- FTSE 100 closes 76 points higher
- Wall Street advances after April payrolls beat
- British Airways owner, IAG, raises profit guidance
4.40pm: FTSE 100 rebounds
The FTSE 100 ended the week on a stronger note, up 1% to finish at 7,778 points, but failed to gain any ground over the past five days despite renewed confidence in the US economic outlook.
“This afternoon’s bounce still leaves the FTSE 100 down for the week, but with a broad swathe of gainers on the index it looks well-positioned to continue its rebound beyond the long weekend," noted IG's Chris Beauchamp.
“Few would have put ‘market rally’ as the result of a strong payrolls report this afternoon, but that is where we are. 13 successive payrolls reports have come in better than expected, and markets are taking this report as a clear sign of US economic strength which will drive earnings higher, even with the potential for interest rate increases.”
3.55pm: Upbeat end to difficult week
The FTSE 100 index headed into the last half of trading in London ahead of the long Coronation holiday weekend hovering near the session peak, with the UK benchmark set to finish a difficult week and start to the month on an upbeat note after today’s above-forecast US payrolls report.
Michael Hewson, chief market analyst at CMC Markets UK noted: “After spending the week being buffeted by concerns about the US banking system, the latest US jobs numbers showed a US economy that is still creating jobs at a decent clip, with 253k jobs added, comfortably beating expectations, and saw the unemployment rate fall to 3.4%, even as wages went up to 4.4%.
“The strong report was slightly overshadowed by a negative -149k adjustment to the previous 2 months and did take some of the gloss over the broader numbers, however, they don’t support the idea that the US economy is struggling. What the numbers do suggest is the US labour market remains resilient and pushes back on the idea of rate cuts in the short term.”
He pointed out that the FTSE 100 was dragged lower over the week by the likes of banking blue-chips Lloyds, Barclays, and NatWest, while oil giant BP also joined them in the basement after results this week, even though all of them have managed to finish the week on an up note.
Hewson noted that today’s results saw British Airways owner IAG report a surprise operating profit during the first quarter, as well as raising its full-year guidance, while Holiday Inn owner IHG posted a 34% rise in full-year revenues to $3.8bn while operating profits rose to $628mln.
3.40pm: Oil slicker
Oil prices jumped on Friday but were still set for a third straight week of losses amid fears over the economic impact of global interest rate hikes and slowing Chinese demand.
UK Brent crude rose 3.6% to $73.70 a barrel, while US West Texas Intermediate (WTI) was up 4.3%, at $71.46 rallying after four days of declines that sent the contract to lows last seen in late 2021.
In spite of the gains, Brent remained on track to finish the week with a decline of about 5.5%, while WTI was set for a 7% loss.
Fawad Razaqzada market analyst at City Index and FOREX.com noted: “A fter a big drop, oil prices have staged an impressive bounce off their lows in the last couple of days. Yet it remains to be seen whether this is driven by just short-covering, or actual buying in the hope that prices have bottomed.
“If we do get some confirmation, this would certainly boost the WTI outlook, especially in light of the OPEC’s big supply cuts and falling US oil inventories.”
3.15pm: Proposals pinged
Back at the HSBC AGM, and shareholders have rejected a proposal to split the business and spin off the global bank's Asian arm.
The proposal, which was backed by the lender's largest shareholder - Chinese insurer Ping An Asset Management which owns an 8% stake - was voted down earlier at the annual meeting in Birmingham.
Resolutions 17 and 18 on the agenda were tabled by a group of investors led by Ken Lui, and called for a strategic review of the bank, which included the potential spinoff and a proposal for fixed dividends.
Only around 20% of shareholders voted in favour of each resolution.
2.50pm: Wall Street advances
The FTSE 100 index held firm as US stocks moved higher at the open as investors weighed up April’s jobs report which showed the US economy added more jobs than expected last month, while employment growth and wage growth both eased.
Around 20 minutes after the opening bell in New York, the Dow Jones Industrials Average had added 420 points or 1.3% at 33,547, the S&P 500 and the Nasdaq Composite both jumped 1.2%.
