FTSE 100 closes down
In the US, the increase in the Household Survey’s measure of employment barely reversed its January decline
Wall Street shares lower
FTSE 100 closed lower Friday as Wall Street also sank after a mixed US monthly jobs report.
Traders are concerned about disappointing China trade numbers overnight, the state of Brexit and global growth following a dismal headline non-farm number.
The US economy added just 20,000 jobs in February – the lowest rise in 17 months - while economists had been expecting 180,000 jobs to be
added.
Footsie finished down around 53 points at 7,104. On the week as a whole, it shed around 0.028%.
Mid-cap cousin FTSE 250 was also down on Friday, off around 136 points at 19,047.
"Equity markets are firmly in the red as traders are concerned about the state of the global economy," said David Madden, at CMC Markets.
"China posted disappointing trade numbers overnight. Exports and imports declined by 20.7% and 4.8% respectively. The poor numbers added weight to the argument that the global economy is cooling down."
The top laggard in London was gambling operator GVC Holdings (LON:GVC) which lost nearly 145% to stand at 588.50p, as the decision by the chairman and chief executive to dump hundreds of thousands of shares shocked the market and increased speculation that the betting sector is in line for another walloping from the regulators.
3.55pm: The Footsie crawls back above 7,100
Like most of the world’s stock markets, London ended the week on a dull note as concerns grow about global economic growth.
The FTSE 100 was down 53 points (0.74%), which did at least mean it was back above 7,100 at 7,104.
In the final half hour of trading, the number of Footsie stocks in positive territory had risen to just over 20, led by precious metals miner Fresnillo plc (LON:FRES) – up 3.2% - on the strength of gold’s surge following the US jobs report.
The love for miners did not extend to those outside of the precious metals sector, with Antofagasta PLC (LON:ANTO) the Footsie’s second biggest faller, down 4.6%.
2.35pm: US benchmarks open sharply lower following "huge miss" on US jobs number
US benchmarks, which were tipped to open lower even before the underwhelming jobs report, opened deeper in the red than expected.
The Dow Jones was 142 points (0.56%) in the hole at 25,330 and the S&P 500 was 19 points (0.69%) weaker at 2,730.
Gold received a leg-up from the non-farm payrolls read and was 1% (US$13.10) higher at US$1,299.10 an ounce.
Back in Blighty, the FTSE 100 was down 70 points (0.97%) at 7,088.
The big miss on the jobs numbers had pundits scratching their talking heads.
“The United States added only 20,000 jobs to its economy last month, which is a stunningly low figure but it has been joined by other data that paints a more encouraging picture. For example, hourly earnings on an annual level increased by 3.4% - which is an impressive number to cap off an odd economic release,” said Jameel Ahmad, the global head of currency strategy and market research at FXTM.
“I wonder whether investors will digest the figure off the back of a disappointing retail sales release in the past couple of weeks as an indicator that the global economic slowdown narrative is sneaking its way into the world’s largest economy. The initial selling reaction in the Dollar Index just one day following a downbeat ECB alerted the Dollar divergence trade suggests as much,” he added.
James Knightley, the chief international economist at ING economists, was also wondering and what he was wondering was whether the figures were “too bad to be true”.
“The February US jobs report has clearly disappointed, with total employment rising just 20,000 versus expectations of a 180,000 increase. January’s figure was revised up marginally to 311,000, but this is a troubling headline number and on the face of it offers support to the dovish shift in the Federal Reserve's policy stance while justifying market pricing that the Fed funds rate has peaked.
“The details show there was a particular weakness in construction, which fell 31,000 with retail employment falling 6,000 and government workers falling 5,000. Elsewhere it was largely flat or single-digit gains in key components while business services rose 42,000,” he added, before suggesting that the numbers do not necessarily tell the whole story.
“This report seems very odd since it completely contradicts other evidence such as the ISM employment indices, the ADP report and the NFIB jobs number,” Knightley observed.
“Significantly, from a policymaking perspective, it also contradicts the Fed’s own sources. The recent Fed Beige Book noted that “employment increased in most Districts”, highlighting “notable worker shortages for positions relating to information technology, manufacturing, trucking, restaurants and construction”. We could argue that the weak payrolls number was because firms couldn’t recruit the labour they wanted – the National Federation of Independent Businesses did report yesterday that a net 37% of firms have vacancies they can’t fill – but this looks more like a data error,” Knightley declared.
Rupert Thompson, the head of research at asset management firm, Kingswood, reckons the reading will increase the Fed’s inclination to stay on the sideline over the coming months.
