FTSE rises 22 points
IAG, Pearson and M&S shares gain
Barclays and IHG under pressure
US non-farm payrolls beat forecasts
3.36pm...Pearson shareholders reject chief executive's pay package
A majority of Pearson shareholders (66%) have rejected the £1.5mln pay package awarded to chief executive John Fallon at the group annual general meeting today.
Fallon received a 20% pay rise last year, including a £343,000 bonus, even after the company posted record annual loss of £2.6bn.
The education group earlier said in a trading update that it was considering selling its US school courseware business and will launch another cost cutting drive in the latest attempt to turn around its fortunes.
Pearson, which has issued five profit warnings in four years after students in the US started renting rather than buying text books, said its first quarter trading had been in line with its guidance and it reiterated its full-year target. The trading update sent shares surging.
Shares continued to rise after the AGM statement, rising 11.70% to 735.0p.
2.38pm...Easing US wage growth concerning, says analyst
On the US jobs report, AJ Bell investment director, Russ Mould, said: “The better-than-expected jobs number may be enough for the Federal Reserve to hike interest rates for the second time this year in June but the US central bank (and the President) will both be concerned to see wage growth slackening – even if American companies will be delighted.
“The cooling of wage growth sits oddly alongside an unemployment rate of 4.4% and may both perplex Federal Reserve officials and also concern the President. While the Fed may not be deflected in its mission to push through two more rate hikes in 2017, weak wage growth may sow some seeds of doubt, while putting into full perspective the size of the task facing Donald Trump when it comes to reinvigorating American economic growth."
The downward revision to March earnings growth has taken the shine off what was otherwise a pretty positive #nonfarmpayrolls #Forex
— Richard Perry (@HantecRich) 5 May 2017
#nonfarmpayrolls increased 211,000, which compares to expectations of up 190K & unemployment rate fell to 4.4%, when 4.6% anticipated.
— ADM InvestorServices (@TradeADMIS) 5 May 2017
2.00pm... US stocks set to open mixed as crude oil price falls outweigh good news on US jobs front
US jobs numbers for April were stronger than expected, but blue-chips are still expected to open mixed.
Spread betting quotes point to the S&P 500 opening around 2,393, up two points or so on the situation before the jobs report was released and a couple of points higher than last night's close, but the Dow Jones is tipped to open lower.
The Dow Jones industrial average, which closed at 20,951 last night, is seen opening its account at around the same level.
1.52pm... Analysts weigh in on US non-farm payrolls report
Here's what analysts have to say about the US monthly jobs report.
ETX Capital’s Neil Wilson said: “Not too hot and not too cold. As we needed it, today’s nonfarm payrolls are just right to nail on a June rate hike but not enough to make us think the Fed will turn more hawkish. After a big miss in March, the April number was a big beat at 211k."
Wilson added: “Markets are pretty well taking this in their stride as the numbers don’t do anything to alter picture in favour of a hike in June and one more after that. The dollar is pretty well at the mid-point for the day against the yen. We saw a big swing in the euro-dollar rate but it’s also trading much on a level for the day. Cable is a shade higher with the pound trying gamely to hold on to the $1.295 handle but struggling.”
Oanda's Craig Erlam said: "We’ve had another mixed jobs report from the US today that will likely do nothing to either encourage or deter the Fed when it comes to deciding whether to raise interest rates next month. Arguably the most important aspect of the report was wage growth given that the Fed has all but achieved its full employment mandate but continues to fall a little short on inflation.
"With the Fed pinning their hopes on a tighter labour market spurring higher levels of wage growth – which is still far from reaching the levels prior to the financial crisis – traders are understandably a little underwhelmed today. Wages grew by only 2.5% compared to last year, remaining stubbornly around the levels we’ve seen over the last year. Still, the Fed seems determined to raise rates twice more this year as long as the economy continues to improve and despite another weak first quarter, it’s hard to argue that this is happening, albeit slowly when it comes to wages."
ING's senior economist James Knightley said: "The fact that we are still quite a way away from 3% wage growth means that there is no real pressure on the Fed to accelerate the pace of interest rate hikes. Nonetheless, the rebound in employment offers support to the Fed’s assertion from earlier in the week that the slowdown in activity seen in the first quarter is 'transitory'. This would suggest the FOMC members’ forecasts that they will hike rates by 25bp on two, possibly three more occasions this year, still holds. The markets remain a little more cautious, pricing in around 40bp of tightening while our official forecast is for just one 25bp hike."
