- FTSE closes up around seven points
- US job figures better than expected
- Energy bills to rocket
4.50pm: FTSE closes marginally ahead
FTSE 100 closed a tad higher on Friday, closing the day at 7,196, up around seven points, or 0.1% as traders mulled over a strong US jobs report.
The US economy added 372,000 jobs in June this year, which was well above the 250,000 consensus estimate.
"The minutes from the June Fed meeting were published on Wednesday and another large rate hike is on the cards this month," noted David Madden, analyst at Equiti Capital.
"Shortly after the jobs data were released, the money market was pricing-in a 93% chance of a 0.75% hike, up from 83% prior to the announcement."
Madden added: "This afternoon, we also heard from John Williams, and the US central banker said the Fed needs to be resolute when it comes to inflation.
"This hammers home the point that monetary policy will probably be tightened at a fast pace to keep a lid on spiralling costs."
3.24pm: US stocks start lower
US stocks opened lower, with the Dow Jones losing 0.26%, the S&P 500 down 0.46% and the tech-laden Nasdaq falling 0.57%.
The prospect of further FED hikes seems to have hit the market, given expectations were that it would open higher as the week draws to a close.
3.10pm: More hikes in the US?
Rob Clarry, investment strategist at wealth manager Evelyn Partners said today’s US data strengthens the US Federal Reserves argument for raising interest rates by 75 basis points in July.
“The Federal Reserve is likely to take a dim view of this ongoing tightness in the labour market,” Clarry said.
“Ahead of this release, they will have been counting on a slowdown in the number of jobs added to the economy in the hope that this would cool inflationary pressures.”
“But this data strengthens the case for a 75 basis points hike at the July FOMC meeting. The immediate response from markets was a 10 basis points increase in the US 2 year yield, while stock futures lost around 0.4% on S&P 500 contracts.”
2.43pm: Entain down on Deutsche Bank target price cut
Shares in Entain PLC (LSE:ENT) slipped 2% to 1,075p on the back of a target price cut by Deutsche Bank, following yesterday's first-half results where it warned on profit.
Deutsche maintained its Buy rating, but analysts clawed back the target price from 2,034p to 1,871p for the gambling and betting company.
Online revenues were below expectations, although this was somewhat offset by a stronger recovery in retail which meant second-quarter results were “broadly in line” with its expectations.
Notably, the bank pointed to management comments on the current macro-conditions which is “reducing customers’ rate of spend.”
As a result, revenues are expected to be flat for the financial year, below analysts’ predictions of a 2.3% increase.
Other forecasts, such as underlying earnings (EBITDA) have also been reduced, alongside a host of reductions previously due to other headwinds.
As well as that, the upcoming Gambling Act review, which has been delayed, postpones regulatory clarity for the market according to Deutsche.
There could also be some “downside protection from potential bid interest, most obviously joint venture partner MGM.”
1.42pm: Pay not keeping up with inflation
More on US non-farm payroll figures.
There were notable job gains in professional and business services, where employment grew by 74,000.
Leisure and hospitality also saw significant growth, adding 67,000 jobs. However, the sector as a whole is down since the start of the pandemic by 1.3mln.
Health care employment rose by 57,000, while transportation and warehousing were up 36,000 and manufacturing increased 29,000 and back to pre-pandemic levels.
Data also shows that employment as a whole in the US is only 0.3% down comapred to February 2020.
However, average pay is still lagging behind inflation, which over the past 12 months has risen by 5.1%, compared to inflation rising by 8.6%.
1.42pm: US job figures
The US economy added more jobs than expected in June, with non-farm payrolls rising by 372,000.
Original forecasts estimated an increase of 268,000 in jobs, which may point to a stronger labour market than was originally feared.
Unemployment rate was steady at 3.6%, which may also show that the US economy is going against recession worries, despite inflation at 40-year highs.
June’s figure was only slightly by May, which recorded 384,000 new hires.
WASHINGTON (AP) — US added 372,000 jobs in June in sign of economic resilience as unemployment remains a low 3.6%.
