FTSE 100 index closes over 144 points higher
US non-farm payrolls rise far more than expected in December
Dollar rises after non-farm payrolls
FTSE 100 put on a convincing show on Friday to finish up over 144 points at 6,837, although 7,000 still seems a distant memory.
It comes after a very strong jobs report from the US for December, which sent the dollar higher and US stocks skyward.
The Dow Jones Industrial Average is up over 706 points at the time of writing, at 23,394.
Footsie was also up on the week, adding nearly 4%.
"Today’s was an exceptionally strong jobs report, totally defying expectations and signaling the ongoing strength of the US labor market," said Neil Wilson, chief market analyst at Markets.com.
"We got a very strong headline number, sharper wage acceleration and a very strong increase in labor force participation. In short this report does one thing – it leaves the Fed with the ammunition to keep raising rates and ignore what the markets are telling it to do – at least for now."
FTSE 250 was also up - ahead by nearly 357 points at 17,795, while European benchmarks were also higher.
Top riser on Footsie was copper titan Antofagasta (LON:ANTO), which added 6.45% to 785.60p.
3.00pm: Strong dollar pushes the Footsie higher
Glory be, the FTSE 100 has notched up a genuine, bona fide triple digit gain.
Encouraged by the rise in the value of the dollar following the release of US jobs figures for December, the Footsie’s copious big dollar earners have driven the top-shares index up to 6,822, up 129 points, or 1.9%.
Remember the financial crisis of January 2, 2019? #NFP
— Hodgo (@Hodgjo) January 4, 2019
The US dollar index was up 0.16 on the day at 89.88 while poor old sterling was down one-tenth of a cent at US$1.2623.
Neil Wilson at markets.com reckons today’s jobs report gives the US central bank “ammunition to stock to its guns on rates”.
“Today’s was an exceptionally strong jobs report, totally defying expectations and signalling the ongoing strength of the US labour market. We got a very strong headline number, sharper wage acceleration and a very strong increase in labour force participation,” Wilson said.
“In short this report does one thing – it leaves the Fed with the ammunition to keep raising rates and ignore what the markets are telling it to do – at least for now. Despite being superficially strong, it hasn’t really moved the markets in the way a report like this would have done even 12 months ago, highlighting the uncertainty that overhangs the state of play with the US economy and the Fed.” Wilson said.
Tool hire group Ashtead Group PLC (LON:AHT), which earns most of its corn in the USA, was one of those rising on the strength of the greenback, adding 3.9%. Plumbers merchant Ferguson Plc (LON:FERG), up 3.2%, was on the rise for similar reasons.
Banks were also wanted, with Barclays PLC (LON:BARC) and Standard Chartered PLC (LON:STAN) both up around 3.3%.
1.45pm: US non-farm payrolls expanded way faster than expected in December
The number of new jobs added in the US economy in December came in way above economists’ estimates.
Non-farm payrolls increased by 312,000, versus expectations of around 184,000. The unemployment rate rose to 3.9%, versus expectations of 3.7%.
Something bullish for a change: US jobs data smashed estimates. NFP +312k vs 184k exp , AHE +0.4%MoM vs 0.3% consensus, Unemployment rate 3.9 vs 3.7% expected. Bond yields and Dollar jump. US 10y at 2.62%! pic.twitter.com/9qhVcxKV54
— Holger Zschaepitz (@Schuldensuehner) January 4, 2019
Average hourly earnings were up 0.4% month-on-month, slightly ahead of economists’ predictions of a 0.3% increase.
The Footsie did not move much following the release of the jobs data, hovering around 6,784, up 91 points on the day.
1.15pm: The Footsie extends gains ahead of US jobs report
With the release imminent of the US jobs report for December, the FTSE 100 was extending earlier gains.
The FTSE 100 was up 94 at 6,787.
“Yesterday’s +271K surge in the ADP measure of private employment stateside in December provides further evidence that the US economy remains in healthy shape,” suggested Dean Popplewell at Oanda.
