FTSE 100 ahead 37 points at 7,512
US payrolls up 209,000 in July, versus expectations of 182,000 additions
House builders weigh on the Footsie
Pound falls versus stronger dollar
Close: Footsie finishes close to intra-day highs
The FTSE 100 received a substantial leg-up from US jobless figures today, ending the day 37 points higher at 7,512.
The gain on the week was 143 points.
Today's advance was achieved despite shareholders in house builders taking fright at the possibility the government's Help-to-Buy scheme – dubbed by some wags as Help-to-Sell – could be binned.
Barratt Developments, Persimmon and Taylor Wimpey were the three biggest fallers, shedding between 3.7% and 4.7%.
Alton Towers owner Merlin Entertainments PLC (LON:MERL) worked its magic, rising 5.5% on the back of half-year results.
Broker Liberum sounded less impressed than many with the company's performance.
“The company comments that it remains on track to deliver profits in line with current market expectations (Thomson Reuters consensus FY17 PBT is currently £300m versus our forecast for £286m) but remains cautious on the outlook for the UK. Despite this, we believe expectations will continue to drift down with UK remaining approx. 1/3 of revenues and as doubts still linger regarding the Midway model with its new openings running behind schedule and new brands still under development. Additionally, we note the increasing capital intensity of the business (and reduced cash conversion),” the broker said.
3.15pm: Footsie up as pound falls
The FTSE 100 stayed higher in late afternoon trading, holding above the 7,500 level as afternoon trading as the pound fell against the dollar strong US jobs data, even though US stocks were mixed in early New York trading.
Around 3.15pm, the UK blue chip index was ahead 31 points higher at 7,506, below the day’s peak of 7,516.71 but well above the low of 7,465.12.
On currency markets, sterling dropped 0.7% versus the dollar to US1.3046, reversing earlier modest gains after the US data, albeit having jumped higher against the US currency yesterday.
Sterling, however, was 0.2% higher against the euro at €1.1085.
The dollar got a boost after US non-farm payrolls increased by an above-forecast 209,000 in July, just below the 220,000 jobs added in June, and well above estimates for 180,000.
But US stocks were more sanguine having pushed up to record highs ahead of the data, reflecting subdued wages growth. The Dow Jones was only up around 14 points, though it held above the record 22,000 level, while the broader S&P 500 was flat, and the tech-laden Nasdaq Composite fell 0.1%.
Naeem Aslam, chief market analyst at Think Markets UK Ltd said: “Today’s number has shown that halfway through 2017 the economy is in a stable condition but not enough to produce the kind of growth which we need.
“Going forward, traders will be focusing on two key data – the average hourly earnings and the household income creation. If we are to see a rise in GDP in 2H we need the increase of household income to materialise faster.
“The data however is currently pointing to a different direction. Based on the 2Q GDP results it is consumers who made the largest contribution to growth. Therefore, we expect the wage and salary gains to remain a key indicator for economic growth in the second half of 2017.”
RBS still stands out
In London, Royal Bank of Scotland Group PLC (LON:RBS) remained the top blue chip gainer today, up over 2% at 261.6p as the bank posted a return to a half-year profit despite litigation and conduct charges as it cut costs as part of its ongoing restructuring.
The lender - which remains more than 70% owned by the government following its 2008 bailout - posted an attributable profit of £939mln for the first six months to 30 June, compared to a loss of £2.1bn the same period a year ago. It marked its first half-year profit in three years.
RBS says it will expand its Amsterdam office to serve customers in the EU if there is a hard Brexit https://t.co/yvOkIU9LRU pic.twitter.com/jfIIAFNbFz
— Financial Times (@FT) 4 August 2017
Alton Towers owner, Merlin Entertainments PLC (LON:PLC) was also a blue chip gainer adding 5.4% at 487.8p after it saw revenues and visitor numbers ride higher in the first half of the year, though it warned that the recent terror attacks in London are weighing on its Midway business.
During the six months ended 30 June, Merlin’s various attractions – which include Thorpe Park and Legoland – welcomed 29.7mln visitors; 6% more than in the first half of 2016 (H1 2016: 28mln).
On the second line, Petrofac Ltd (LON:PFC) was the biggest riser, up 6.7% at 475.8p after the FTSE 250-listed firm said it has won a US$2.0bn contract over just under four years from Oman's Duqm Refinery & Petrochemical Industries LLC.