— Ken Thomas (@KThomasDC) July 8, 2022
1.35pm: Energy bills over the years
A quick comparison of energy bills over the last couple of years shows the struggle many Britons will face this winter.
The latest energy price cap predictions from Cornwall Insight are honestly pretty terrifying.
Q4 2022: £3,244.54
Q1 2023: £3,363.70
Average this winter of £3,304.12 pic.twitter.com/ByeYewJN9x
— Matilda Long (@tilda_long) July 8, 2022
1.05pm: No charges for Beergate members
Keir Starmer and Angela Rayner have been cleared by Durham Police over the 'Beergate' scandal.
Full Durham police statement. pic.twitter.com/NtjIgdOZ7R
— Peter Walker (@peterwalker99) July 8, 2022
12.36pm: US preview
US stocks are expected to open little changed on Friday ahead of June US non-farm payrolls (NFP) data that are expected to show a robust though cooling labor market.
Economists are expecting US employers to have added 250,000 jobs in June, down from 390,000 in May.
Futures for the Dow Jones Industrial Average were trading 0.1% higher pre-market, while those for the broader S&P 500 index were down 0.1% and futures for the tech-laden Nasdaq-100 lost 0.2%.
Swissquote senior analyst Ipek Ozkardeskaya said the consensus estimate that the US economy added more than 250,000 jobs in June is a strong number, even for pre-pandemic times, while the unemployment rate is seen stable at 3.6%, just above the 2019 lows.
A strong read could bring forward the idea that the Federal Reserve will take a more aggressive approach to fight inflation, sending the US economy into a soft landing, while a lower-than-expected read will confirm that the slowdown had begun, forcing the Fed to soften its tone.
“In both cases, there is a large room for market interpretation. It’s difficult to predict what direction the market would take,” she added.
Fawad Razaqzada, market analyst with City Index and FOREX.com, said the Fed will not want to focus away from inflation just yet although it knows that the economic outlook will deteriorate with a tighter monetary policy.
“Any surprise weakness in employment isn’t going to deter the Fed from its hawkish path since it is determined to create a soft landing to bring down inflation. After all, the Fed likes to see a trend before making a change in policy. One month’s worth of data isn’t going to change their outlook about the labour market,” he added.
Razaqzada said the stock market has priced in a 90% probability that the Fed will raise its benchmark rate by 75 basis points.
“Surging inflation and weakness in economic growth have been the story of 2022 so far. More recently, worries about the latter has leapfrogged the former. The market has started to price in a recession. Yield curves have inverted. Commodities have tanked. The dollar has roared higher against all major currencies. Friday’s jobs report is not going to change that outlook,” he added.
In energy markets, WTI crude oil futures were down 0.9% at $102.64 a barrel, while Brent crude futures were 0.1 % higher at $104.79.
12.06pm: Energy bills to climb again
British energy bills could hit £3,300 year in January, according to new data from Cornwall Insight, an energy market analysis and consultancy firm.
Just last month, Cornwall calculated the cap would rise to £3,003 for the January to March period, but the latest energy price moves suggest it will be higher.
The price cap is on track to rise to £3,244 a year in October, when it is next adjusted, which is up from £1,971 per year at present.
“As the energy market continues to grapple with global political and economic uncertainty, the corresponding high wholesale prices, and the UK’s continued reliance on energy imports has once again seen predictions for the domestic consumer Default Tariff Cap rise to what are even more unaffordable levels,” said Dr Craig Lowrey, principal consultant at Cornwall Insight.
“There is always some hope that the market will stabilise and retreat in time for the setting of the January cap. However, with the announcement of the October cap only a month away, the high wholesale prices are already being “baked in” to the figure, with little hope of relief from the predicted high energy bills.”
“Ofgem are continually reviewing the cap and there are a raft of consultations and potential reforms which could impact these forecasts. However, as it stands, energy consumers are facing the prospect of a very expensive winter.”
11.32am: Gold set for another decline
Gold is set to decline for the fourth consecutive week as precious metals end the week on a gloomy note.
Silver and platinum are both also down, although palladium is up.
Fears in the US over aggressive rate hikes and soaring inflation will stifle consumer demand and drive the US economy into a recession, where gold usually trades higher.