“The surprising headline print would suggest that there maybe some upside risk to this morning’s non-farm payroll (NFP) headline print. Market expectations are looking for a print of +180K,” Popplewell added.
Just 11 FTSE 100 stocks were in the red, including defensive standbys such as supermarket chains J Sainsbury plc (LON:SBRY) and Wm Morrison Supermarkets PLC (LON:MRW), drinks brands owner Diageo plc (LON:DGE) and fat-moving consumer goods maker Unilever plc (LON:ULVR).
Spread betting quotes are suggesting the S&P 500 will open about 38 points higher at 2,477 when Wall Street opens in just over an hour’s time but that could change rapidly after the non-farm payrolls report.
Jobs data due in 15 minutes. The market expects:
Nonfarm payrolls: +180k
Unemployment rate: 3.7%
Private payrolls: +175k
Manufacturing payrolls: +19k
Participation rate: 62.9%
Avg. hourly earnings: +0.3%
Avg. workweek: 34.5 hours
— Scott Nations (@ScottNations) January 4, 2019
11.00am: Investors look to cash in on Caixin reading
After opening hesitantly, London’s blue-chips were forging ahead confidently mid-morning on the back of some encouraging data from Chinese the manufacturing sector.
The FTSE 100 was up 77 at 6,769.
“The Caixin survey of Chinese manufacturing reading was 53.9, which topped the forecast of 52.9, and it was an improvement of the 53.8 reading in November. The announcement was a welcome change from the negative news surrounding China this week,” declared David Madden at CMC Markets.
. @caixin Nudges China's Services #PMI to Six-Month High https://t.co/xyezJ1KaUS pic.twitter.com/dGhPeldML5
— Yicai Global 第一财经 (@yicaichina) January 4, 2019
“The Beijing authorities confirmed it will assist the economy in light of the broadly disappointing economic indicators that have been released recently. The reserve requirement ratio has been trimmed in order to stimulate the economy, and cuts to taxes are expected too, and that has lifted sentiment across Europe this morning. Mining and energy stocks are higher on the back of the Chinese news, and they are some of the biggest gainers in London this morning,” he added.
Fiona Cincotta, the senior market analyst at City Index, was attributing the market’s advance to the announcement of a new date for Sino-US trade talks.
“The US and China will sit down at the negotiating table next week to try and resolve the almost year-long trade dispute that continues to disrupt business flows between the two countries and keeps global markets on tenterhooks,” she reported.
Meanwhile, the market seems in the mood to shrug off indifferent data relating to the UK’s all-important services sector.
“The latest UK services PMI provides further evidence that the economy has lost most (if not all) of the momentum it had last summer,” asserted James Smith, the economist covering developed markets at Dutch finance house, ING.
“While slightly better than November, the latest service sector PMI reading of 51.2 doesn't bode well for growth over the winter,” suggested Smith.
“If there is one ray of hope for the Bank of England, its that firms are still reporting hiring difficulties, prompting higher wages. This is one of the reasons why policymakers have appeared keen to hike rates further once the current Brexit storm has passed.
“In reality, though, that still looks quite far off. With the Prime Minister’s deal likely to be voted down in a couple of weeks, we’re likely to see increasing signs of firms implementing contingency plans for a ‘no deal’ Brexit. Unless MPs can unite around an alternative Brexit option, a ‘no deal’ exit on 29 March by law remains the default scenario – although we think the likelihood of a delay to this exit date (most likely via an application to extend article 50) is rising.
“For this reason, it looks increasingly unlikely that the Bank of England will be able to hike interest rates again before the summer,” Smith concluded.
Earlier today we had the Nationwide housing price index update for December confirming that house prices in the UK are barely rising and now we have the Bank of England mortgage approval figures, which also indicate that the UK housing market is cooling off.
