- FTSE 100 closes up 35 points at 7,564
- WPP cuts outlook on lower spend by US tech firms
- US stocks motor ahead, Amazon lifts Nasdaq
4.40pm: FTSE 100 ends tough week on the front foot
The FTSE 100 ended a tough week in positive fashion boosted by opening gains in New York.
At the close London's lead index was up 35.21 points, 0.5%, at 7,564.37+35.21 while the FTSE 250 advanced 100.97 points, 0.5%, to 18,934.62.
"Today’s job figures have acted as a support to market sentiment, and even slightly stronger wage growth has not unduly alarmed investors," said Chris Beauchamp, chief market analyst at online trading platform IG.
3.52pm: Tern leaps as investee signs deal with Musk's SpaceX
After a week dominated by the big blue chips, we'll head to the close with news of AIM-listed Tern Group PLC.
Shares in the firm have rocketed after its portfolio company Wyld Networks AB signed an agreement with SpaceX, the spacecraft engineering company led by Elon Musk.
Shares more than doubled to 8.12p, after hitting an intra-day iof 11p, a rise of 116%.
Tern, an investment company specialising in supporting early-stage internet of things technology businesses, holds a stake of about 27% in Wyld Networks.
"Wyld and SpaceX will explore potential areas of collaboration to collect data from Internet of Things sensors in remote locations. Satellite connectivity can help bridge the digital divide and increase the reach and resilience of connections for IoT devices. This is particularly the case for the 85% of the earth's surface that has no cellular coverage," Wyld said.
Wyld Networks chief executive officer Alastair Williamson said: "We are excited to explore possible areas with SpaceX where our technology can enable additional connectivity and access to data from sensors and devices in remote locations," said Alastair Williamson, CEO Wyld Networks."
"With Wyld Connect available to deliver data from IoT devices anywhere on earth, this is a great opportunity to partner with the world's most important satellite companies."
The potential of offering remote connectivity will first be tested in North, Central and South America.
3.25pm: Sterling rallies after US jobs figures
The pound jumped after the US jobs report which showed the US jobs market was cooling in the face of interest rate rises.
Economists think it increases the chances the Federal Reserve will hold rates at its next meeting although next week's inflation figures are likely to be the key determinent for the data driven central bank.
ING Economics said: "On balance this report doesn’t suggest any need for renewed impetus for the Fed hiking interest rates again in September."
"All eyes will now switch to CPI and PPI and a couple more 0.2% MoM prints as we and the market expect should further dampen talk of a potential September hike," the bank added.
As a result, the dollar slipped back with sterling now up 0.5% at $1.2733.
2.45pm: Nasdaq lifted by Amazon as Wall Street advances, FTSE rallies
The FTSE 100 bounced into the green after US markets opened higher.
News that the US economy added fewer jobs than forecast in July increased the likelihood the Federal Reserve will hold interest rates steady at its next meeting.
Shortly after the opening bell the Dow Jones Industrial Average was up 147.81 points, 0.4%, at 35,363.70, the S&P 500 jumped 25.70 points, 0.6%, to 4,527.59 and the Nasdaq Composite climbed 139.41 points, 1.0% to 14,099.13.
US non-farm payrolls were 187,000 in July, below expectations of 200,000, while figures for June and May were revised downwards.
Ian Shepherdson, chief economist at Pantheon Macroeconomics described the payrolls as “softish.”
“The bottom line here is that this report is not strong enough to change Fed doves’ minds, and not weak enough change any Fed hawks’ minds.”
“We still expect the inflation numbers to be good enough to keep the Fed at bay in September, but it’s not a done deal.“
The CME FedWatch tool sees an 85% likelihood that the Fed will leave rates unchanged.
“The big picture here is that the wave of post-Covid catch-up hiring now appears to be over, and modest downward cyclical pressure is now the dominant force in payrolls.”