Spot gold fell 0.2% to US$1,737 per troy ounce this morning while silver lost 0.4% to US$19.10 per troy ounce.
11.06am: Former Japanese PM assassinated
Former Japanese prime minister Shinzo Abe has died after he was shot while giving a speech in the western city of Nara.
The 67-year-old, who was giving a campaign speech in the city, bled to death after sustaining two deep neck wounds.
He had no vital signs on arrival, and one wound was deep enough to reach his heart, a doctor at Nara Medical University Hospital said to Sky News added.
10.52am: Cost of living payments not enough
The cost-of-living crisis payments will not be enough to help tame runaway prices, according to Hargreaves Lansdown.
From next Thursday, 8mln households will be given a £326 payment to help with rising costs in food and energy bills.
Data from the Office of National Statistics found that 91% said the cost of living rose in the past month.
Nearly half of people are buying less food when at the supermarket, while the roughly the same amount of people are spending more on what they usually buy.
On the energy front, 43% of people found it difficult to afford their energy bills, with many turning down the heating, leaving appliances on standby and washing clothes and lower temperatures to try and keep costs down.
“The first cost-of-living payments will hit the first bank accounts next week. It’s a vital step in the right direction for those on lower incomes, but it’s a small step back from the precipice after millions of people have edged ever-closer over the past few months,” said Sarah Coles, senior personal finance analyst at Hargreaves Lansdown.
“Those on lower incomes will get £326 now, and another £324 in the autumn. Aside from the £150 council tax rebate, it’s the first in a series of payments which will also see a £150 top up for those with disabilities in September, £300 for pensioners expected to be around November, and £400 for all households - delivered direct to your energy company in instalments, between this October and March 2023.”
“It’s a positive step for those on the lowest earnings, who've been hit three times harder than higher earners by rising prices.”
“However, it’s not enough to put people back where they were before price hikes.”
10.19am: Coal and electricty on the up
Graphs from the Twitter account DailyShot show that coal prices are on the rise, while European electricty prices also hit record highs.
European electricity prices are hitting record levels as natural gas prices surge.@SPGlobal pic.twitter.com/YOMxoAZtSS
— (((The Daily Shot))) (@SoberLook) July 8, 2022
Coal prices are climbing due to tight natural gas supplies globally. pic.twitter.com/AEszq5NVou
— (((The Daily Shot))) (@SoberLook) July 8, 2022
Separately, their data also shows that downgrades in the market continue to outpace upgrades.
Earnings forecast downgrades continue to outpace upgrades as equity analysts attempt to catch up with the market. pic.twitter.com/vs8ETXCepm
— (((The Daily Shot))) (@SoberLook) July 8, 2022
9.52am: Quick snapshot
FTSE 100 was treading water ahead of the monthly US jobs data and as UK commentators assessed the post-Boris Johnson era. London’s blue-chip index was down 10 at 7,178.
Some bullishness from Vistry, which issued an upbeat outlook on the current year after trading in the first half beat its expectations. The FTSE 250 housebuilder reported “good demand” across all areas of its business, with the average weekly private sales rate rising 11%.
Today is the last opportunity for airlines using UK airports to scrap flights without fear of punishment. The amnesty slots were announced last month by the government to try and avoid last-minute cancellations.
Supermarket chain Asda said children will be able to eat a hot meal at its cafes for £1 with no minimum adult spend. The ‘cost of living’ promotion runs at any of its 156 cafes between July 25 and September 4.
Among the small caps, AQRU has launched a weighted basket of 10 leading cryptos for retail investors. The product tracks crypto market movements based on price momentum and volatility.
Castings group Chamberlin said its underlying profit has risen by 112% and it will post a first full-year profit in five years. All three operating divisions have also started the current year strongly.
Litigation Capital Management said it anticipates 25% revenue growth and a 15% rise in adjusted operating profit hike in 2022. The legal case investor grew assets under management to A$414mln at end June.
9.18: Job growth slows down
Data from the KPMG/REC Report on Jobs suggests June experienced the softest jobs growth for 16 months as concerns surrounding the market continue to grow.