The oil services firm, in a joint venture with South Korean technology giant Samsung Electronics Co Ltd, will work an a 47-month oil refinery project to provide engineering, procurement, construction and commission, training and start-up operations for all utilities and offsites at Duqm.
Among the small caps, Anglo African Oil & Gas Plc (LON:AAOG) gained 8% at 23.5p after the AIM-listed firm said it has completed its acquisition of the remaining stake in Petro Kouilou, the majority owner of the Tilapia oil field in the Republic of the Congo.
Anglo African paid US$2.5mln in March to Sister Holding SAS for an initial 49% interest in Petro Kouilou, which has a 56% interest in the producing field.
2.15pm: Jobs up, wages subdued
The Footsie remained stronger just ahead of the US restart with the Dow Jones set to notch up early gains which would put it on course for ninth straight session of gains following strong US jobs creation in July, even though wage growth remains subdued.
Craig Erlam, senior market analyst at Oanda said: “The July jobs report from the US appeared to tick all the boxes when the numbers were released, strong jobs gains, higher participation and unemployment back at 16 year lows. But as ever, there was one crucial component missing.”
“Earnings growth has eluded US workers ever since the global financial crisis and despite the labour market appearing to have tightened dramatically over the years, the path back to higher earnings continues to be a painfully slow one. The earnings numbers for June were once again the only disappointment in an otherwise stellar report, in which 209,000 jobs were added, unemployment fell to 4.3% and even participation ticked up to 62.9%.”
#US Jobs Report Fails to Deliver Knockout Blow https://t.co/cKs9oJ4Zdo #NFP #Unemployment #EURUSD #GBPUSD #USDJPY #AUDUSD #USDCAD #NZDUSD pic.twitter.com/XTdFZCb6xm
— Craig Erlam (@craig_forex) 4 August 2017
He added: “ While the job gains and unemployment decline is what will probably make the headlines – and of course, Donald Trump’s Twitter feed – it’s the lack of significant earnings growth that continues to hold the economy back and frustrate the Federal Reserve. To make matters worse, earnings growth has actually slowed since the end of last year when, at 2.9%, it appeared progress was finally being made.
“With all of this in mind, today’s report has probably done very little to alter the Fed’s position on interest rates this year.”
1.45pm: Blue chips bounce higher
The Footsie bounded through the 7,500 level once again in early afternoon trading as the pound fell against the dollar after US jobs creation in July beat forecasts, putting further Federal Reserve rate hikes back on the agenda.
By 1.45pm, the FTSE 100 index had rallied 26 points higher to 7,501, just easing off the session peak of 7,504.23, having been stuck in a tight trading range ahead of the US data.
On currency markets, the pound reversed earlier gains versus the dollar, shedding 0.3% at US$1.3104, but stayed fairly flat versus the euro at €1.1069.
The dollar got a boost after US non-farm payrolls increased by an above-forecast 209,000 in July, just below the 220,000 jobs added in June, and well above estimates for 180,000.
The US has added nearly 450,000 new jobs in the past two months, knocking the unemployment rate back down to a 16-year low of 4.3% in July.
Hourly pay rose by 0.3% in July to an average of $26.36, though over the past 12 months, wages have risen just 2.5%, the same as in the prior month.
In other data, the US trade deficit shrank by nearly 6% in June to an eight-month low of US$43.6bn down from US$46.4bn in May, and better than forecasts for a $44bn gap.
US stock futures only pointed to modest early gains at the start today on Wall Street, the Dow Jones having already set new records highs above the 22,000 level in the past two sessions.
James Knightley, chief international economist at ING Bank said: “This combination of stronger wage, producer and consumer price inflation could nudge the market into thinking that its pricing of only one rate rise over the next 18 months may be too cautious.
“With the activity backdrop looking reasonable and the economy adding jobs in significant numbers we are looking for a December Fed rate hike followed by two further moves next year.”
11.30am: Few drivers ahead of US jobs
UK new car registrations dropped by 9.3% year-on-year in July, according to the latest data from the Society of Motor Manufacturers and Traders (SMMT), reflecting "growing uncertainty" over plans for Brexit.
The SMMT said about 162,000 vehicles were sold last month, with the total sold so far this year at 1.56mln, down 2.2% from a year earlier.
UK #diesel cars sales down 20% year on year, alternative fuelled (incl electric) up 65% https://t.co/Vo3t9a5VyZ
— Doug Parr (@doug_parr) 4 August 2017
Mike Hawes, SMMT’s chief executive, said: "The fall in consumer and business confidence is having a knock on effect on demand in the new car market and government must act quickly to provide concrete plans regarding Brexit.”