“For the Fed, it’s not all about growth. While employment came in weaker than expected, the unemployment rate actually fell more than anticipated to a lowly 3.8% and also wage growth picked up more than expected. The US economy may be slowing but these numbers suggest wage pressures are still building. Altogether, this report can only make the Fed even more inclined to stick to its current mantra of flexibility and patience,” Thompson claimed.
1.35pm: US non-farm payrolls increased by just 20,000 in February
On the plus side, the US unemployment rate dropped to 3.8% from 4.0% in February, but the non-farm payrolls boost was minimal.
The US economy added just 20,000 jobs in February – the lowest rise in 17 months.
Economists had been expecting 180,000 jobs to be added.
"The US jobs number was a pure disaster, not many were expecting this number to be this bad. Clearly, the dollar bulls have been cursed by the prayers of the bears. The retracement for the dollar index was long due. The gold price surged on the back of this data. I think it is likely that the gold price may close the week above 1300 mark because of this terrible number," predicted Naeem Aslam at thinkmarkets.
"The only thing which was good in this number was the average hourly number and the labour participation rate was steady. This particular element will keep the hopes alive for the dollar bulls and the initial reaction which pushed the dollar index lower may help it to recover," he added.
The FTSE 100 was down 68 points at 7,089.
12.15pm: Dow Jones trending lower on futures markets ahead of non-farm payrolls release
The Footsie’s losses were lengthening as the countdown began to the release of US jobs data for February.
The blue-chip index was close to its low point for the day, down 73 points (1.0%) at 7,085.
“Wall Street stumbled yesterday in the wake of the ECB’s monetary policy announcement. Rather than reassuring investors, this seems to have reiterated the point about just how bad the global economic slowdown is, something that was further underlined by shock news of a 205 decline in Chinese exports for February. As a result, index futures are pointing to a lower start on Friday, although non-farm payrolls and average wage inflation is still to come before the opening bell,” reported James Hughes at Axi Trader.
“In light of the recent sell-off, weak wages growth may be sufficient to convince the market that the fed is ready to call time on quantitative tightening. This should, in turn, have the ability to bolster the inflation print without resorting to talk of a rate hike and any suggestion that cheap money is coming back into circulation also has the potential to lend some support to stocks,” he added.
“Progress in the China-US trade talks would certainly be useful, too, but that’s still absent and all told unless the wages data lands squarely in a Goldilocks zone – not too hot, yet cold enough to justify some tinkering with monetary policy – then it’s difficult to see why stocks will find cause to bounce in the near term,” Hughes concluded.
11.30am: Brent crude tumbles on the futures exchanges
Fallers among Footsie constituents outnumbers risers by seven to one as the top-share index’s losses lengthen ahead of the US open.
The FTSE 100 was down 65 points (0.90%) at 7,092 with oil giants Royal Dutch Shell (LON:RDSB) and BP PLC (LON:BP.) among the losers after the Norwegian Sovereign Wealth Fund decided that with the country already a big player in the energy sector, it would drop oil and gas companies from its investment universe.
Shell was down 2.0% and BP was off 1.5%. The US$1tn fund has around US$37bn tied up in oil & gas investments, with stakes of around 2.5% and 2.3% respectively in Shell and BP.
John Wood Group PLC (LON:WG.), in which it also has a stake, was down 1.7%.
It will be a while before the fund unwinds its holdings and the big falls in the sector were probably more to do with Brent crude declining by 1.8% on futures markets.
BREAKING: Norway ???????? recommends its wealth fund divest oil and gas shares, big win for green movement https://t.co/g9vhcU31ro via @financialtimes
— Lionel Barber (@lionelbarber) March 8, 2019
“Burdened by its sizeable commodity sector, the FTSE saw its losses accelerate as the day went on, its 0.9% decline taking it under 7090 for the first time in a week,” noted Connor Campbell.
“Heading for a 100 point fall when the US session begins, the Dow Jones is looking at opening under 25,400, its worst price for three-and-a-half weeks. That admittedly could change, however, dependent on the afternoon’s non-farm jobs report. February’s headline figure is set to pull back to 180k from January’s 304k, something that could potentially be countered by a jump in average hourly earnings from 0.1% to 0.3%. The unemployment rate, meanwhile, is expected to hit 3.9%,” he added.
10.45am: FTSE 100 below 7,100
The FTSE 100 has fallen below 7,100, albeit only just, as traders wait on this afternoon’s US jobs report.