1.41pm...US earnings growth slows
While employers added more jobs than anticipated in April and the jobless rate fell, earnings growth slowed.
Average hourly earnings rose 2.5% in April from a year ago from a downward revised 2.6% increase. Analysts had pencilled in a 2.7% year-on-year gain.
Compared to a month earlier, earnings growth picked up to 0.3%, as expected, from a downward revised 0.1%.
The participation rate, which indicates the share of working-age people who are employed or looking for work, fell to 62.9% from 63.0% in March.
Something for both Hawks and Dissenters in US APril jobs report #nfp
— Mike van Dulken (@Accendo_Mike) 5 May 2017
1.30pm...US non-farm payrolls exceed expectations
US employers added more jobs than forecast in April and the jobless rate unexpectedly fell, the Labour Department has revealed.
Non-farm payrolls rose 211,000 last month, compared to economists’ estimates of 190,000. The previous month’s figure was revised down to 77,000 from a previously reported 98,000.
The Labour Department said job gains were in leisure and hospitality, health care and social assistance, financial activities, and mining.
The jobless rate dipped to 4.4% from 4.5%, surprising analysts who had expected an increase to 4.6%.
1.05pm...London's small caps risers and fallers
Among the small caps, shares in Management Resource Solutions plc (LON:MRS) plunged 62.31% to 5.70p after it resumed trading on AIM. The Australian-based company’s shares were suspended from trading last October during an investigation into funds raised last August that were not applied to the working capital of its MRS Services Group plant hire business.
It clarified that the funds were used for the creditors of sUBSidiaries that are no longer in operation.
Sepura plc (LON:SEPU) shares slumped 27.56% to 11.41p after the maker of radio terminals said German authorities are reviewing a proposed takeover by Chinese company Hytera Communications. The Federal Ministry of Economic Affairs and Energy in Germany has decided to probe the acquisition on “public policy and/or national security grounds relating to Sepura Deutschland GmbH”.
More positively, Amur Minerals Corporation (LON:AMC) shares increased 3.35% to 6.18p after kicking off its 2017 drill programme at the Kun-Manie nickel-copper project in Russia’s far east.It marked an earlier than scheduled start to the programme, for the second year in a row. The programme will take place at strategic locations along the 16 kilometre length of the project’s Detailed Exploration and Production Licence (DEPL).
Falcon Oil & Gas Ltd (LON:FOG) was another high riser, with shares up 14.55% to 28.35p, after saying oil and gas major Origin Energy has bought-out Sasol from the Beetaloo basin shale venture in the Northern Territory. Origin’s stake in the project doubles to 70% as a result of the deal, while AIM-quoted Falcon Oil & Gas Ltd (LON:FOG) retains the other 30%.
12.09pm... FTSE flat ahead of US non-farm payrolls
The FTSE 100 was little changed at the midday mark at 7,248.90 points after a raft of corporate earnings and before the all-important US non-farm payrolls report.
Barclays plc (LON:BARC) was a top faller after Goldman Sachs downgraded the bank’s rating to ‘sell’ from ‘neutral’ and lowered the target price by 28% to 180p on concerns about its capital. Goldman said the capital gap between Barclays and its UK and European IB peers has “widened meaningfully” since the start of the year.
The bank last week reported that its common equity Tier 1 (CET1) ratio fell to 11.3% in the first quarter from 11.4% at the end of 2015.
InterContinental Hotels Group (LON:IHG) slid 1.68% to 4,109p after announcing the resignation of chief executive Richard Solomons.
Morgan Advanced Materials (LON:MGAM) fell 3.48% to 316p as it said revenue fell 0.8% in the first quarter, driven by declines in its thermal products division.
International Consolidated Airlines Group (LON:IAG) was the biggest riser after posting a record first-quarter performance in what is usually the weakest part of an airline’s year. Shares jumped 4.9% to 600.0p.
Marks & Spencer Group plc (LON:MKS) shares rose 4.90% to 375.00p after it named former Asda boss Archie Norman as its non-executive chairman with effect from 1 September.
Pearson’s (LON:PSON) shares surged 13.91% to 749.50p as the publishing giant said it is considering selling its US school coursework business and will launch another cost cutting drive in the latest attempt to turn around its fortunes.
