FTSE 100 closes higher on day but lower on week
IAG top Footsie loser
UK services PMI falls to three-month low
Non-farm payrolls miss expectations but unemployment rate falls
FTSE 100 closed Friday higher as a positive US jobs report buoyed markets, but the UK blue-chip index was lower on the week.
Footsie closed the day up over 83 points at 7,659, but over the week as a whole it was down 0.54%.
Mid-cap cousin FTSE 250 was also higher, up over 86 points, at 20,635.
In Europe, benchmarks were also higher and in the US at the time of writing, the three major benchmarks are all green.
The US economy showed a solid show of hiring in July in a rapidly growing economy.
Around 157,000 new jobs were created last month, according to official data, though that was lower than the 195,000 jobs that had been expected.
David Madden, analyst at CMC Markets UK, said: "Trade tensions have risen again as China threatened to impose tariffs on $60 billion worth of US imposts."
He added: "Traders are worried the tough line that both sides are taking could hurt global growth. The US released the latest non-farm payrolls report, and by-and-large it was a positive update."
Top riser on Footsie was packaging and paper group Mondi Plc (LON:MNDI), which added 7.92% to 2,236p after it posted a rise in first-half earnings, boosted by a global trend to replace plastic with durable paper products.
British Airways owner International Consolidated Group PLC (LON:IAG) was top Footsie laggard as the group revealed a drop in first-half profits as French Air Traffic control strikes led to a “significant level” of flight cancellations
3.50pm: China lists proposed tariffs on US goods
China has released a list of US$60bn worth of US goods that could be hit with tariffs, including a range of agricultural products and small aircraft.
China’s finance ministry said duties ranging from 5% to 25% will be levied on 5,207 types of imports if the US pushes ahead with its planned tariffs on US$200bn of Chinese goods.
US President Donald Trump has ordered officials to consider imposing a 25% tax on US$200bnworth of imported Chinese goods, up from an initially proposed 10%.
A spokesperson of the Ministry of Commerce said: “China always believes that consultation on the basis of mutual respect, equality and mutual benefit is an effective way to resolve trade differences. Any unilateral threat or blackmail will only lead to intensification of conflicts and damage to the interests of all parties.”
3.20pm: US services PMI revised lower
The US services sector grew less than previously estimated in July.
The IHS Markit US services purchasing managers index was unexpectedly revised down to 56.0 from 56.2, compared to 56.5 in June. The latest reading marked a three-month low as the rate of new business growth softened to the weakest in six months. Business confidence also eased to a six-month low.
“Survey respondents cited concerns about rising costs and trade frictions, alongside difficulties sustaining the tempo of new business growth seen in the second quarter of 2018,” said Tim Moore, associate director at IHS Markit.
2.30pm: US stocks open higher
US stocks opened modestly higher as investors mulled over the latest non-farm payrolls report.
The Dow Jones Industrial Average added 34 points to 25,362, the S&P 500 increased 3 points to 2,830 and the Nasdaq rose 4 points to 7,806.
The non-farm payrolls report showed US employers added less jobs than expected in July but the previous two months of data were revised higher and the unemployment rate fell.
“But lurking beneath the vanilla surface of today’s jobs report is a more bitter reality – the American job creation miracle is slowly running out of road," said Jacob Deppe, head of trading at online trading platform, Infinox.
“With the number of people re-entering the labour market falling and the US lurching ever close to full employment, the increasing shortage of staff threatens to slam the brakes on an otherwise booming economy.
Meanwhile, data showed the US trade deficit widened in June, although it was not as bad as economists had expected.
2.00pm: Non-farm payrolls 'not as bad as they look'
Erik Norland, senior economist at CME Group, has weighed in on the latest non-farm payrolls figures from the Labor Department and thinks they are "not as bad as they look".
"The payroll numbers came in below expectations at 157,000 BUT the previous two months were revised higher by 59,000. So overall, it’s a pretty strong result that is about 22,000 jobs more than expected," he said, adding that the unemployment rate fell to 3.9%.
Norland noted that average hourly earnings grew in line with expectations and at the same rate as last month.
"This indicates that despite modest wage growth, inflationary pressures aren’t particularly strong," he said.
"So why is the Fed in such a hurry to raise rates? Total income flowing to the labour force grew at 4.6% in July from the same month a year earlier. This should underpin consumer spending but does not indicate that the US economy is overheating."
1.50pm: US trade deficit widens in June
The US trade deficit rose 7% in June to US$46.4mln from a revised US$43.2bn the previous month, the Commerce Department has revealed.
It was not as bad as feared as economists had expected a deficit of US$46.6bn. However, the data shows the US is on track to post the largest annual gap in a decade.