House price growth slowest for almost six years, says Nationwide https://t.co/jCs5cn7fW6
— BBC News (UK) (@BBCNews) January 4, 2019
“The Bank of England reported that mortgage approvals for house purchases fell back to a seven-month low of 63,728 in November after rising to a nine-month high of 66,709 in from 65,313 in September,” said Howard Archer, the chief economic advisor to the EY ITEM Club.
“Mortgage approvals had previously improved to October’s high from a 2018-low of 63,367 in March (which had also been the second lowest level after December 2017 since August 2016).
“At 63,728 in November, mortgage approvals are subdued. They are 21.3% below their long-term (1993-2018) average of 80,969,” he added.
The Bank of England also reported that growth in unsecured consumer credit slowed further in November to be at the weakest rate since March 2015. Archer noted this extended the downward trend seen since November 2016.
“These figures reinforce the impression that consumers are currently relatively cautious in their borrowing while lenders have certainly become warier about advancing unsecured credit. This is welcome news for the Bank of England given its view that recent rapid growth in consumer credit has created a ‘pocket of risk’,” Archer opined.
On the corporate news front, fallen glamour stock Gear4Music Holdings PLC (LON:G4M) saw its share price halved after it revealed severe growing pains.
City broker Peel Hunt responded to the trading update by downgrading to ‘hold’ from ‘buy’ and cut its price target in half citing warehouse issues and the re-emergence of pricing pressures for the instrument retailer.
Peel Hunt’s new price target is 500p – which is still almost double the current share price of 257.5p.
In other broker action, the teenaged scribblers in the City have been busy updating their models following yesterday’s trading update from clothing retailer, Next PLC (LON:NXT).
Berenberg upgraded the stock to ‘hold’ from ‘sell’ but Goldman Sachs cut its price target to 4,800p from 5,800p.
Shares in Next were up 37p at 4,387p.
9.30: FTSE 100 shrugs off anaemic retail price and house price data
The UK's leading share index was on the upturn despite underwhelming data from the UK services sector.
The FTSE 100 was up 55 at 6,748 with oilfield support services provider John Wood Group PLC (LON:WG.), up 5.1%, and copper miner Antofagasta PLC (LON:ANTO), up 4.5%, paving the way.
The headline seasonally adjusted IHS Markit/CIPS UK Services PMI [Purchasing Managers’ Index] Business Activity Index registered 51.2 in December, up only slightly from the 28-month low seen in November (50.4).
Reports from survey respondents suggested that Brexit-related concerns were a key factor weighing on business-to-business spending at the end of 2018. A number of firms also noted that subdued consumer demand had acted as a brake on sales in December.
“Worryingly, even the modest growth of output and order books seen in December in part reflected heightened activity in preparation for a possible disruptive ‘no deal’ Brexit next year,” observed Chris Williamson, a business economist at IHS Markit.
“Manufacturers often reported to need to source components and ship goods to customers ahead of potential supply chain or transport delays, resulting in a surge in new orders and near-record levels of inventory building. Construction sector companies likewise often reported the need to complete projects or source materials ahead of the UK’s departure from the EU. Similar evidence was also seen among some service sector companies,” Williamson added.
Meanwhile, the latest BRC-Nielsen Shop Price Index shows that overall annual inflation accelerated to 0.3% last month, up from 0.1% in November.
It is the highest level of inflation since April 2013, driven by an increase in food prices. Non-food items reduced in price by 0.4% year-on-year in December, compared to a 0.8% decline in October.
Elsewhere, the UK housing market continues to see little growth in house prices, according to the Nationwide Building Society’s house price index.
The December index was up 0.5% on a year earlier, having been up 1.9% year-on-year in November. Economists had predicted a 1.5% increase.
The rise in house prices is the lowest since February 2013.
“In particular, measures of consumer confidence weakened in December and surveyors reported a further fall in new buyer enquiries towards the end of the year. While the number of properties coming onto the market also slowed, this doesn’t appear to have been enough to prevent a modest shift in the balance of demand and supply in favour of buyers,” commented Robert Gardner, the Nationwide’s chief economist.