The FTSE 100 was down 58 points at 7,099 on what has been a quiet day for news from the blue-chips, apart from the GVC shocker.
The decision by the chairman and chief executive officer of GVC to dump hundreds of thousands of shares in the company has shocked the market and has increased speculation that the betting sector is in line for another walloping from the regulators.
“Shares in GVC, the owner of Ladbrokes, fell sharply today alongside those of other large betting groups such as William Hill and Paddy Power Betfair. The slide began yesterday when there were reports that the government might introduce a further tightening of regulations on the sector in the Spring Statement next week. The sector is still seeing the effects of the recent government decision to impose a big drop in the maximum stake for fixed odds betting terminals,2 said Ian Forrest, an investment research analyst at retail investor-focused The Share Centre.
“Shares in William Hill dropped 4% and Paddy Power Betfair was down 3%, but the biggest hit today was to GVC which dropped 15%. That may be due to the additional news today that GVC’s CEO and chairman have both sold significant numbers of shares recently. While investors should take note of these sales they should also be aware that there are many reasons for a director to sell shares which have nothing to do with the company itself. Both Paddy Power Betfair and GVC are looking very much to the US for growth but they are both clearly exposed to further government action in the UK so investors should be cautious ahead of the Spring Statement,” Forrest said.
This morning’s other headline grabber – although technically it is news from yesterday – is Mike Ashley’s latest assault on Debenhams PLC (LON:DEB), the struggling department stores group.
“Debenhams is in need of a lifeline, and there’s been widespread speculation it could be hauled aboard the good ship Sports Direct before too long. Not for the first time, Mike Ashley has surprised the market with a more unexpected solution to the problems besetting the retailer,” Laith Khalaf, an analyst at Hargreaves Lansdown.
The good ship Sports Direct?
Moving on ...
“The strategy appears to be designed to give Mike Ashley executive control of Debenhams, without stumping up the cash to buy the 70% of the department store which Sports Direct doesn’t own.
“If the vote passes, he would give up his role as CEO of Sports Direct, which sits in the FTSE 250 and is worth around £1.4 billion, for an executive role at Debenhams, which is worth around £40 million, and is on the brink of relegation from the FTSE All Share. However, Mike Ashley owns a 60% stake in Sports Direct, which affords him ultimate control over the direction of the company.
“Debenhams is in dire straits already, and so the potential for change has been received positively by the market. We wouldn’t get too carried away with what the share price move means, the stock is small and targeted by short sellers, so any sort of news tends to lead to big price swings, up or down,” Khalaf said.
Shares in Debenhams were up 16%. Around 10.4% of the shares in Debenhams have been shorted in the market, making it the fourth most shorted stock in London.
9.15am: GVC plunges as top brass sell shares
It’s a take-your-pick event this morning in determining what is driving markets lower: China, Germany, ECB or more sellers than buyers.
The FTSE 100 was down 55 points (0.78%) at 7,102, not far off its low for the morning.
“Several bouts of poor economic news from China and Germany cast a dark cloud over global markets,” said AJ Bell’s Russ Mould.
“Chinese exports saw their biggest fall in three years in February amid the trade war with the US and German industrial orders fell by their steepest amount in seven months in January. It is understandable why investors have been so worried about the outlook for global growth when you see figures like these,” he added.
On Tuesday, GVC Holdings CEO Kenny Alexander offered to bet me £10,000 that he'd get the betting group back in the FTSE 100 within six months. Perhaps I should have taken the bet: shares down 15% after CEO and chairman dumped almost £20m of stock
— Dominic Walsh (@walshdominic) March 8, 2019
Bookie GVC Holdings PLC (LON:GVC), down 16% at 577p, and that man Russ Mould, who is paid to have opinions, has a view on this as well.
“There is a widely used phrase in investing that says ‘follow the money’. In GVC’s case, shareholders are following this advice to the letter as the gambling company’s share price dives amid news of hefty share sales by directors.
“Chief executive Kenneth Alexander has sold £13.7mln worth of stock and chairman Lee Feldman has dumped nearly £6mln of his personal holding. Investors are clearly spooked by this news and are also selling down.
“The two directors have pledged not to sell any more while they ‘continue’ at GVC. Investors may have read that statement as implying the pair aren’t going to be around that long,” Mould suggested.
8.50am: Weak start awaiting data
The FTSE 100 fell in the opening hour of trade following a double-dose of negativity and worries ahead of a set-piece monthly announcement.