Howard Archer, chief economic advisor to the EY ITEM Club, commented “Private new car sales fell 6.8% y/y in July, indicating that squeezed, uncertain consumers are perhaps reluctant to make major purchases. This certainly ties in with the weakened July GfK consumer confidence survey.”
However, Archer added: “A 10.1% y/y drop in new sales to the fleet sector may be of particular concern to the car sector as it has been holding up pretty well so far. Indeed, fleet sales were still up 0.1% y/y over the first seven months of 2017.
“It could be a sign that businesses are becoming more reluctant to replace or add to their fleets amid heightened economic and political uncertainties.”
Approaching 11.30am, the UK blue chip index was about 6 points higher at 7,488, stuck in a narrow trading range between the session peak of 7,486.45 and the low of 7,465.12, awaiting this afternoon’s US jobs report.
On currency markets today, the pound remained fairly steady after big falls yesterday, just adding 0.1% against the dollar at US$1.3150, and staying flat versus the euro at €1.1069.
10.40am: Footsie subdued
The FTSE 100 index managed to slightly rally from early modest falls in mid morning trading, helped by a good post-results gain from majority state-owned lender Royal Bank of Scotland Group PLC (LON:RBS), although interest was limited ahead of today’s US July jobs report.
Around 10.40am, the UK blue chip index was about 3 points higher at 7,477, near the session peak of 7,486.45, stuck in a narrow trading range with the day’s low of 7,465.12.
The FTSE 100 posted strong gains yesterday as the pound took a tumble following dovish statements from the Bank of England as it left UK interest rates on hold once again.
On currency markets today, sterling was fairly steady, just adding 0.1% versus a weaker dollar at US$1.3153, and flat versus the euro at €1.1069.
Joshua Mahony, Market Analyst at IG, said: “The exuberance of yesterday appears to have been left behind this morning, with the FTSE retreating into a risk-conscious period of consolidation, given the unpredictability ahead of us.”
He added: “In a week of dominated by gains for the FTSE, yesterday’s sterling sell-off could mark the beginning of a period of strength for UK stocks. It is clear that despite some statements to the contrary, the BoE is unlikely to raise rates anytime soon.
“With the BoE unlikely to act, and the Fed expected to tighten further, there is a reason to believe we could see a pro-FTSE sterling decline in the fourth quarter.”
RBS leads gainers
On the corporate front, RBS was the top blue chip gainer, up over 3% at 264.2p as the bank posted a return to a half-year profit despite litigation and conduct charges as it cut costs as part of its ongoing restructuring.
The lender - which remains more than 70% owned by the government following its 2008 bailout - posted an attributable profit of £939mln for the first six months to 30 June, compared to a loss of £2.1bn the same period a year ago. It marked its first half-year profit in three years.
But on the downside, educational publisher Pearson PLC (LON:PSON) shed 1.1% at 661.5p as it slashed its interim dividend and announced a further 3,000 jobs cuts as it attempts to mitigate some of the damage caused by a slowdown in the US higher education market.
Pearson’s revenues were flat on a constant exchange rate basis at £2.05bn in the six months ended June 30, though it did emerge from the red, posting statutory operating profit of £16mln.
Elsewhere, house builders were under pressure with blue chip Persimmon PLC (LON:PSN) shedding 5.6% at 2,423p on reports that an independent review commissioned by the UK government could call for an early end to its Help-to-Buy scheme.
Initially introduced in 2013, the scheme helps first time buyers get on the property ladder by enhancing the buyer’s deposit.
IG’s Mahony said: “In the week we saw a sharp deterioration in the UK construction PMI, this latest news is a major blow to a sector which already has clouds of uncertainty over it.”
Echo Energy higher
Away from the blue chips, Echo Energy PLC (LON:ECHO) was a strong gainer, jumping almost 20% higher to 11.5p after the explorer said it has had a very busy start since its recent relaunch as it reported interim results.
The company ended the six month period, ended June 30, with £25.5mln of cash and equivalents. The pre-revenue explorer reported a £1.6mln loss for the six months.
But another oiler was the markets' biggest faller early on, with Providence Resources PLC (LON:PVR) shares dropping 31% to 10.88p after it told investors that its drilling operation offshore Ireland encountered the Druid target on-prognosis, but, that the reservoir was found to be water bearing.