Evelyn Partners chief investment strategist Daniel Casali said the key takeaway from today’s jobs data was that both employment growth and wage rates were slowing, increasing the likelihood of the Fed pausing its interest rate hiking cycle.
“This latest non-farm payrolls of 253,000 is below the 12-month moving average of 339,000, indicating a softening employment trend ahead,” Casali said.
“Importantly, employment growth has slowed to an annual 2.9% increase in April, a steady deceleration over the past year. Average weekly hours in the private sector have tailed off to their lowest level since the pandemic and is an early indicative signal that businesses are cutting back on labour.”
However, he noted that, even with this softening in the jobs and wage data, there was still a long way to go before the Fed could feel comfortable that the labor market has eased sufficiently to be consistent with 2% inflation over time.
“So, while the Fed may be unlikely to cut interest rates to match the downward shift in the Fed Futures market, the US Central Bank is still coming to an end in its hiking cycle,” Casali said. “Provided that interest rate expectations do not rise further, it could provide the backdrop for equities to continue their recovery.”
2.30pm: Food for thought
Analysts at Barclays believe Tesco PLC is the preferred option of the UK’s two remaining listed grocery retailers, trumping J Sainsbury PLC to the top spot.
Following results from the pair in recent weeks, the Barclays analysts said it was time to compare. Tesco penned a 4% rise in free cash flow to £3.75bn, while Sainsbury’s recorded a 24% growth to £635mln. Underlying earnings before interest, taxes, depreciation, and amortization (EBITDA) sat at £4.25bn for Tesco and £2.14bn at Sainsbury’s meanwhile.
“We tend to see more upside potential in Tesco’s share price,” analysts noted, and “find that Tesco is generally cheaper on earnings-based measures”.
“Sainsbury generally offers a slightly higher free cash flow yield” though, they added.
Classing both stocks as ‘overweight,’ the Barclays analysts confirmed each supermarket was “performing relatively well in market share terms” and that there was potential for “sentiment on the UK grocery sector [to] improve later in 2023 as food inflation reduces”.
They reiterated price targets for both, pegging Sainsbury’s at 300p and Tesco at 320p against current share prices of 282.00p and 285.50p, respectively.
2.10pm: US jobs boost
The FTSE 100 index and US stock futures held their gains following data showing the US economy added more jobs than expected during April, a sign of continued strength in the labor market amid inflationary pressures.
According to new data from the Bureau of Labor Statistics, total non-farm payroll employment rose by 253,000 last month, above the 180,000 new jobs expected by Wall Street analysts.
The unemployment rate slipped to 3.4%, while analysts had expected a slight uptick to 3.6%.
Employment in professional and business services, health care, leisure and hospitality, and social assistance continued to trend up in April, the Bureau noted.
John Leiper, chief investment officer at Titan Asset Management, commented: “Really positive jobs number in April and a drop in the unemployment rate suggests the economy continues to hold-up better than expected. That’s also reflected in the average hourly earnings rate which rose 0.5% over the last month.
"This is good news for the economy and may push back recession forecasts. My main concern is that markets have been conditioned to view good news as bad news when it comes to tightening financial conditions in the ongoing battle against inflation. The pick-up in wage inflation could help feed that narrative. Let's see what the inflation number looks like next week… but I see risks skewed to higher-for-longer and I don’t buy into market pricing for a rate cut over the next few months.”
1.45pm: Some of the risers and fallers on the junior market
Mirriad Advertising PLC (AIM:MIRI, OTCQX:MMDDF) enjoyed another 20% jump after announcing on Wednesday it had been chosen to collaborate with none other than Microsoft to build a new application programming interface (API) for integrating the Microsoft Azure cloud-computing platform and its AI capabilities for various client-driven use cases.
Corcel PLC (LSE:CRCL) shares rose 12.3% following news the firm has sold a 20% interest in its Mt. Weld Rare Earth Element project to Extraction Srl for A$1mln.
TPXimpact Holdings PLC (AIM:TPX) added 2.4% to 41.5p after the digital transformation consultancy said trading for the past quarter was at the higher end of previous forecasts and raised its guidance for the year ahead.