The index of blue-chips fell 47 points to 7,110.08 early on
The latter first: there was some nervousness ahead of American jobs figures, which come out early afternoon London time.
At the same time, traders are still trying to digest the European Central Bank’s decision to ramp up its stimulus programme amid mounting economic gloom and China’s latest, rather lacklustre, trade figures.
"The effect of the ECB’s dovish tilt is still being felt in markets this morning,” said Neil Wilson of Markets.com.
“Not only has the euro and bonds been affected, but the downbeat note from the ECB rocked investor sentiment, sending stocks lower.”
Predictably the miners were on offer early on after the latest data from China, which is a big importer of the diggers’ products. Leading them lower was Antofagasta (LON:ANTO), which fell 2 %.
GlaxoSmithKline was 1% perkier as its unit ViiV said it had successfully trialled a once-a-month HIV injection.
Better than expected figures for SIG (LON:SIG), the former Sheffield Insulation Group which is no longer headquartered in the Yorkshire city, sent shares racing 9% higher.
Proactive news headlines:
Diversified Gas & Oil PLC (LON:DGOC) revealed it has agreed a new fifteen-year agreement with the authorities in Pennsylvania which defines the company’s asset retirement obligations in the state. The company operates some 23,000 wells in Pennsylvania, which represents around 40% of the group current well portfolio.
Seeing Machines Limited (LON:SEE) is preparing to trial its eye-tracking technology in a helicopter flight simulator as part of a partnership with Toll Helicopters, an arm of Australian logistics group Toll.
Specialist lender PCF Group Plc (LON:PCF) said trading in the first five months of its current fiscal year has been strong and in line with management's expectations.
United Oil & Gas PLC (LON:UOG) confirmed that the sidetrack in the Colter well has been completed, after encountering the appraisal target. The sidetrack encountered oil and gas shows in the targeted zone, though it was found deeper than expected and initial analysis suggests it is smaller than previously estimated.
Oriole Resources PLC (LON:ORR) told shareholders its stake in the Muratdere copper-gold project in Turkey is now less than 10% as a result of dilution.
The board of Thor Mining PLC (LON:THR, ASX:THR) has released a questions & answers (Q&A) document reflecting some of the questions recently received from shareholders.
RM Secured Direct Lending PLC (LON:RMDL), an investment trust specialising in secured debt instruments, said that, further to its announcement on 28 February 2019, the company has received commitments from investors for a total of £13.5mln before costs and expenses via the placing. Accordingly, it added, an aggregate of 13,500,000 new ordinary shares have been issued and at the placing price of 100p each.
Europa Metals Ltd (LON:RUZ), the European lead-zinc explorer, confirmed the cessation of trading in its securities on the official list of the ASX with effect from 4.00pm Australian Eastern Standard Time today. The group added that no change will occur to the quotation and trading of Europa Metals' shares on the London Stock Exchange’s AIM market or the AltX of the Johannesburg Stock Exchange, with the company's primary listing being on AIM and secondary listing being on AltX going forward.
6.45am: Red is the colour, sell-off is the game
Red is the colour and sell-off is the game today ahead of the release of non-farm payrolls data in the US this afternoon.
Spread betting quotes suggest the FTSE 100, which closed 38 points lower at 7,157 yesterday, will open around 45 points lower this morning after a torrid trading session in the US yesterday.
Stateside, the Dow Jones index tanked by 200 points to 25,473 while the broader-based S&P 500 lost 23 points at 2,749.
“Overnight, China released the latest trade data. US dollar-denominated exports fell by 20.7%, and economists were expecting a decline of 4.8%, and that compared with the 9.1% rise in January. The US dollar-denominated imports component fell by 5.2%, and the consensus estimate was for -1.4% and the previous reading was a decline of 1.5%. China celebrated the Lunar New Year last month so the numbers might not be an accurate reflection of trade. Equities in Shanghai and Hong Kong are much lower on the back of the trade data,” reported David Madden at CMC Markets.
At the time of writing, the Hang Seng was down 490 points at 28,290 and the Shanghai Composite was off 104 points at 3,002.
Elsewhere in Asia, Japan’s Nikkei 225 was off 430 points at 21,026.
US jobs report the big event this afternoon
The main focus today will be on the US jobs figures, particularly after Wednesday’s drop in the country’s trade deficit showed the impact on the US economy of trade tensions with China.
The ADP payrolls report for the US private sector, a not always reliable guide to the non-farm payrolls data, was released on Wednesday and showed an increase of 183,000 jobs in February, below the 190,000 forecast by analysts although the previous month’s figure was revised markedly higher from 213,000 to 300,000.