Smith & Nephew PLC (LON:SN), was up 3.26% to 1,311.41p as it reported a 3% rise in underlying revenue in the first quarter as emerging markets returned to double digit growth.
EasyJet plc (LON:EZJ) flew 3.31% higher to 1,248.0p after reporting an 11.7% increase in passenger numbers in April with the load factor up 2.5 percentage points to 92.9%.
Turning to afternoon trading, markets will focus on the US non-farm payrolls report at 1.30pm to gauge the health of the labour market and the economy. There are also a few Federal Reserve speakers later on and investors will be looking for clues on the timing of the next interest rate hike after the central bank decided to stand pat on Wednesday.
Ahead of the report the dollar is static against other major currencies, including the pound and the yen.
FXTM research analyst, Lukman Otunuga, said: “The greenback was on standby during Friday’s trading session ahead of a crucial US non-farm payroll data that may approve or dismiss the heated market speculations of a June interest rate increase.
“A solid US labour market data for April may compliment the Fed hawks and confirm expectations of a rate hike in June. However, if job growth fails to meet market forecasts and wage growth softens, the dollar will find itself exposed to heavy losses as optimism over a June interest rate hike fades.”
10.51am...Delta Airlines apologises to family removed from overbooked flight
Another day, another airline scandal.
Delta Air Lines has apologised after a couple said they were kicked off an overbooked flight with their two children.
Brian and Brittany Schear posted a video online showing them being asked to leave a flight or be arrested during a dispute over a spare seat they had bought. The argument was over whether they could put their toddler son on a seat they had originally purchased for their 18-year-old son, and whether the younger boy needed to in a seat of his own or sit on the lap of an adult.
Delta said it was “sorry for the unfortunate experience”.
The #DeltaAirlines flight attendant should be fired for threatening that couple with jail time and that their kids would be in foster care
— Shawn (@sleek429) 4 May 2017
#DeltaAirlines WOW. Threatening a family with jail and foster care if they did give up their childs seat they PAID for?!! Shame on you
— Sarah Thompson (@SThompson909) 4 May 2017
It is not the first time an airline has been forced to apologise for removing passengers from overbooked flights.
United Airlines sparked outrage last month after passenger, Dr David Dao, was dragged off one of its overbooked flights. Footage of the incident with the 69-year-old has been viewed more than two million times online.
10.15am...Brexit will stall City, Goldman warns
The chief executive of Goldman Sachs, Lloyd Blankfein, has warned that London’s financial centre will “stall” as a result of Brexit.
Blankfein told the BBC: “It will stall, it might backtrack a bit, it just depends on a lot of things about which we are uncertain, and I know there isn’t certainty at the moment.”
Blankfein said it will take companies a couple of years to adjust after the UK leaves the European Union in 2019.
“We are talking about the long-term stability of huge economies with hundreds of millions of people and livelihoods at stake, and huge gross domestic product,” he said. “So, if it takes a little while, I’d rather get it right than do things quickly.”
Goldman, which employs more than 6,000 people in the UK, is transferring hundreds of staff out of London ahead of Brexit. A major concern for banks is losing access to Europe’s single market and Goldman is just one of many lenders making contingency plans. Lloyds Banking Group is setting up a German sUBSidiary while HSBC Holdings, JP Morgan Chase & Co and UBS plan to move staff from the UK to the continent.
Proactive news headlines...
Aussie oil and gas major Origin Energy has bought-out Sasol from the Beetaloo basin shale venture in the Northern Territory. Origin’s stake in the project doubles to 70% as a result of the deal, while AIM-quoted Falcon Oil & Gas Ltd (LON:FOG) retains the other 30%.
Kibo Mining PLC’s (LON:KIBO) listing of its Imweru and Lubando gold mining assets in Tanzania is to take effect on 23 May.
A reverse takeover of Opera Investments is the method for the deal with the name of the company to be changed to Katoro Gold PLC to reflect the new business focus.
ValiRx Plc (LON:VAL) is continuing discussions with potential partners over funding for the next stage of clinical studies for its two lead cancer drugs after good progress in 2016. The AIM-listed group has two drugs currently in clinical trial: VAL201 for prostate cancer; and VAL401 for lung cancer.
Strategic Minerals Plc (LON:SML) is to take full control of Central Australia Rare Earths, the company that own the Hanns Camp prospect in Western Australia. John Peters, Strategic’s managing director, said CARE’s tenements will need extra funding to explore fully, something it can provide from its booming Cobre tailings business in New Mexico.