The fly in the ointment was a larger than expected increase in average hours but Shepherdson doesn’t think the Fed “will be alarmed” by that.
Amazon.com Inc (NASDAQ:AMZN) stock jumped 0.9% to $141.22 after it smashed forecasts in the second quarter while results also a lift to Booking Holdings Inc, up 5.88%.
But weaker than hoped iPhone sales weighed on Apple Inc (NASDAQ:AAPL) down 2%.
2.20pm: Maersk sees bleak outlook for global trade
Shipping giant Maersk has issued a warning about the outlook for global trade as it cut its outlook for the number of containers it will carry.
The Danish shipping and logistics firm, often viewed as a bellwether for the world economy, said there are no substantial signs that volumes will recover this year as it said global container trade will probably contract as much as 4% in 2023.
The prediction compared to a previous worse case scenario forecast of minus 2.5%.
The firm, along with the rest of the shipping industry, is facing an abrupt readjustment after generating record profits in 2021 and 2022 thanks to a rise in demand for consumer goods during the pandemic.
In a statement, the company said: “The inventory correction observed since the fourth quarter of 2022 appears to be prolonged and is now expected to last through year end.
“Overall, the environment for container trade and logistics services remains challenging.
“Currently there is no sign of a substantial rebound in volumes in the second half of the year.”
It did however, raise its full-year earnings guidance after a stronger-than-expected first half of the year but warned that the rest of 2023 would be tougher.
Revenue fell by 40% to $13 billion in the second quarter while earnings before interest, tax, depreciation and amortisation dropped 72% to $2.9billion, ahead of analysts’ forecasts of $2.4billion. Maersk lifted its full-year ebitda forecast from $8-11billion to $9.5-11billion
2.00pm: US adds 187,000 jobs in July, weaker-than-expected
The FTSE 100 has come off its lows after the US non-farm payrolls figures which showed the US economy added fewer jobs than expected in July as the employment market showed signs of weakening in the face of the Federal Reserve's rate rising spree.
US non-farm payrolls rose by 187,000 in July, below forecasts of an increase of 200,000, according to figures from the Bureau of Labor Statistics.
June’s number was revised down too, from 209,000 to 185,000, while May’s was been cut by 25,000, from 306,000 to 281,000.
The unemployment rate fell to 3.5%, down from 3.6% in June.
Job gains occurred in health care, social assistance, financial activities, and wholesale trade.
Not such good for the Fed on average hourly earnings which rose 0.4% in July taking the annual rate of growth to 4.4%. Economists had expected increases of 0.3% and 4.2% respectively.
Futures have risen since the release. Dow futures are up 46 points, S&P futures are up 13 points and Nasdaq futures are 51 points to the good.
Economist Mohamed A El-Erian said: "This monthly US jobs report has something for everyone when it comes to the "landing" of the US economy."
"The softer-landing camp will take comfort in the lower-than-expected payroll gain of 187,000. The harder-landing camp will point to hotter wage growth (4.4%) and the fall in the unemployment rate to 3.5%."
1.32pm: Here’s a quick recap of the top risers and fallers on the junior market today
Shares in Parity Group PLC (AIM:PTY) fell 8.7% following a market update that revealed a 10% drop in expected first-half revenue compared to the latter half of 2022.
The data and technology-focused recruitment firm cited challenging market conditions and economic uncertainty, leading to deferred hiring decisions by clients, as the main reasons for the decline.
Carr's Group plc saw its shares fall around 15% after the agricultural engineering firm issued a profits warning, with US drought conditions and soaring UK inflation blamed for lower demand.
XP Factory PLC (AIM:XPF) shares advanced 2% as the escape room and ‘battle bar’ operator reported a jump in turnover and earnings.
It told investors that in July its trading was significantly ahead of May and June and early indications are positive for August, this was despite “the ongoing rhetoric of the cost of living crisis and rising interest rates”, the company highlighted.