Mark Zandi, chief economist of Moody’s Analytics, which helped compile the ADP report commented: “The economy has throttled back and so too has job growth. The job slowdown is clearest in the retail and travel industries, and at smaller companies. Job gains are still strong, but they have likely seen their high watermark for this expansion.”
For February expectations are that the unemployment rate may have once again dropped below 4%, with the wage rate recovering a little, but only 170,000 jobs being created.
On the corporate front, full-year results from two FTSE 250-listed firms are the only items on the company news diary.
Metal heat treatment engineer Bodycote PLC (LON:BOY) is likely to have seen a strong aerospace backdrop in the fourth-quarter partially offset by a weak European auto market, which saw production fall by 4% in the period.
Analysts at Peel Hunt are expecting Bodycote to report organic revenue growth of 6.6% for 2018, with a margin of 18.6%.
The analysts are expecting Bodycote to pay a 25p special dividend again, reflecting the net cash position of the balance sheet, but if it happens to be absent they think this will generate much debate around M&A.
Insulation group SIG (LON: SHI) has been making decent progress on cutting overheads and pushing gross margins ahead across the group, but especially in the UK.
Those rune readers at Peel Hunt expect these benefits will be more fully felt in 2019 but the headwinds from softer construction activity will continue to limit the group's overall progress in its full-year 2018 numbers.
Peel Hunt is forecasting SIG’s 2018 adjusted pre-tax profit to slip to £76.0mln, down from £9.2mln in 2017, on sales of £2.71bn, down from 2.78bn.
Significant announcements expected On Friday:
Finals: Bodycote PLC (LON:BOY), SIG PLC (LON:SHI)
Economic data: US jobs data; US wholesale inventories
Around the markets:
- Sterling: US$1.3093, up 0.11 cents
- 10-year gilt: yielding 1.173%
- Gold: US$1,292.90 an ounce, up US$6.80
- Brent crude: US$65.96 a barrel, down 34 cents
- Bitcoin: US$3,963.61, up US$30.35
City headlines:
- In an audacious bid to take control of Debenhams, the Sports Direct tycoon Mike Ashley last night called for the removal of all the members of the Debenhams board bar finance director Rachel Osborne.
- Huawei has launched a legal fight back against bans on its equipment, accusing the US of acting as ‘judge, jury and executioner.’
- Blue-blooded Schroders has given a seat on the board to Leonie Schroder, a member of its founding family who has no experience in high finance.
- Internet lender Funding Circle posted solid growth last year amid hopes of a revival in its flagging fortunes.
- John Lewis has slashed bonuses to the lowest level since 1953 with the company’s boss warning that the crisis crippling the High Street will last another ten years.
- The Financial Conduct Authority has issued a stark warning that Provident Financial’s customers must not be exploited for higher profits if bidder Non-Standard Finance wins control of the firm.
- The ECB has wheeled out a crisis-era stimulus programme again, signalling rising concern over the eurozone’s stuttering economy
- Four Hollywood studios and Sky UK have reached an anti-monopoly settlement with Brussels
- Melrose Industries, which bought GKN in a bitter £8 billion takeover battle, has set aside £629 million to cover sales woes at the engineer.
- Britain’s largest satellite operator Inmarsat’s revenues grew 5% to $1.47 billion last year on the back of rising use of broadband during flights.
- Fashion retailer Quiz’s shares plunged by nearly 50% on Thursday after it issued its third profit warning in six months.
- A second member of the Bank of England’s monetary policy committee said that they were likely to cut rates in a no-deal Brexit, showing signs of a split among the rate-setters.
- The Pentagon is reviewing security clearance of Elon Musk, chief executive of SpaceX and Tesla, after he appeared to smoke marijuana on a US comedian’s podcast.
- Aberdeen Standard Investments, which owns almost 5% of Interserve, has thrown its weight behind the struggling outsourcing group’s proposed rescue deal.
- The American fashion brand Calvin Klein is shutting its luxury collections business to focus on its existing categories, including denim and underwear.
- The UK’s largest bakery chain Greggs had a milestone year in 2018 with sales exceeding £1 billion for the first time.
- UK house prices racked up their biggest monthly increase since records began in 1983, defying the Brexit gloom, according to the Halifax.
- Budget fashion chain Primark has told 220 of its staff in the UK that they must agree to move to Ireland or risk being made redundant.
- The upmarket fashion retailer LK Bennett collapsed into administration, putting about 500 jobs at risk.