The first of the well’s two targets has disappointed. Druid accounted for slightly more than 3bn barrels of the well’s 5bn barrel resource potential. Drilling will now continue down to the Drombeg target, which is anticipated some 1,000 metres beneath Druid.
Elsewhere, Getbusy PLC (LON:GETB) shares started trading today, changing hands at 34p, each, against a 28.3p float price, after the developer of SmartVault and Virtual Cabinet document management software raised £3.0mln via a fully underwritten rights issue giving it an initial market capitalisation of approximately £13.7mln.
8.35am: Flat start for Footsie
The FTSE 100 opened almost flat as traders kept their powder dry ahead of US jobs data later.
At 8.35am, the index of blue-chip shares was off just 2 points at 7,472.96.
Unusually, for a Friday there was more than a trickle of corporate news with publisher Pearson (LON:PSON) and Royal Bank of Scotland (LON:RBS) at the vanguard.
Shares in the former were up 4% after it said it was taking further tough action, including cutting 3,000 jobs and slashing the dividend, to aid the turnaround.
Some in the City are still sceptical about the business’ prospects, however.
“Pearson’s first-half results are not usually a good guide for the full-year so,” said mid-ranked London broker Liberum.
“While there might be some pushing the name post-first-half, we are happy to retain our ‘sell’ recommendation, especially with the signs suggesting the key upcoming US higher education selling season will be subject to the structural pressures we have highlighted previously.”
RBS was ‘bid up’ after results with the shares ahead around 3% - this despite saying it will move some operations to Amsterdam post-Brexit.
The investment group Hargreaves Lansdown (LON:HL.) was the Footsie’s biggest casualty (it fell 6%) after it announced it was shelving a special dividend to bolster its regulatory capital base.
Proactive news headlines:
Currency-card specialist FairFX Group PLC (LON:FFX) has confirmed it is in advanced talks over the acquisition of a payments services business to be funded by a £25mln placing. The brief statement followed a 30% spike in the share price to 75p from 58p over the past six weeks.
Computer games localisation specialist Keywords Studios PLC (LON:KWS) has bought four of the leading businesses in France supplying similar services. La Marque, Dune Sound, Asrec and Around the Word are all based in Paris and provide French audio recording and localisation services to the video games industry.
Faron Pharmaceuticals Ltd (LON:FARN) said it is planning to provide its lead drug on a compassionate use basis once its Phase III clinical trial has concluded.The study, code-named INTEREST, should be wrapped up by the fourth-quarter.
Rapid diagnostics specialist Akers Biosciences Inc (NASDAQ:AKER, LON:AKR) said quarterly sales were the strongest since the company’s admission to America’s NASDAQ market in 2014. Revenues were US$1.2mln for the three-month period ended June 30, up around 25% on the same period last year and 1.8-times the turnover recorded in the first-quarter.
ECR Minerals PLC (LON:ECR) told investors it has appointed Weili (David)Tang as the group’s new director and non-executive chairman, meanwhile, William Howell is leaving the company.
Shares in specialist lender S & U PLC (LON:SUS) jumped higher at the opening bell this morning after it told investors that its Advantage motor finance subsidiary is trading at “record levels”. New loan transactions are up by 20% year-on-year, while monthly collections from its 49,000 customers hit an all-time high of £10mln in July – a 27% increase on the same month in 2016.
VinaCapital Vietnam Opportunity Fund (LON:VOF) has bought a sizeable stake in Tasco, one of the country’s largest toll road and property groups. VOF was the largest investor (US$11mln) in a placing by Tasco that raised US$23mln
Tidal power specialist Atlantis Resources Ltd (LON:ATL) told investors its finance chief Simon Counsell will stand down at the end of August, to be replaced by Andrew Dagley. The latter is the current head of corporate finance at the group and has been with Atlantis since before its IPO (initial public offering) in 2014.
Corporate debt investment trust RM Secured Direct Lending PLC (LON:RMDL) has declared an interim dividend of 0.2p for the April to June quarter. The trust is managed by RM Capital.
6.45am: Modest gain predicted
The FTSE 100 is expected to consolidate yesterday's gain in early trading today following mixed showings overnight on Wall Street and in Asia, with all eyes on the latest US jobs data and results from the Royal Bank of Scortland Group PLC (LON:RBS).