Ilika PLC (AIM:IKA, OTCQX:ILIKF)'s share price has surged 9% following the announcement of a landmark 10-year agreement with Cirtec Medical, a provider of complex medical devices.
The partnership will focus on the manufacturing and sale of Ilika's Stereax solid-state batteries, used in minimally invasive surgical tools and implants.
1.04pm: Wall Street awaits non-farm payrolls
US markets are indicated to open modestly higher, with Amazon a likely big riser, although much will depend on non-farm payrolls data before Wall Street opens.
Futures for the Dow Jones Industrial Average are one point higher, those for the S&P 500 are 7 points to the good while Nasdaq futures are up 31 points.
Non-farm payrolls are forecast to rise 200,000 in July against the 209,000 seen in June, according to an FXStreet consensus. The unemployment rate is expected to hold steady at 3.6%.
Joshua Mahony chief market analyst at Scope Markets thinks the jobs report “will receive even more attention than usual as they will provide insights into the tightness of the labour market and the pace of wage growth.”
“Wednesday’s blockbuster ADP reading could provide the basis for confidence this afternoon, but last month proved that the link between the two can be tenuous at times,” he noted.
In company news, Amazon.com Inc (NASDAQ:AMZN) and Apple Inc (NASDAQ:AAPL) will take centre stage after the two tech giants enjoyed mixed fortunes when reporting after the closing bell Thursday.
Amazon is set to jump after it smashed expectations on the top and bottom line but weak iPhone sales took the gloss of solid numbers at Apple with shares expected to open lower.
12.42pm: John Wood rises on Jefferies upgrade
John Wood Group PLC's shares received a boost as Jefferies upgraded its rating to buy from hold.
The firm was recently the target of a lengthy and ultimately unsuccessful bid approach from private equity outfit, Apollo.
"With recent award momentum and cash exceptionals still under control, we upgrade (back) to buy with a 210p price target," the broker said.
Jefferies pointed out Wood is trading at almost half the multiple of American Australian engineering company peer, Worley.
"We believe one reason Apollo did not ultimately make an offer for Wood was due to "bonding" once off-balance sheet performance bonds facilities were factored in."
"Performance bonds are a little understood but essential part of Wood's business which comparison to closest peer Worley confirms," it added.
"One area we have analysised in the wake of the Apollo offer is performance bond facilities and come away satisfied this is no reason to adjust valuation methodology," Jefferies said.
Shares were 2.0% higher at 160.92p.
12.07pm: St James's Place lifted by Bank of America upgrade
Shares in St James's Place PLC rose 1.8% after Bank of America upgraded to buy from neutral.
The broker noted shares have fallen by over a quarter in less than a week after a disappointing update, including introduction of a charge-cap for longer-serving clients.
"This came as a shock to investors, compounding an already challenging backdrop for flows," BofA added.
But although the backdrop will remain tough it does not expect further charge cuts in the foreseeable future and think SJP's market-leading franchise remains intact with high barriers to entry.
The broker lowered its price target to 1,150p from 1,175p which offers around 30% upside from today's price of 886p.
11.35am: Barclays favours L&G in UK life sector
Legal & General Group PLC (LSE:LGEN) is the favoured play in the UK life insurance sector for analysts at Barclays.
The broker said life insurers enter the reporting season facing a degree of cautiously negative sentiment, as pedestrian macro trends prevail, while IFRS17 brings added uncertainty, with disclosure to date varying widely.
"With most UK life names offering attractive yields and strong cash profiles, we like L&G (rated overweight) for its scope for growth, Barclays said.
Most UK life insurers have strong cash generation profiles to support sustainable dividends (L&G, Phoenix, Aviva, and M&G all yield 8-10%), Barclays noted, and most generate new business from institutional decision makers through bulk annuities or workplace savings (L&G, Phoenix, Just, Aviva), and have excess cash to support growth (L&G, Phoenix, Aviva).
However, "with its leading position in bulk annuities and and vertically integrated structure," Barclays considers L&G to be differentiated from peers.