Pizza franchise group DP Poland Plc (LON:DPP) has told investors it is trading in line with expectations, with a 21% increase in like-for-like system sales during the first quarter. DP Poland, in a statement ahead of today’s annual general meeting, highlighted that it has opened eight new stores in the year to date, taking its tally to 43 stores across 16 towns and cities.
SDX Energy Inc (LON:SDX) has given details of the deeper exploration target in the SD-1X well, in Egypt, where drilling is now complete. Having already made a significant gas discovery in shallower gas targets the company has now confirmed the presence of hydrocarbons and a working petroleum system in the deeper exploration target, though there wasn’t a sufficient amount of hydrocarbons to warrant further testing at this time.
ReNeuron Group Plc (LON:RENE) has presented encouraging new data relating to the characterisation and scale-up of its CTX cell-derived exosome therapy candidates at a leading scientific conference in London. Exosome therapy is being explored by ReNeuron both as a potential new nanomedicine targeting cancer and as a delivery system for gene therapy treatments.
Internet of things specialist Telit Communications Plc (LON:TCM) is set for an acquisition spree after a £39mln cash call. Telit said it had already identified companies in the IoT Services sector that it wanted to buy and with the new money will look to execute deals in the near to medium term.
09.44am... Airline shares take off
Airline shares are flying higher this morning, including International Consolidated Airlines (IAG) and easyJet, helping to push the FTSE up 9 points to 7,257.18 after an initial dip at the open.
IAG shares jumped after posting a record first-quarter performance while easyJet advanced after reporting an 11.7% increase in passenger numbers and a 2.5 percentage point rise in load factor for April.
Neil Wilson, senior market analyst at ETX Capital, said: “Some nice figures from two of the key players in the UK airline sector this morning suggest that the turbulent times of late are being left behind.”
Wilson added that the airlines flew in the face of a difficult market.
“It’s been a pretty tough environment for airlines across Europe with strikes, price wars, terrorism and bad weather blamed. It’s been even tougher for the UK-based groups who derive earnings in sterling but have a lot of costs in dollars.”
Looking ahead, he said there are concerns about aviation agreements for British-based airlines flying into the EU after Brexit.
“Notably EasyJet shares are still trading well below the level they were before the EU referendum, although overall investors seem happy to overlook the dire, and rather outlandish, warnings from some others in the industry that there might be no flights between the EU and UK after Brexit. "
Shares Pearson and Marks & Spencer have also surged, topping the FTSE 100.
08.39am... FTSE dips at the open ahead of US non-farm payrolls
The FTSE 100 shed 20 points to 7,227.48 at the open as investors exercised caution ahead of the US non-farm payrolls report and the results of UK local elections.
The non-farm payrolls report, released at 1.30pm, will be in focus as it is considered a barometer for US economic growth. Economists expect employers added 190,000 jobs in April and the jobless rate rose to 4.6% from 4.5%.
Closer to home, the results of the local elections in England, Wales and Scotland started to roll in with the Conservatives gaining five councils and Labour losing two seats.
Mike van Dulken & Henry Croft at Accendo Markets said, “incoming results from the UK local elections will provide an interesting insight into next month’s general election”.
On the company front, International Consolidated Airlines Group (LON:IAG) shares gained 4.17% to 597.0p after posting a record first-quarter performance in what is usually the weakest part of an airline’s year. The British Airways owner said its first-quarter operating profit before exceptional items rose by 9.7% to €170mln (US$186.6mln), up from €155mln in 2016 and well ahead of analysts forecast for €140.5mln.
Marks & Spencer Group plc (LON:MKS) shares rose 3.41% to 369.70p after it named former Asda boss Archie Norman as its non-executive chairman with effect from 1 September, perhaps illustrating its re-focusing on improving its Food retail side.
Pearson’s (LON:PSON) shares jumped 10.64% to 728.0p as the publishing giant said it is considering selling its US school coursework business and will launch another cost cutting drive in the latest attempt to turn around its fortunes.
Smith & Nephew PLC (LON:SN), edged up 2.13% to 1,296.0p as it reported a 3% rise in underlying revenue in the first quarter as emerging markets returned to double digit growth.
Heading in the opposite direction mining shares continued to decline following yesterday’s slump, with BP, Glencore and Anglo American on the back foot. Royal Dutch Shell reversed gains from the previous session after well-received first quarter results as a drop in oil prices weighed.