Spread betting firm CMC Markets expects the FTSE 100 index to open around 2 points higher at 7,476, having jumped 63 points yesterday after the pound took a tumble following dovish statements from the Bank of England as it left UK interest rates on hold once again.
Overnight on Wall Street, the Dow Jones managed to hold on to the 22,000 level breached for the first time in the previous session, eking out a 9 point gain to close at a record high for a seventh straight session. But other US indices ended lower, notably the tech-laden Nasdaq Composite, which lost 0.4%.
Weakness in technology stocks weighed in Asia where the Nikkei 225 retreated, although some other indices in the region managed modest gains as the US dollar stayed weak, hit by ongoing political concerns for President Donald Trump and mixed economic data.
Today’s US July jobs report should provide further clues on the outlook for further US interest rate rises this year, with most commentators still expecting the Federal Reserve to hike one more time in 2017.
Analysts are forecasting that 180,000 or so jobs were added to non-farm payrolls (NFP) last month, albeit down on the 222,000 increase in June.
The US unemployment rate is expected to remain near 17-year lows at 4.3% - down from 4.4% in June.
Neil Wilson, senior market analyst at ETX Capital said: “The dollar index has skidded to its weakest since January 2015 on political instability and longer odds for another Fed rate hike this year.
“A very crowded short dollar trade, with positioning at its most bearish in eight years, creates the environment for a sharp reversal but we’d likely need to see something really impressive from the NFP to sPark the short squeeze."
UK data released overnight showed accountancy firm BDO's High Street Sales Tracker record a 0.6% fall in like-for-like store sales in July, a turnaround from a 1.3% advance in the previous month, led by a 3.5% drop in fashion sales.
RBS numbers main corporate focus
Ahead of that key US data, investors will have also numbers from state-owned lender RBS to digest today, bringing down the curtain on the UK bank’s latest results season.
Restructuring and misconduct costs will be the prime focus of the taxpayer-rescued bank’s first half results and investors will be hoping to see some light at the end of the tunnel.
In the first three months of the year, RBS reported its first quarterly profit, of £259mln, since the third quarter of 2015 as it cut costs.
Market expectations are for a second quarter profit in the region of £300mln, at the lower end of expectations, to as much as £1bn, to be added to the profit seen in the first quarter.
Another blue chip firm, Alton Towers owner Merlin Entertainments PLC (LON:MERL) will also report interims on Friday, with consensus estimates suggesting a 3.5% uplift in like-for-like sales to give underlying earnings of £142mln and profit before tax of £50mln for the period.
Midway – the division that houses Madame Tussauds and the London Eye among others – will be under the spotlight with analysts suggesting that the recent terror attacks in the UK could impact visitor numbers.
Significant news expected on Friday August 4:
Interims: Kennedy Wilson Europe Real Estate PLC (LON:KWE), Merlin Entertainments PLC (LON:MERL) Millenium & Copthorne Hotels PLC (LON:MLC), Pearson PLC (LON:PSON), Royal Bank of Scotland PLC (LON:RBS), RPS Group PLC (LON:RPS)
Trading updates: S&U PLC (LON:SUS)
Economics: US July non-farm payrolls, average earnings
Around the markets:
- Sterling: US$1.3135, down 0.02%
- Gold: US$1,268.10 an ounce, up 0.02%
- Brent crude: US$48.93 a barrel, down 0.2%
City Headlines:
- Brexit is putting firms off giving pay rises, says Bank of England – The Guardian
- Sports Direct loses biggest independent investor as crisis deepens _ The Guardian
- Ousted AA Boss left to pay for medical care – The Times
- Aviva signs 10-year distribution deal with HSBC – Financial Times
- Three UK sticks to its legal threat over 5G sale – The Times
- RBS falls out of Fortune 500 as Standard Life re-enters – The Scotsman
- Tech tycoon Elon Musk burns through £1bn in three months to design new Tesla car – Daily Mail
- Axa Chief set to examine buying asset managers – The Times
- L’Oreal brand ambassador Helen Mirren says moisturiser probably does f*** all – The Independent
- Ikea launches solar batteries in the UK – The Independent
- Uniqlo launches experiment in selling clothes through vending machines – The Independent
- Auction house Sotheby’s shares tumble on lower second-quarter profit – CityAM
- Toyota to build $1.6bn US plant with rival Mazda: source - Reuters
- Property company M7 explores £300mln London float – Daily Telegraph
- Property portal OnTheMarket plots a £50mln IPO - CityAM