M&G (underweight) is its least preferred UK insurer "due to its low growth and high leverage compared to peers."
Barclays explained the UK life insurers will be reporting under IFRS17 for the first time in their first-half results and cautions that without full pro forma detail and sufficient data for trend analysis, forecasting is "challenging."
11.10am: Oil price set for sixth week of gains
The FTSE continues to limp along little changed, 2 points to the good.
Helping to keep it out the red are oil majors, BP PLC (LSE:BP.) and Shell PLC (LSE:SHEL, NYSE:SHEL), both up 0.8%.
The oil price has continued to climb after yesterday's gains and is heading for a sixth straight weekly gain - its longest winning streak in more than a year - after Saudi Arabia and Russia extended production cuts into next month.
Brent crude has risen 0.5pc to $85.58, while West Texas Intermediate advanced 0.8% to $82.23 a barrel.
It takes oil’s gains over the six-week span to about 18%
Saudi Arabia said Thursday it would extend its unilateral one million barrel a day oil output cut into September, and that the move could be prolonged further or even deepened.
Russia will also extend its cut into next month, although it tapered the size of the reduction.
Meanwhile, US data this week showed the largest-ever drawdown of crude stock as holdings plunged by more than 17 million barrels, providing further evidence of a tightening market.
10.35am: One more rate rise seen, policy to remain tight for some time - UBS
UBS expects one more interest rate increase in the current cycle but thinks it will be some time before the Bank of England looks at reducing them.
The Swiss bank was commenting after yesterday’s 25bps increase which took rates to a 15-year high of 5.25%.
The increase was smaller than we had anticipated, but broadly in line with market expectations, which had shifted following a weaker-than-expected June inflation print.
Interestingly, notwithstanding the surprisingly soft June data and several other leading indicators pointing to inflation slowing sharply in the coming months, policymakers pushed back the timing of when they expect it to fall back to target to mid-2025. Moreover, this projection comes with upside risks, UBS pointed out.
UBS reckons this gives a reasonably clear message that the BoE still believes there is more work to do in terms of monetary tightening if it is to get inflation back to target in a timely manner.
With this in mind, UBS continues to look for the BoE to hike again by a further 25bps when it meets in September.
But the August meeting leaves us with little doubt that the BoE intends to keep policy tight for some time.
“So, we may be waiting until the middle of next year before any easing takes place,” UBS suggested.
“Our sense is that the outlook for growth and inflation from here is balanced, with overshoots and undershoots equally likely.”
However, UBS cautioned that should June’s inflation print prove a fluke rather than a turning point, then there is still a possibility the BoE could be hiking into November.
9.41am: Construction sector grows but housebuilding remains weak
The construction sector returned to growth in July although there remains a split in fortunes across the industry, according to a survey.
The S&P Global/CIPS UK construction PMI posted 51.7 in July, up from 48.9 in June and the highest level for five months.
The rise was led by the strongest rise in commercial building since February and another solid contribution to growth from civil engineering activity.
But, there was another sharp reduction in residential construction activity.
Lower volumes of residential work have now been recorded for eight consecutive months, although the rate of decline eased to its least marked since April.
The sub-index measuring the house-building sector picked up to 43.0 from June’s 39.6, still well below the 50-point mark showing stagnation.
July data signalled a renewed expansion of overall construction output in the UK according to the S&P Global / CIPS UK Construction #PMI which posted 51.7 (Jun: 48.9).
Read more: https://t.co/NZ0n62rKb6 pic.twitter.com/uql3gciTN7
— S&P Global PMI™ (@SPGlobalPMI) August 4, 2023
Tim Moore, economics director at S&P Global Market Intelligence said: “July data indicated that some parts of the UK construction sector gained momentum, notably commercial building and civil engineering activity.”
But he noted only “around 35% of the survey panel reported a decline in residential work during July, while only 18% signalled a rise.”