US exports fell 0.6% to US$213.8bn after reaching a record high last month, driven by declines in new cars and trucks. Imports rose 0.6% to US$260.2bn.
US President Donald Trump has been working to close the gap by imposing tariffs on overseas goods.
As investors analyse the data on trade and jobs, stock futures are mixed.
Dow Jones Industrial Average futures fell 7 points to 25,326 while S&P 500 futures are up 13 points to 2,827 and Nasdaq futures up 95 points to 7,802.
1.30pm: US non-farm payrolls weaker than expected
US employers added 157,000 new jobs in July, well below the 185,000 expected, the Labor Department has revealed in its monthly non-farm payrolls report.
The Labor Department, however, revised June's non-farm payrolls report to say 248,000 jobs were added, up from the 213,000 initially reported. May was also revised up to 268,000 job adds from 244,000.
The unemployment rate fell to 3.9% last month from 4.0% in June, as expected.
Average hourly earnings grew at an annual rate of 2.7% to US$27.05, which had also been predicted. On a month-on-month basis, earnings increased 0.3% in line with forecasts.
1.00pm: Amazon paid less UK taxes last year
Amazon.com Inc (NASDAQ:AMZN) paid less UK taxes last year despite profits nearly trebling, accounts show.
The corporate tax bill for Amazon UK Services, which operates the company’s warehouses that process, package and post deliveries in the UK, was £4.6bn, compared to £7.4mln a year ago. It was also able to defer £2.9mln in taxes, meaning it only paid £1.7mln in tax despite pre-tax profits rising to £72.3mln from £24.3mln.
Another of Amazon’s UK divisions –Amazon Web Services UK – also paid less tax. The division, which provides cloud computer storage, paid taxes of £155,000, down from £404,000, but profits rose to £5mln from £2.7mln.
Amazon said it paid all the taxes required in the UK and all the countries where it operates.
"Corporation tax is based on profits, not revenues, and our profits have remained low given retail is a highly competitive, low-margin business and our continued heavy investment,” a spokesman said.
12.10pm: FTSE 100 rises as pound falls on dovish BoE, Brexit worries
The FTSE 100 continued to rise in lunchtime trading, up 58 points to 7,634, as the pound weakened after Bank of England Governor Mark Carney issued a dovish statement and warned that the risk of a no-deal Brexit deal is "uncomfortably high".
After the Bank raised interest rates by 25 basis points to 0.75% yesterday, Carney said future hikes would be gradual and limited. He then told the BBC that he reckons there is a high possibility that the UK could leave the EU without a deal.
Cementing expectations that the Bank will hold off on another rate hike until after Brexit in March 2019, data showed a slowdown in UK services activity. The IHS Markit/CIPS UK services PMI fell to a three-month low of 53.5 in July from 55.1 in June.
In company news, Royal Bank of Scotland Group PLC (LON:RBS) shares jumped 3% to 258p after saying it would pay its first dividend since 2008 as it posted a profit of £888mln for the first half.
Mondi Group PLC (LON:MNDI) shares rose 6.2% to 2,201p after the packaging company posted a rise in first-half earnings, boosted by a global trend to replace plastic with durable paper products like Mondi’s.
International Consolidated Group PLC (LON:IAG) shares flew 2.9% lower to 664p after the British Airways owner revealed a drop in first-half profits as French Air Traffic control strikes led to a “significant level” of flight cancellations.
11.30am: Many companies still unprepared for Brexit, IoD reveals
A survey by the Institute of Directors has revealed that less than a third of 800 business leaders in the UK have implemented a contingency plan for Brexit.
Some 49% do not intend to plan and of those respondents, 49% believed Brexit would not impact their business and 42% were waiting to see what happens.
"Many companies are still unprepared for Brexit, and it’s hard to blame them," said Stephen Martin, IoD director general.
"When it comes to knowing what to plan for and when, firms have been left in the dark," he added in a statement.
The news comes after BoE Governor Mark Carney told BBC Radio today that he thinks the possibility of the UK exiting the EU without a deal is "uncomfortably high".
“People will have things to worry about in a no deal Brexit, which is still a relatively unlikely possibility but it is a possibility," he added.
Carney's remarks have added a further drag on sterling, which was already weaker after his dovish speech on interest rates yesterday.
10.45am: Job creation in services industry "worrying", says analyst
Joshua Mahony, market analyst at IG, said the most worrying part of the UK services PMI report is the deterioration in job creation.
Job creation in the services sector was at the weakest level since August 2016.