While the labour market remained tight last month, job growth was at its slowest in 16 months.
Softer rises in demand were evident to see in both permanent and temporary workers.
For permanent staff appointments, the index fell for the seventh consecutive month, and by 4.5 to 54.8, almost 18 points lower than last summer’s peak.
The ongoing imbalance between supply and demand drove pay further again, although the average rate of salary inflation eased to the softest since August 2021.
London saw the sharpest rise in temp workers at the end of the second quarter.
“The labour market is still strong, with demand for new staff high,” said Neil Carberry, chief executive of the REC.
“That said, today’s data show that we are likely to be past the peak of the post-pandemic hiring spree. That pace of growth was always going to be temporary – the big question now is the effect that inflation has on pay and consumer demand over the course of the rest of the year.”
“Whether we will see the market settle at close to normal levels, or see a slowdown, is unpredictable at this point.”
8.51am: Rio Tinto's downgrade
More on Rio Tinto and its downgrade.
Analysts at Berenberg changed their position from a 'hold' to a 'sell', believing there are currently downsides in the share.
Rio Tinto will be releasing its first-half results on 27 July, which according to the broker will be the first negative catalyst due to higher costs at its iron ore and aluminium units.
Earnings per share estimates were 13% below consensus for the front half of the year.
"A precursor to this will be the Q2 operating review on 15 July, which, while likely better than Q1, is still set to bear the marks of challenging operating conditions, particularly in Australia."
In the same report, it also slashed its target price from 6,500p to 4,200p.
8.21am: FTSE down with miners dragging the index
London's blue-chip index opened lower, shading 15 points to 7,143 points.
Mining giants Anglo American, Rio Tinto, Glencore and Antofagasta are currently the index lower, likely due to Berenbergs sell note on Rio Tinto which has read across to the others.
Meanwhile, JD Sports is one of the top risers after the appointment of experienced retailer Andrew Higginson as chair.
Higginson has been a non-executive director on PLC boards for over 28 years, including senior leadership roles at Tesco PLC (LSE:TSCO) (Tesco PLC (LSE:TSCO)) for nearly 15 years, the sports retailer said in a statement.
In his previous role as chair of Wm Morrison Supermarkets from January 2015 until the takeover of the business by private equity firm CD&R LLP in November 2021, Higginson oversaw a turnaround of the business, the retailer said.
7.14am: FTSE to open lower
FTSE 100 was set to give back some of its recent gains with politics and economics to make the headlines today.
Financial spread betting firms had pencilled in a loss of about 30 points in London around an hour before the start of trading with attention later in the day to be focused on the US non-farm payrolls number.
Consensus predictions here are for jobs created in June to drop to around 268,000 from 390,000 in May but it would not be a surprise if it was lower given recent trends, said economists.
"We expect to see a 225K headline payroll print for June, with private sector employment up by 200K", said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
"Our forecast is driven by the Homebase small business jobs data, which usually are a decent guide to the official unadjusted private payroll number."
Minutes from the last ECB meeting are also due, so investors should have a decent steer on where interest rates are heading in Europe and the US by late afternoon.
In the UK, eyes are fixed firmly on the race to succeed Boris Johnson as PM.
Johnson is staying on to the autumn until a replacement is found.
Five so far have officially announced their candidature, though none yet of any of the big hitters from Johnson's government.
"The only question now is whether Labour has the strength to upset the Tory-run handover of power and force a snap election through a no-confidence vote in Parliament," said Chris Beauchamp chief market analyst at IG.
"Even this isn’t much of a risk to the (not very bright) economic outlook, given Labour’s tame policy positions compared to 2019.”
Asia markets were affected by the news of the shooting of former Japanese prime minister Shinzo Abe, who is said to be in 'grave condition' after being attacked in the city of Nara.
Abe was Japan's longest-serving PM and was famous for his policies of money printing, fiscal stimulus and enabling corporate cultural changes to boost the country's economy.
Vistry is the main company announcement today so far.
The FTSE 250 builder said it is in 'great shape' with good demand across all areas of its business.
Weekly housing sales rates rose by 11% in the first half while forward sales are up by 16% to £2.14bn.