9.21am: New car sales hit three-year high in July
The new car market grew 28.3% in July with 143,921 new vehicles registered, according to the latest figures from the Society of Motor Manufacturers and Traders (SMMT).
As a result, the market has enjoyed non-stop growth for a full year despite challenging economic conditions, as supply chain challenges ease, production increases and deliveries can be fulfilled.
It was the best July performance for three years when pent-up demand for new cars was unleashed following three months of lockdown during the pandemic.
Summer surge as one new EV registered every 60 secondshttps://t.co/8tNa70Rr4F pic.twitter.com/v4M4nFruyo
— SMMT (@SMMT) August 4, 2023
However, the overall market year to date remains behind pre-pandemic levels.
Company registrations drove the growth, as uptake by large fleets increased 61.9% to 80,961 units and business registrations rose 28.7% to 2,915 new vehicles. Private demand remained stable at 60,045 units (up 0.3%).
Electrified vehicles accounted for more than a third (35.4% of the market). Hybrid (HEV) volumes grew, although their overall market share fell to 11.3%.
9.00am: Flutter and Entain lifted by strong DraftKing numbers
The FTSE 100 has pushed into the green, now up 21 points at 7,550, as it looks to end a troubled week on a high.
Leading the risers is betting firm Flutter Entertainment with Entain PLC (LSE:ENT) not far behind on a read through from strong results from DraftKings in the US.
Draftkings shares soared by over 12% after-hours as it reported an 88% jump in second-quarter revenue and earnings ahead of management’s prior expectations.
It reported US$875 million of revenue for the period with the company boasting robust customer retention, ‘efficient’ new customer acquisition, and product innovation.
Shares in Flutter rose 2.9% and Entain by 0.9%.
WPP remains top of the fallers, down 7.4%
8.35am: WPP warning comes a week after S4 Capital's blow
Tough times in the world of advertising with WPP leading the pack of the FTSE 100 fallers after cutting its 2023 outlook today.
The warning comes a week after S4 Capital, Sir Martin Sorrell's advertising group, plunged after it too sounded the earnings alarm.
The lower outlook is "unwelcome but not wholly surprising," according to Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.
She noted technology spending, especially in the US, has slowed, leading to a dent in performance from the group’s substantial integrated creative agencies.
Market conditions are tough and Lund-Yates thinks corporations are in "wait-and-see mode when it comes to splashing the cash and handing margin over, at a time when demand is very tough to profile."
"While demand for WPP’s suite of services hasn’t been totally washed out, it has faded this half, and investors will be wanting to see a clear path to return to full colour," she added.
"Harnessing AI correctly, and swiftly, could be one way to propel large amounts of growth, but change of this magnitude always comes with risk," she stressed.
8.15am: FTSE subdued and WPP warning dents the mood
The FTSE 100 has made a tepid start to proceedings on Friday as investors pause after a frantic week of earnings, a US debt downgrade, the Bank of England rate rise and with US non-farm payrolls to come.
At 8.15am, London’s lead index was down 8 points at 7,521 while the FTSE 250 was 7.99 points higher at 18,841.64.
Richard Hunter, head of markets at interactive investor, commented “Markets returned to a sense of relative calm after a torrid week.”
On a quieter day for company news, WPP PLC (LSE:WPP) hit the headlines after it lowered its full-year growth forecast due to reduced spending by US firms as it reported profit halved in the first half of 2023.
The advertising giant now expects full-year like-for-like growth of 1.5-3.0%, down from previous guidance of 3-5%.
Chief executive Mark Read said: “Our performance in the first half has been resilient with Q2 growth accelerating in all regions except the USA, which was impacted in the second quarter by lower spending from technology clients and some delays in technology-related projects.”
Shares slipped 6.9% to 789p per share.