8.40am: Bounce back
For the first time this foreshortened week, the FTSE 100 got off on the front foot as it added 53 points to climb to 6,745.33.
The first three days of the trading year have brought with them a triple whammy of bad news – Apple’s warning, which poleaxed US stocks, was sandwiched by poor manufacturing data from the world’s two largest economies.
“All these suggest that the Sino-US trade war is having a greater effect on confidence and activity on both sides of the Pacific than we had maybe thought likely,” said Neil Wilson, an analyst at Markets.com.
“However, we see some light, albeit dim. First, there are signs of progress in terms of the trade spat.
“Trade talks take place next week and we may start to see that the effects on both the stock markets and on the real economies of the respective countries will focus their attention.
“That may just be an optimist’s view of the world – the US is still in the stronger position and will not easily give it up.”
Shares in Sainsbury (LON:SBRY) fell 1.9% after the food retail team at HSBC downgraded stock in the grocer to ‘reduce’ and hacked its price target down by 70p to 230p a share.
Tesco (LON:TSCO) and Morrisons (LON:MRW) followed in its wake.
Next (LON:NXT), which rose strongly on Thursday after its trading statement, was upgraded by the London arm of the German shop Berenberg, which cancelled its ‘sell’ advice in favour of a ‘hold’ recommendation.
Barclays Capital, meanwhile, has moved to ‘equal weight’ from ‘overweight’ on the Whitbread (LON:WTB), the hotelier that recently sold its Costa Coffee chain to Coca-Cola.
Proactive news headlines:
Remote Monitored Systems PLC (LON:RMS), the company formerly known as Strat Aero, has been successfully accepted into the EU's KEEP+ funding innovation programme. The company’s specialist surveying and inspection business, Geocurve, will receive modest financial support from KEEP+ as it works with the University of Essex on “groundbreaking knowledge exchange, collaboration, contract research and innovation in the Virtual and Augmented Reality spaces (VR/AR)”.
An unnamed US biopharmaceutical company is to run the rule over ReNeuron Group Plc’s (LON:RENE) exosome drug delivery platform. Under the terms of the collaboration agreement, the biopharma will explore the use of exosomes as a potential delivery vehicle for synthetic oligonucleotides used in gene therapy.
Circassia Pharmaceuticals PLC (LON:CIR) said its cost containment efforts were showing results as it gave an upbeat assessment of the company’s growth prospects and provided revenue guidance for the 12 months just gone. Ahead of a meeting to approve its move to AIM, the speciality pharma, which is focused on respiratory disease, told shareholders it had a healthy cash cushion of £41mln.
Franchise Brands plc (LON:FRAN) has announced a continuation of its share buy-back programme, with up to £200,000 of shares to be purchased before 30 June. The cash generative group said the programme is an offset to the dilutive impact of employee share option awards.
Keywords Studios PLC (LON:KWS) said that further to its announcement on 21 December 2018, it has completed the acquisition of Sunny Side Up Creative Inc from its founder, Thomas Giroux, after all of the conditions were fulfilled.
6.45am: FTSE 100 set for a 'Brylcreem bounce'
After yesterday’s late swoon, the FTSE 100 was expected to make another sortie back above 6,700 this morning.
Spread betting quotes indicate the Footsie will open at around 6,738, having shed 42 points yesterday to close at 6,693.
US markets took a hammering yesterday in the wake of Wednesday night’s profit warning from Apple and yesterday’s soft US manufacturing data.
In the US, the Dow Jones plunged 660 points, or 2.8%, to close at 22,686 while the broader-based S&P 500 tumbled 62 points (2.5%) to 2,448. The tech-heavy NASDAQ Composite plummeted 202 points (3.0%) to close at 6,463.
Attention today turns to US-non farm payrolls for December.
“There was mixed employment numbers from the US yesterday. The ADP private employment report for December was 271,000, which was well above the 178,000 that economists were expecting, but the November update was revised from 179,000 to 157,000. The jobless claims report was 231,000, while dealers were expecting 220,000,” reported David Madden at CMC Markets.