Bushveld Minerals Limited (AIM:BMN, OTC:BSHVF) shares rose 18% after the firm revealed it has signed a non-binding term sheet to refinance its existing convertible loan note of approximately US$45mln due in November 2023.
Proton Motor Power Systems PLC (AIM:PPS) saw its shares jump 2.3% to 10 after the company.5p revealed a contract from Shell PLC (LSE:SHEL, NYSE:SHEL) for a hydrogen-based power plant.
Aptamer Group PLC (AIM:APTA) in the life sciences sector had a shocker on Friday. The developer of Optimer binders for the life sciences industry warned that its full-year revenues will be materially lower than expected, with its existing business pipelines taking longer than expected to convert, including licensing and royalty-based contracts, amidst market headwinds. Aptamer shares crashed more than 50% as a result.
1.00pm: US futures higher ahead of jobs report
US stocks are currently expected to open modestly higher on Friday morning, supported by above-forecast earnings from Apple Inc (NASDAQ:AAPL), released after Thursday's close, but much will depend on the April non-farm payrolls report, due out at 8.30am ET.
Investors are still nervous about the forward path for Federal Reserve monetary policy following the US central bank's 25 basis point rate hike on Wednesday, and the jobs report is always closely watched. Economists predict that 180,000 jobs were added last month.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank commented: "Data released yesterday revealed that US unemployment benefit applications jumped the most in six weeks, as a sign that the US labour market could be loosening.
Earlier this week, job openings data also came in softer than expected, yet ADP report released on Wednesday came in double the expectations, at 300,000 new private jobs."
"Today, the NFP data is expected to reveal that the US economy added around 180K new nonfarm jobs last month, for a steady wage growth at 4.2% on annual basis, and a slight uptick in unemployment from 3.5% to 3.6%.
"A soft NFP read, and ideally softening wages growth could further fuel the Fed doves and boost Fed rate cut expectations," she added.
Ahead of the data, futures for the Dow Jones Industrial Average (DJIA) were up 0.3%, while those for the S&P 500 rose 0.4%, and contracts for the Nasdaq 100 futures added 0.4%.
On Thursday, the three major US stock indexes closed lower for the fourth consecutive day as renewed fears of contagion risk from the embattled regional bank sector after a tumble by PacWest depressed investors. The DJIA closed 0.9% lower at 33,127, while the S&P 500 lost 0.7%, and the Nasdaq Composite fell 0.5%.
The indexes are on course for a week of losses, the worst performance for all three since March 10 - the DJIA is currently down 2.8%, the S&P 500 is off 2.6%, and the Nasdaq Composite has lost 2.1%.
However, on the corporate front, Apple gave investors a boost after Thursday's close as the tech giant posted beats on the top and bottom lines for the fiscal second quarter, propelled by iPhone sales. Apple shares gained more than 2% after-hours trading, with the announcement of a $90bn share buyback plan, unchanged from last year, also helping.
Ozkardeskaya at Swissquote Bank pointed out: "Note that Apple and Microsoft, together, made up around half of the gains in the S&P500 this year. And thanks to their sizeable balance sheets – and the falling yields, big tech companies remain a refuge for equity investors.
"That certainly explains why the S&P500 has been relatively resilient to the bank turmoil. What’s risky however is that, if winds change direction for the Big Tech, we could rapidly see gains in the S&P500 crumble."
12.36pm: HSBC boss sees no systemic risk to banks
Away from the protests, HSBC Chair Mark Tucker said: "I do not believe the issues experienced by these banks represent a systemic risk but the market has yet to settle."
He believes "the banking sector as a whole is well capitalised, profitable and has good liquidity."
"Specifically, HSBC has a strong balance sheet, good liquidity, good profitability and good diversity of earnings," he commented.
Meanwhile, the FTSE 100 has ticked higher as it looks ahead to the key US jobs report - non-farm payrolls are due at 1330BST
12.10pm: HSBC AGM disrupted by climate protestors
Climate protesters have disrupted the annual general meeting of HSBC in Birmingham, beginning with a man interrupting chairman Mark Tucker to call the company's investments in fossil fuels a "disgrace".