He added: “Despite the overwhelming confidence shown by the Monetary Policy Committee yesterday in voting unanimously for a rate rise, the weakness across both manufacturing and services sectors this week highlights the fact that any further rate rises are unlikely to be driven from a position of economic strength.”
On Wednesday, a survey from Markit/CIPS showed the UK manufacturing PMI fell to a three-month low of 54.0 in July from 54.4 in June, missing expectations of 54.2.
Howard Archer, chief economic advisor to the EY ITEM Club, said the softer services survey cements his expectation that interest rates will remain unchanged until after Brexit.
"Even allowing for indications that the fine weather and the football World Cup weighed down on consumer footfall, and possibly disrupted some business operations, the survey points to a loss of momentum in the services sector at the start of the third quarter," he said.
"This is after the sector seemingly played a leading role in GDP growth likely improving to 0.4% quarter-on-quarter in the second quarter from 0.2% quarter-on-quarter in the first."
10.20am: Hot weather and World Cup impacts services industry
Growth in UK services activity slowed in July by more than expected, according to a survey by IHS Markit and CIPS.
The IHS Markit/CIPS UK services purchasing managers index fell to a three-month low of 53.5 in July from 55.1 in June. While it was above the 50 level that signals expansion in the sector, it missed forecasts of 54.7.
Weaker July #UK #services #PMI may well fuel criticism of #BOE hiking #interest rates from 0.50% to 0.75% on Thursday & it reinforces belief that the #MPC is unlikely to hike again until after the UK leaves the #EU next March - and much will clearly depend on #Brexit developments https://t.co/d3knR0Tzgf
— Howard Archer (@HowardArcherUK) 3 August 2018
“While it’s difficult to quantify the precise impact of the recent heat wave on overall business performance, some survey respondents reported that a combination of hot weather and the World Cup had weighed on consumer footfall,” said Tim Moore, associated director at IHS Markit.
“These short-term disruptions and a general slowdown in new business growth appear to have offset the boost to tourism-related activity from the extended dry period in July.”
He added: “Looking at demand fundamentals, service providers commented that Brexit uncertainty had held back new project wins, reflecting risk aversion and a wait-and-see approach to investment spending among international clients. Tight labour market conditions and rising wage pressures are also a key challenge for service sector companies, which contributed to the slowest pace of job creation since August 2016.”
9.50am: Pounds slips below US$1.30
The pound has dipped below US$1.30 as the market continues to digest a dovish statement from the Bank of England. Sterling is down 0.16% versus the dollar at US$1.2996. Against the euro, it fell 0.1% to €1.124.
A weaker pound contributed to a higher open for the FTSE 100, which is now up 31 points to 7,607.
The BoE raised interest rates by 25 basis points to 0.75% yesterday but Governor Mark Carney said future hikes would be gradual and limited. He later told the BBC that he thinks the risk of the UK leaving the EU without a Brexit deal is "uncomfortably high".
8.40am: Mood more positive
The FTSE 100 recovered some of Thursday’s lost ground in early trading as it opened 23 points to the good at 7,598.45 with investors in a more chipper mood after the UK rate hike and ahead of US jobs figures.
The day’s big news was provided by Royal Bank of Scotland (LON:RBS) in the form of interim results, which judging by the share price (up 3.2%) were well received by the market.
“RBS continues to take small steps, rather than large strides, but even so is demonstrating something of a return to health,” said Richard Hunter, head of markets at Interactive Investor.
Barclays (LON:BARC) and Lloyds (LON:LLOY), which both updated earlier in the week, nudged higher in RBS’s slipstream.
The French air traffic strike took its toll on the profits of IAG (LON:IAG), whose shares were effectively grounded as they sank 3.7% in the wake of the British Airways owner’s interims.
Making its debut this morning was Argo Blockchain (LON:ARB), which rose 2p to 18p a share in the first hour of trading.
Argo is what’s called a crypto miner, which creates new cryptocurrencies.
The IPO raised more than expected and received some heavyweight City support in the form of Miton, Henderson and Jupiter.
Not bad for a business that’s essentially pre-revenue.
Proactive news headlines:
Summit Therapeutics PLC’s (LON:SUMM) new treatment for superbug C-difficile outperformed the current standard of care in its latest clinical trial. In the Phase II CoDIFy trial, Summit’s drug, Ridinilazole, was more effective than the widely prescribed Vancomycin in preserving the gut microbiome, which is known to be important in protecting both against the initial infection and its recurrence.
ECR Minerals PLC (LON:ECR) told investors that it has secured an option over the Iceberg gold project in Western Australia. Iceberg comprises 3 tenement areas covering 137 square kilometres of ground immediately along strike and adjacent to the Tropicana gold mine which host some 8mln ounces of gold.