Brent crude fell 1.0% to US$47.90 per barrel and West Texas Intermediate decreased 1.2% to US$44.94 amid worries about a global supply glut.
InterContinental Hotels Group plc (LON:IHG) was also on the back foot, with shares down 1.58% to 4,111.0p, after announcing the resignation of chief executive Richard Solomons.
06.39am...FTSE to make cautious start
Footsie is expected to make a cautious start today following weak showings overnight from US and Asian markets in reaction to lower oil and metal prices, with all eyes on the latest US jobs data.
Spread betting firm London Capital Group expects the FTSE 100 index to open around 16 points lower at 7,232, having added around 13 points yesterday.
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The market’s main focus will undoubtedly be on the latest, always volatile US jobs report, especially after this week’s Federal Reserve policy meeting statement tightened expectations for a likely further US rate hike next month.
The traditional precursor for the monthly report, ADP’s private sector payrolls data released on Wednesday showed growth of 177,000 for April, pretty much as expected.
Last month the ADP number beat expectations by around 80,000 jobs, which led many analysts to upgrade their forecasts for the March non-farm payrolls release.
But these missed even the unrevised predictions by over 70,000 raising concerns about the outlook for this Friday’s number.
David Morrison, senior market strategist at SpreadCo, said: “The expectation is that last month’s number was a seasonal aberration, so the hope is we get a strong bounce-back in the data”.
He added: “The current forecast is for a gain of around 200,000 after the 98,000 recorded in March.”
Update from publisher Pearson unlikely to surprise
The day’s main corporate interest should be on under-pressure educational publishing giant Pearson PLC (LON:PSON) which holds its annual general meeting, with a first-quarter trading update also expected from the group which in February reported a 21% drop in full-year 2016 profits.
READ: Pearson confirms massive 2016 loss after huge write-downs
However, in a preview of the first-quarter update, Liberum analyst Ian Whittaker said he “would not expect much of detail to come from this”.
The analyst noted: “Pearson is very 2H weighted so expect a bland statement about how it remains on track”.
International Consolidated Airlines Group (LON:IAG) - the owner of carriers British Airways, Aer Lingus, Iberia, and Vueling - will also report first quarter numbers on Friday, with Deutsche Bank predicting underlying earnings (EBITDA) of €179mln.
Significant events expected on Friday 5 May:
Trading updates: Pearson PLC (LON:PSON); InterContinental Hotels Group PLC (LON:IHG); Smith & Nephew PLC (LON:SN.); BBA Aviation PLC (LON:BBA)
Interims: International Consolidated Airlines Group PLC (LON:IAG); Millennium & Copthorne Hotels PLC (LON:MLC), McCarthy Stone PLC (LON:MCS); Smurfit Kappa Group PLC (LON:SKG)
AGMs/EGMs: InterContinental Hotels Group PLC (LON:IHG); FBD Holdings PLC (LON:FBH); Smurfit Kappa Group PLC (LON:SKG); Pearson PLC (LON:PSON); Man Group PLC (LON:EMG); T Clarke PLC (LON:CTO)
Around the markets
- Sterling: US$1.2932, up 0.07%
- Gold: US$1,232 an ounce, up 0.33%
- Brent crude: US$44.94 a barrel, down 1.27%
City Headlines
- Burberry to relocate 300 jobs from London to Leeds - BBC News
- Canberra insists BHP Billiton keeps Australian listing – The Times
- Activist investor rallies peers in threat to block DX Group’s mooted deal with rival John Menzies – Daily Telegraph
- Rolls-Royce workers stage carmaker’s first-ever strike over potential £160k pension loss – Daily Mail
- Former BHS owner Retail Acquisitions near collapse - Financial Times
- Bosses warn LSE against going soft to lure Saudi’s Aramco – The Times
- London estate agents offering buyers free cars and iPads to win sales – The Independent
- Elliott Advisers to warn Akzo’s independence will lead to more job losses - Daily Telegraph
- Apple CEO Tim Cook hits back at Donald Trump’s attacks – The Independent
- Amazon to triple R&D staff at Cambridge base – The Guardian
- MetLife warns of delay to $10 billion consumer division spin-off – Financial Times
- Snap targets smaller advertisers with self-serve platform – Financial Times
- Japan strikes ‘flammable ice’ in new offshore test well – Financial Times