The Telegraph reported he shouted: "How can you possibly justify the way that you're behaving? Our grandchildren will inherit a polluted planet and they will curse us for it. This is a disgrace and you should be ashamed."
BREAKING: EXTINCTION REBELLION DISRUPT HSBC'S AGM
"You are happy to profit while the world burns"
XR & @money_rebellion have disrupted @HSBC_UK's Annual General Meeting to call out the bank's shameful climate policies pic.twitter.com/eeModtCxBu
— Extinction Rebellion UK ???? (@XRebellionUK) May 5, 2023
"You are the chief arsonists - this organisation has been described as a financial arson organisation and you are the chief arsonist."
The protests follow similar disruption at Barclays' AGM earlier this week where agitators adapted the lyrics of a Spice Girls tune to make their opposition in a more tunefull manner.
11.58am: US regional banks rally in pre-market trading
Shares in US midsized banks are rallying in pre-market trading, amid calls for a ban on short-selling to calm the crisis gripping the sector.
PacWest shares are up 9% in pre-market, a small recovery after tumbling 50% on Thursday, while Western Alliance have gained 12.7% after a 38% tumble and First Horizon, which lost 33% yesterday after TD scrapped its merger plans, are up 7%.
Today’s rally comes after Reuters reported that US federal and state officials were assessing whether “market manipulation” caused the recent volatility in banking shares.
The White House vowed to monitor “short-selling pressures on healthy banks”, and the American Bankers Association (ABA) urged federal regulators to investigate a spate of significant short sales of publicly traded banking equities
In a letter to the US Securities and Exchange Commission, Gary Gensler, chair of the ABA said it had also observed “extensive social media engagement” about the health of various banks that was out of step with general industry conditions.
11.25am: CBI hires business ethics firm as it fights for survival
The crisis-hit CBI has drafted in a business ethics consultancy to aid a review of its culture four weeks before a meeting of its membership that will determine its future, according to Sky News.
Sky said that Rain Newton-Smith, the new CBI director-general, has signed off the appointment of Principia following an exodus of corporate backers two weeks ago.
Britain's biggest business lobby group is facing an existential crisis over its handling of allegations of rape and other sexual misconduct.
It has suspended most of its activities pending the outcome of a root-and-branch review, with many long-time supporters, including Aviva and John Lewis Partnership, having deserted it.
Last month, it sacked its director-general, Tony Danker, after an inquiry into his behaviour, although he subsequently accused the CBI of "throwing me under a bus".
11.01am: Boohoo squeezing suppliers - report
Boohoo Group has asked its suppliers for a 10% discount on delivered and undelivered clothing orders as the online fashion retailer takes tighter control of costs, according to a report in The Times.
The paper quoted one supplier, who spoke on condition of anonymity, saying they had received a call yesterday “demanding” a discount on all outstanding orders.
“It turns all orders produced into losses,” the supplier said. “This is major self-harm. They are struggling to find suppliers and now they are screwing the ones they have.”
The Manchester-based group upset suppliers last year when it extended its payment terms from 30 to 60 days.
The group has been focused on reducing its overheads as it struggles with weaker consumer sentiment while the cost of living soars.
It has been consulting on more than 100 redundancies at its office in Soho, central London.
Most of the roles under threat are in its eCommerce, buying and design unit.
Meanwhile, the FTSE 100 is holding firm, up 30 points.
10.30am: New business start-ups slump
The number of business creations in quarter one of 2023 was 22% lower than the corresponding quarter in 2022, the lowest level of business creations in any first quarter of the year since quarterly data started in 2017, according to new figures.
Data from the Office for National Statistics showed there was a decrease in creations in all 16 main industrial groups in the quarter compared with last year with the most significant decrease coming from transport and storage.
The number of business creations totalled 79,080.
The number of business creations in Quarter 1 (Jan to Mar) 2023 was 22% down on the previous year ????
This is the lowest first-quarter total since quarterly data started in 2017.
— Office for National Statistics (ONS) (@ONS) May 5, 2023
But the number of businesses closures was 8% lower than in 2022.
There was a decrease in the number of closures in 9 out of 16 main industrial groups with the most significant decrease coming from professional, scientific and technical activities, and the most significant increase from accommodation and food services, the ONS said.