Keywords Studios PLC (LON:KWS) is anticipating pre-tax profit growth of over 60% in the first half of the year as the firm’s numerous acquisitions began to contribute to its balance sheet.
The financial year just ended saw a sharp increase in sales for Seeing Machines Limited (LON:SEE), with sales in the second half 9% higher than in the first half.
Minds + Machines Group Limited (LON:MMX) has entered into an exclusive agreement to integrate the Ethereum blockchain into its upcoming top-level domain name ‘.luxe’.
Tekcapital PLC (LON:TEK) said its portfolio company, Lucyd Pte Ltd, has launched an online store to sell spectacles and smart glasses.
The latest trading update for S & U PLC (LON:SUS) once again suggested that Advantage Finance has no reverse gear, with the car finance arm continuing to rack up record profits.
Oracle Power PLC (LON:ORCP) has raised £450,000 of new capital to support efforts to advance coal to power partnerships in Pakistan with state-backed Chinese firms. It is placing 45mln new shares, priced at 1p each.
London’s first listed crypto-currency business made its debut Friday, supported by some heavyweight cornerstone investors. Argo Blockchain PLC (LON:ARB) raised £25mln as institutions and influential high net worth backers got behind the company’s mining as a service (MaaS) business model.
88 Energy Limited (LON:88E) (ASX:88E) confirmed that the company's latest corporate presentation is now available on the company's website. www.88energy.com.
Kibo Energy PLC (AIM:KIBO), the AIM-listed multi-asset, Africa-focused, energy company, announced that its change of name to Kibo Energy has become effective immediately.
6.45am: Positive start predicted
London’s FTSE 100 is expected to trade positively this Friday morning, and, at least some headlines will feature Apple as its value sees new highs.
Closer to home, investors are digesting the somewhat expected increase in interest rates.
The FTSE 100 finished Thursday some 77 points lower, closing at 7,575, whilst the British pound’s short-lived rally gave way.
IG Markets sees the FTSE 100 recovering 38 points, calling the index at 7,614 to 7,618 with just over an hour to go until Friday’s open.
In New York, Apple’s valuation swelled above the US$1trn threshold after a few days of hype and anticipation - the iPhone maker is the first US stock to be worth this much.
The Dow Jones closed only 7 points lower, finishing at 25,326, meanwhile the S&P 500 advanced 0.49% to 2,827 and the Nasdaq gained 1.24% to end the session at 7,802.
It put investors in high sentiments ahead of monthly employment stats with the ever closely watched US non-farm payrolls set for release this afternoon.
“Today’s US employment report is likely to reinforce the hawkish narrative of the US central bank with the latest non-farm payrolls set to show that 193k new jobs were added in July,” said Michael Hewson, analyst at CMC Markets.
“Once again it will be the wages data that will help to determine the direction of the US dollar, which is trading back at one-year highs against a basket of currencies.
“This is something that President Trump has railed against recently, accusing both China and the EU of artificially keeping their currencies weak, and is likely to raise his ire again.”
In Asia, Japan’s Nikkei was only slightly trading in positive territory, up 0.03% at 22,521, while Hong Kong’s Hang Seng was slightly lower, down less than 0.1% at 27,689. The Shanghai Composite was similarly pointing lower, down 0.26% at 2,761.
Australia’s ASX 200, meanwhile, was down 0.13% at 6,232.
Looking back at London, specifically at the corporate diary, there’s a pair of big name results for investors to get stuck into – with RBS and BA owner IAG due to release interims.
Significant announcements expected on Friday August 3:
Interims: Royal Bank of Scotland Group (Q3) (LON:RBS), International Consolidated Airlines Group PLC (LON:IAG), Cobham PLC (LON:COB), Mondi PLC (LON:MNDI), Essentra PLC (LON:ESNT), William Hill PLC (LON:WMH)
Economic data: UK services PMI; US non-farm payrolls; US international trade; US ISM non-manufacturing; US manufacturing PMI
Around the markets:
- Sterling: US$1.3105, up 0.06%
- Gold: US$1,207 an ounce, down 0.23%
- Brent crude: US$73.37 a barrel, up 1.33%
- Bitcoin: US$7,330, down 2.7%
City Headlines:
Apple is the first public company worth US$1trillion – BBC News
Amazon UK tax bill slashed despite profits almost doubling – Sky News
Kaz Minerals in US$900m copper deal with Roman Abramovich
Starbucks to deliver coffee to customers in China after teaming up with Alibaba – Daily Mail
Cisco to buy cybersecurity group Duo for US$2.4bn – Financial Times