“The US non-farm payrolls report will be released at 1.30pm (UK time) and the consensus estimate is 177,000. The unemployment rate is tipped to hold steady at 3.7%. Average earnings on a yearly basis are expected to cool to 3% from 3.1%, but on a monthly basis are expected to be 0.3%, up from 0.2%. Last month, dealers were afraid of the Federal Reserve being too aggressive, but now traders are wary of signs of cooling growth,” he added.
On this side of the pond, UK services data will be in focus.
The Markit/CIPS purchasing managers’ index for UK services is expected to rise to 50.7 in December, up from 50.4 in November. A reading above 50 signals expansion in sector activity.
The report follows Markit’s better-than-expected UK manufacturing report on Wednesday. The manufacturing PMI rose to 54.2 in December from an upwardly revised 53.1 in November, beating forecasts of 52.5.
In Tokyo, the Nikkei 225 followed Wall Street lower, diving 453 points (2.3%) to 19,562 but in Hong Kong, the Hang Seng rebounded and was up 365 points (1.5%) to 25,408 heading into the close.
Major announcements due on Friday:
Trading updates: Johnson Service Group plc (LON:JSG)
Economic data: UK services PMI; US non-farm payrolls
Around the markets
- Sterling: US$1.2635, up 0.01 cents
- 10-year gilt: 1.067%
- Gold: US$1,296.50 an ounce, up US$1.70
- Brent crude: US$56.42 a barrel, up 47 cents
- Bitcoin: US$3,856.71, up US$16.18
Business headlines
Daily Telegraph
A poll of Conservative Party members showed more than half would prefer to leave the EU with no deal, shattering Theresa May’s hopes of persuading Tory MPs to back her Brexit deal.
Bristol-Myers Squibb is to buy Celgene for £60 billion, which represents a 54% premium to the US biotech firm’s market value.
Traders blamed Apple’s shock sales slowdown and thin computer-driven trading for a currency flash crash that suddenly lifted the Japanese yen by as much as 7% against the Australian dollar.
The Times
Google channelled nearly €19.9 billion to a subsidiary in the Caribbean haven Bermuda in 2017 as part of its contentious “Dutch sandwich” tax avoidance manoeuvre.
The latest monthly figures from the British Retail Consortium and Nielsen show that overall shop price inflation rose at their fastest rate in six years despite heavy discounting by fashion retailers on the high street before Christmas.
Whitbread will make a one-off contribution of up to £380 million to the group’s pension fund after the sale of its Costa Coffee chain to Coca-Cola.
The British arm of Condé Nast, the American owner of magazines such as Vogue, Vanity Fair and GQ, made a £13.7 million pre-tax loss in 2017 despite a £4.3 million profit the year before.
City broker FinnCap has registered a decline in profits and revenues in its first update since its stock market float last month.
The latest purchasing managers’ index for construction fell to 52.8 last month because of a slowdown in house building and commercial work.
Three former Credit Suisse bankers were arrested in London yesterday on charges that they took part in a $2 billion fraud scheme involving state-owned companies in Mozambique.
Financial Times
Profit from Delta Air Lines hits US airline stocks
Wagamama, the restaurant chain about to be subsumed into The Restaurant Group, posted a 15.4$ increase in turnover in its fiscal second quarter.
The Guardian
Next reported overall sales growth of 1.5% for the last two months of 2018 on the back of a late surge in online sales that helped save Christmas for the fashion chain.
The CAA has granted Ryanair an air operating certificate for a UK subsidiary to carry on operating all domestic and non-EU flights after Brexit.
UK CEOs are facing renewed scrutiny over excessive pay deals after new figures showed top executives earned the average worker’s annual salary within the first three working days of 2019.
Daily Mail
Former Virgin Money boss Dame Jayne-Anne Gadhia has been named an external member of the Bank of England's Financial Policy Committee, and Banking Standards Board chairwoman Dame Colette Bowe will join as the FPC boosts its senior female contingent.