activity on Fed funds futures gives less than one third chance of another 50bp cut from the Fed in the November meeting. Especially given that the recent data hasn‘t been *that* bad, really.
‘Released earlier this week, both the jolts and the ADP reports have surprised to the upside. The ISM manufacturing index showed further weakness in both activity, prices and employment, but yesterday’s ISM services revealed a stronger expansion both in terms of activity and prices...All looked well besides employment. And overall, Citi‘s US Surprise Index - which has hit a bottom this summer – rebounded strongly since then, and stepped into the positive territory lately, meaning that there are more positive surprises to the data these days than negative surprises and that the Fed doves have probably went far ahead of themselves.’
Brent oil was quoted at $78.14 a barrel early in London on Friday, continuing to climb from $76.56 late Thursday. This helped to boost FTSE 100 oil majors BP and Shell, rising 1.2% and 0.5% respectively.
‘Global headlines were shaken yesterday by the news that Israel is considering striking Iran’s oil facilities, and that Joe Biden may let Israel do it,’ said Swissquote’s Ozkardeskaya. ‘It’s a complex chain of events, but the possibility of Israel targeting Iran’s oil infrastructure is definitely raising eyebrows around the world and giving a decent energy boost to oil prices... The upside potential is clearly present, the rising tensions if coupled with the threat of lower Iranian supplies, should give a further reason to the oil bulls to extend their tactical long positions.
‘But it’s important to keep in mind that the gains that are made on the back of geopolitical tensions will – sooner rather than later – be given back.’
Gold was quoted at $2,663.00 an ounce against $2,651.03 at the London close on Thursday.
Still to come on Friday’s economic calendar, US unemployment and nonfarm payrolls data will be released in the afternoon.
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