Sophie Lund-Yates at Hargreaves Lansdown said: “This outcome is unwelcome but not wholly surprising, given that corporations are in wait-and-see mode when it comes to splashing the cash and handing margin over, at a time when demand is very tough to profile.“
Capita PLC (LSE:CPI) was also marked down by City traders with shares 4.7% lower after it said March’s cyber attack would cost a touch more than expected.
The outsourcer said it now thinks the incident will cost the firm between £20-£25 million, up from £15-£20 million before.
The news came alongside results which saw the firm slide into the red although analysts at Peel Hunt said the numbers were in line with expectations.
7.56am: Cyber attack costs push Capita into the red
Capita PLC (LSE:CPI) expects the costs of the recent cyber attack to cost between £20-25 million which helped push the firm into the red in the firs half of the 2023.
The outsourcer, which has contracts with the NHS, the army and the Cabinet Office, had previously said March’s attack would cost up to £20 million.
The charge contributed to Capita reporting a pre-tax loss of £67.9 million compared to a £0.1 million profit a year ago while revenue edged down by 3% to £1.48 billion from £1.52 million.
Capita said the loss reflected business exits, non-core portfolio goodwill impairment and costs associated with the cyber incident.
It said it was accelerating previously planned investment to improve its “cyber security maturity.”
The free cash flow outflow increased to £84.0 million from £16.6 million but net debt declined to £544.6 million from £710.4 million.
Full-year expectations remain unchanged with the firm on track to deliver an acceleration in financial performance in 2023.
The target is to double group EBIT margin over the medium term, underpinned by £40 million cost savings by the end of 2024, it added.
7.28am: WPP cuts growth forecast as US tech firms spend less
WPP PLC (LSE:WPP) lowered full-year growth forecast due to lower spending by US firms as it reported profit halved in the first half of 2023.
The advertising giant now expects full-year like-for-like growth of 1.5-3.0%, down from previous guidance of 3-5%, although headline operating profit margin of around 15.0% is higher than the 11.5% reported in the first half.
Chief Executive Mark Read said: “Our performance in the first half has been resilient with Q2 growth accelerating in all regions except the USA, which was impacted in the second quarter by lower spending from technology clients and some delays in technology-related projects.”
Revenue in the six months to June rose 6.9% to £7.22 billion from £6.76 billion a year ago but pre-tax profit £204 million down 51% from £419 million. EPS fell 55% to 10.3p from 22.7p.
In the second quarter, ex-US growth accelerated to mid-single digits, with China growing albeit less strongly than expected.
UK revenue grew 9% but North America declined 4.1%, on the lower tech spend.
WPP said new business was solid with $2.0 billion net new billings booked in the first half while the pipeline of potential new business is larger than at the same point in 2022.
It said it remains on track to deliver at least £450 million of annual savings this year over a 2019 base.
WPP said full-year results will include a £220 million impairment charge following a review of its property portfolio resulting in a consolidation of our office space.
The dividend was held at 15.0p.
7.00am: Bright open expected in London
It should be a relatively bright start in London ahead of US non-farm payrolls figures and as investors digest mixed fortunes for two of Wall Street’s tech giants.
Spread betting companies are calling London’s lead index up by 19 points after closing down 32.47 points, 0.4%, at 7,529.16 on Thursday.
It’s likely to be a quieter morning in London with WPP and Capita due to report updates after a hectic week of earnings.
But the focus will switch to the US early afternoon with US non-farm payrolls due.
Michael Hewson at CMC Markets said: “Today’s jobs report is expected to see 200k jobs added, with unemployment set to remain unchanged at 3.6%, while average hourly earnings are expected to slip back from 4.4% to 4.2%.”
The US jobs market has so far proved resilient against a back drop of rising interest rates.
Elsewhere, shares in Apple fell 2% in after-hours trading as falling iPhone sales offset an earnings. But it was better news for Amazon which smashed forecasts on the top and bottom line sending shares 8.8% to the good.
It was monster day of earnings releases in the US and here’s a round-up for those of you waking up.