9.55am: UK construction sector expands in April
UK construction companies remained in expansion mode during April, but the latest survey data indicated uneven growth across the sector.
Rising volumes of commercial work and civil engineering activity helped to offset the steepest decline in residential construction output since May 2020, figures from S&P showed.
The UK S&P Global/CIPS construction PMI rose to 51.1 points in April from 50.7 in March.
"The construction sector stretched out its current phase of expansion to three months in April, signalling a modest rebound from the downturn seen at the turn of the year," said Tim Moore, economics director at S&P Global.
9.25am: German factory orders tumble, FTSE off highs
German factory orders fell 10.7% in March from the previous month, a much bigger drop than economists expected, raising concerns about a sharp slowdown in Europe’s biggest economy.
The slide in new orders for manufacturers was the largest since pandemic lockdowns hit in April 2020 and reflected declines in all sectors except consumer goods.
Foreign orders were down 13.3% while domestic orders dropped 6.8%.
Claus Vistesen chief eurozone economist at Pantheon Macroeconomics said: "This is a terrible headline, but a big fall had been coming given weak surveys and the outsize increase in one-off major orders, mainly in transport equipment."
"More generally, it is difficult to know what to think about these data."
"Usually we only see this kind of collapse in manufacturing orders when Germany is about to go into recession, but Germany has effectively been tiptoeing on the edge of recession since the fourth quarter."
"So, is it about to get worse," he asked.
"It’s possible, but given the weakness in the surveys, it is strange that manufacturing orders have held up for this long."
Meanwhile, the FTSE's bright start is fading, now up just 22 points.
8.53am: FTSE 100 holds gains, sterling advances
The FTSE 100 is continuing it strong progress on Friday, now up 47 points, while the pound has jumped above US$1.26, levels not seen since June 2022.
Victoria Scholar, head of Investment, interactive investor says, “After slumping to a one-month low on Thursday, the FTSE 100 is trading higher lifted by British Airways’ parent company IAG which has taken to the skies following first-quarter earnings."
IAG's raised guidance remains a firm feature, up 3%, providing support to easyJet PLC, up 1.2%, and WizzAir Holdings PLC, up 1.4%.
Meanwhile, sterling continues to march higher with the pound up a further 0.4% to US$1.2618 on expectations that US interest rates have peaked.
The oil price also rallied with Brent crude up 1.25% to US$73.41 boosting shares in BP PLC (LSE:BP.) and Shell PLC (LSE:SHEL, NYSE:SHEL), up 3.1% and 2.1% respectively.
Banks also rebounded with Barclays up 3%, NatWest up 2.4% and Lloyds Banking Group PLC (LSE:LLOY) up 2%.
8.15am: FTSE bounces as IAG and Apple please investors
The FTSE 100 bounced back on Friday as raised profit guidance from the owner of British Airways and better-than-expected results from iphone maker Apple lifted the mood despite ongoing concerns over the health of the US banking sector.
At 8.15am, London’s lead index stood at 7,751.96, up 49.32 points, or 0.64% while the FTSE 250 jumped to 19,280.46, up 35.55 points, or 0.18%.
Sophie Lund-Yates at Hargreaves Lansdown noted: “Apple’s beat has fed into some optimism on the US markets, with futures edging slightly higher.”
However, she added: “The overall mood music is a little downcast though, as some renewed regional banking pressure and recessionary fears came to the forefront after the Federal Reserve’s latest interest rate hike.”
“Investors may well be overlooking the fact that the recent concerns around some banks are related to liabilities rather than asset quality, today’s situation is a far easier problem for the likes of the Fed to solve.”
Back in London and British Airways owner IAG flew 4.9% higher after the airline raised profit guidance for the full year and reported a profit in the first quarter for the first time since 2019.
Liberum said the update was “surprisingly strong.” The broker noted IAG benefitted from both a strong unit revenue environment and lower fuel prices while the outlook remains positive, led by strong leisure demand.
But Intercontinental Hotels Group fell 2.7% despite strong growth in revenue pe average room boosted by strong growth in China following the scrapping of travel restrictions.
