Stocks in London fell on Friday at midday despite a positive outlook from the CBI for the UK economy, ahead of a US jobs report reading.
The FTSE 100 index was down 47.62 points, 0.6%, at 8,237.71. The FTSE 250 was down 105.46 points, 0.5%, at 20,610.42, and the AIM All-Share was down 2.27 points, 0.3%, at 794.27.
The Cboe UK 100 was down 0.6% at 821.06, the Cboe UK 250 was down 0.6% at 18,031.68, and the Cboe Small Companies was down 0.2% at 16,873.14.
In European equities on Friday, the CAC 40 in Paris was down 0.7%, while the DAX 40 in Frankfurt was down 0.8%.
‘After a week of steady recovery from Monday‘s sell-off, the FTSE 100 returned to the back foot on Friday, dragged lower by retail and banking stocks,’ said AJ Bell Investment Director Russ Mould.
NatWest fell 1.6%, Lloyds fell 1.9%, JD Sports Fashion fell 3.1% and B&M European Value Retail fell 1.4%.
‘Wall Street paused for breath last night ahead of non-farm payrolls data later and, more significantly, a meeting of the Federal Reserve next week. The Fed isn’t expected to cut rates just yet, but investors will be watching closely for any indication a move on this front is coming,’ Mould added.
Goldman Sachs estimates non-farm payrolls rose by 160,000 in May, somewhat below consensus of 185,000.
‘When the labor market is tight, job growth tends to slow disproportionately during the spring hiring season and particularly in May - when the seasonal factors expect more hiring than is realistic with fewer workers available - and all five of the alternative measures of employment growth we track suggest a below-consensus report,’ the investment bank said.
Goldman expects the unemployment rate to remain unchanged at 3.9%, in line with consensus.
On Thursday, the European Central Bank cut interest rates for the first time in five years, while the Bank of England is also gearing up to ease monetary policy, although the General Election may delay its first move.
No such change is expected next week by the US Federal Reserve though.
The pound was quoted at $1.2794 at midday on Friday in London, higher compared to $1.2783 at the equities close on Thursday. The euro stood at $1.0892, up against $1.0882. Against the yen, the dollar was trading at JP¥155.53, lower compared to JP¥156.03.
Stocks in New York were called virtually little changed. The Dow Jones Industrial Average and the S&P 500 index were called flat, whilst the Nasdaq Composite was called up 0.1%.
In economic news, the average UK house price fell by 0.1% month on month or or around £170 in cash terms in May, according to an index. The typical property value was £288,688, which was 1.5% higher than a year earlier, Halifax said.
Amanda Bryden, head of mortgages, Halifax, said: ‘Market activity remained resilient throughout the spring months, supported by strong nominal wage growth and some evidence of an improvement in confidence about the economic outlook.’
Andrew Wishart, senior UK economist at Capital Economics said the ‘slight decline in the Halifax house price index in May confirmed that the increase in mortgage rates since the start of the year has caused house prices to stall.’
Wishart thinks the rise in mortgage rates has a little ‘further to go as delays to the first cut in bank rate have fed through to a rise in the interest swap rates that mortgages are priced off.’
As a result, in the near term, house prices will ‘stagnate at best,’ he believes.
Separately, housebuilder Bellway flagged an increase in selling prices as it reported stronger trading through the spring selling season.
The Newcastle Upon Tyne, England-based company said it was now fully sold for the current financial year, with volume and margin guidance in line with previous forecasts.
Bellway said it is on track to deliver around 7,500 homes this year, down 31% from 10,945 the year prior, and continues to expect a reduction in the underlying operating margin of at least 600 basis points from 16% a year ago.
The average selling price is now anticipated to be around £305,000, up 3.4% from previous guidance of £295,000 mainly due to changes in product mix.
Peel Hunt predicted minor increases to earnings forecasts.
Shares in Bellway rose 1.4%.
Elsewhere, the CBI said Britain’s economy will see faster-than-expected growth this year and next as the outlook brightens after a tough 2023.
The business group has upped its forecasts for UK growth to 1% in 2024 and 1.9% in 2025 thanks to an expected pick-up in consumer spending as inflation falls back and wages remain robust. It marks an upgrade on the CBI’s December predictions for expansion of 0.8% in 2024 and 1.6% in 2025 and comes after the UK eked out growth of a paltry 0.1% in 2023, having slipped into a technical recession at the end of last year.
The report follows an upgrade this week from fellow business group, the British Chambers of Commerce, which is now predicting growth of 0.8% in 2024 and 1% in 2025.
In the FTSE 100, shares in gold and silver miner Fresnillo fell 2.3% as the gold price slipped after the People’s Bank of China said its bullion holdings were unchanged at the end of May ending a massive buying spree that had run for 18 months.
Gold was quoted at $2,333.96 an ounce at Friday midday, lower against $2,374.90 at the London close on Thursday.
In the FTSE 250, C&C Group plunged 8.5% after it said Chief Executive Patrick McMahon would step down after accounting errors during his tenure as chief financial officer led the firm to adjust prior year financial figures.
Dublin-based drinks maker C&C, best known for its cider brands Magners and Bulmers, said the total value of the adjustments in aggregate represent an underlying operating profit charge of €5 million. This covers the period 2021 to 2023.
In addition, C&C expects to record an exceptional prior year charge with respect to onerous Apple contracts of €12 million in financial 2023 which was initially expected to be recorded in financial 2024.
The total value of the adjustments is €17 million.
C&C highlighted ‘accounting mistakes and errors of judgement,’ and ‘failures’ in the group’s reporting framework.
C&C explained McMahon was CFO during the period to which the adjustments relate and acknowledges the relevant shortcomings.
As a result, he he decided to step down as CEO, a decision C&C accepted ‘with regret.’
The company stressed figures for financial 2024 to 2027 were unchanged. C&C also pledged a further €15 million share buyback.
On AIM, Redcentric fell 6.7% after WIIT said it does not intend to make a bid for the company after the London market close Thursday.
At the end of May, Wiit, a cloud and cybersecurity service provider, listed in Milan, said it was in talks to potentially acquire Harrogate, England-based IT service provider Redcentric.
Brent oil was quoted at $80.25 a barrel at midday in London on Friday, up from $79.69 late Thursday.
Still to come on Friday, the US jobs report at 1330 BST.
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