The hotel group said its CEO Keith Barr was stepping down after 30 years at the company with nearly six of those at the helm.
Peel Hunt noted the company prudently flagged that the comparatives get tougher from the second quarter of this year and highlights “ongoing economic uncertainty”.
Elsewhere, investors were also mulling the implications of local election results which saw gains for the opposition Labour Party and losses for the Conservatives.
7.51am: First time buyers face mounting mortgage costs
First-time UK house buyers with a 15% deposit to put down face paying nearly £200 per month more for a mortgage typically than they did a year ago, according to Rightmove PLC (LSE:RMV).
The property website said those in this deposit bracket will pay an average of around £1,056 per month compared with £865 last year, due to mortgage rates and house prices rising.
However, it said this is lower than the £1,218 per month that a new first-time buyer would have paid last October, around the time some mortgage rates were peaking.
The analysis was based on the average asking price for a typical first-time buyer property, with two bedrooms or less, and the average rate for a five-year fixed, 85% loan-to-value mortgage, with repayments being spread over 25 years.
7.45am: IAG lifts guidance as travel rebound continues
International Consolidated Airlines Group PLC, the owner of British Airways, raised guidance for the full year as demand for travel continued to pick up.
The FTSE 100 listed airline said it currently expects its full-year 2023 operating profit before exceptional items to be higher than the top end of previous guidance of €1.8 billion to €2.3 billion.
Luis Gallego, IAG chief executive officer, said: “We are seeing healthy forward bookings with leisure demand particularly strong while business travel continues to recover more slowly.”
For the first quarter to March owner IAG reported operating profit before exceptional items of €9 million, up €750 million versus quarter one last year, the first positive outcome in the first quarter since 2019, representing ongoing strong customer demand across all airlines.
The company said British Airways returned to profit in quarter one for the first time since quarter 1, 2019 while strong demand in Spain and Latin America, as well as on routes to the US, delivered Iberia's best-ever quarter one performance.
IAG said the improved performance reflected a strong yield performance and the benefit of a lower fuel price.
Markets in Latin America and North Atlantic markets are now back at pre-pandemic levels of capacity while IAG noted an encouraging outlook for the summer with around 80% of expected quarter two revenue now booked.
7.43am: IHG boosted by growth in China
InterContinental Hotels Group PLC (IHG) reported strong growth in revenue per room boosted by strong growth in China after travel restrictions were removed.
In a trading update, the FTSE 100-listed firm said first-quarter revenue per average room (RevPar) climbed 33% year-on-year with Americas up 18%, EMEAA up 64% and Greater China up 75%.
Compared to 2019, RevPAR rose 6.8% with Americas up 11.1%, EMEAA up 9.7% and Greater China down 9.1%. Occupancy was 64%, up 5 percentage points on last year.
IHG chief executive Keith Barr said: "We've seen a good start to the year, with continued strong trading in both the Americas and EMEAA, and an excellent rebound in demand in Greater China since the lifting of travel restrictions.
“Leisure demand has remained buoyant, and there has been further return of business and group travel as expected.”
He said the company opened eight thousand rooms across 45 hotels in the quarter, and despite financing challenges for the wider commercial real estate industry, “we anticipate improving levels as the year progresses.”
7.00am: FTSE expected to open higher despite US nerves
The FTSE 100 is expected to open higher despite further heavy losses on Wall Street as the banking turmoil hitting midsized US bans showed no signs of easing.
Spread betting companies are calling London’s lead index up by around 23 points.
In New York, the Dow Jones Industrial Average tumbled 286.50 points, or 0.9%, to 33,127.74. The S&P 500 declined 29.53 points, or 0.7%, at 4,061.22 while the Nasdaq Composite fell 58.93 points, or 0.5%, at 11,966.40.
But after the closing bell, Apple provided better news, topping Street expectations despite reporting a fall in revenue and net income.
In Asia, markets were mixed with gains in Hong Kong but falls in China.
Back in London and the early focus will be results from British Airways owner, IAG, while investors will also digest results from the UK local elections which saw the ruling Conservative party nurse heavy losses.
Attention will then switch back across the pond later with US non-farm payrolls figures before trading restarts in the US.