FTSE 100 closes up around 11 points
US non-farm payrolls for August miss forecasts
Boris gets prorogation go-ahead
FTSE 100 closed in positive territory on the day and over the week after a mixed US jobs report on Friday.
The UK’s premier share index closed 11.17 points higher, at 7,282.34. Over the week as a whole, a busy one if you like UK political drama, it added 1.04%.
Meanwhile, FTSE 250 also closed higher, up 55.96 points to 19,705.52.
Earlier in the day, the non-farm payrolls showed the US economy added just 130,000 new jobs in August, the smallest increase in three months, providing further evidence that hiring has slowed amid an escalating trade dispute with China.
Economists had expected 158,000 and the July reading was also revised down to 159,000 from 164,000.
“The chatter about a Fed rate cut later this month is still doing the rounds, but seeing as the unemployment rate is near a 50-year low, and wages are 3.2%, which is comfortably above the 1.8% inflation rate, a rate cut might not be a done deal,” noted analyst David Madden, at CMC Markets.
On Wall Street, the Dow Jones Industrial Average added 97.57 points, while the S&P 500 gained 5.68.
Among the top gainers in London was housebuilder Berkeley Group Holdings (LON:BKG), which added 2.76% to 3,980p as it emerged that the firm has a forward sales book that exceeds GBP1.8 billion, and pricing has ‘remained stable’.
3.30pm: Wetherspoon punters find promise to cut booze prices hard to swallow
Boss Tim Martin said he has lowered the price of Ruddles, an ale made by Greene King, by an average of 20p across its 900 pubs to demonstrate the Brexit benefits it expects for drinkers. It also said it would reduce the price of lagers, spirits, wine and cider if the UK leaves the EU.
Some Twitter users have slammed the move while the pub operator’s shares are down 1.5% to 1,578p in late afternoon trading, suggesting investors are not too happy about it either.
As we haven’t left yet, all this proves is that Wetherspoon’s resident gammon Tim Martin has overcharged customers for years and can afford to pay staff a living wage.
OR that beer would be CHEAPER in the EU
OR that he and his acolytes are just as stupid as they look.?????? https://t.co/mOX6NdQm3r
— Rose Monarch???? (@Rose_Monarch) September 6, 2019
As lots of you have said, Tim Martin can afford to cut prices to promote his #BrexitLies but claims he can’t afford to pay his staff a decent wage.
Another reason to #BoycottWetherspoon and support your local independent pub instead. You’ll get a pint you can enjoy!
— Peter Underwood ???? (@GreenPeterU) September 6, 2019
2.50pm: Berkeley shareholders vote on remuneration policy
The company said it will seek to consult with its shareholders try to find “mutually acceptable ways forward”.
Ahead of the AGM it was reported that the company was facing opposition to its payment policy after shareholder advisory firm, Institutional Shareholder Services, urged investors to vote against its new bonus structure.
ISS said proposals to axe bonuses for the 2019/20 financial year were “unlikely to affect the remuneration received by executives going forward”.
Earlier today the company said it has enjoyed a period of “robust” market conditions in London and the south east of England despite Brexit uncertainty. It said forward sales remained above GBP1.8bn and set a pre-tax profit target of GBP3.3bn for the next six years.
Shares were up 2.2% to 3,960p at the time of writing.
2.05pm: US jobs growth weaker than forecast
The FTSE 100 index remained modestly lower in afternoon trading after the latest US jobs data missed Wall Street expectations on Friday, adding to expectations that the Federal Reserve will cut rates again later this month, having made their first reduction in over ten years in August.
Around 2pm, the UK blue chip index was off around 2 points at 7,268, albeit above the day’s low of 7,244.13.
The US economy added just 130,000 new jobs in August, the smallest increase in three months and providing further evidence that hiring has slowed amid an escalating trade dispute with China.
The increase in new jobs fell well short of the 170,000 forecast of economists, however, the unemployment rate was unchanged at 3.7%.
The US Labor department also revised the increase in new jobs in July down to 159,000 from 164,000, while June’s gain was trimmed to 178,000 from 193,000.
Before the August non-farm payrolls, pre-market trading on Wall Street pointed to a higher opening, but stock futures pared their gains after the weak data in spite of heightened expectations that the Fed will sanction another 25 basis point cut in US interest rates this month – with that reduction largely priced into markets.
Nancy Curtin, chief investment officer of Close Brothers Asset Management, commented: “The Fed has made it clear that they are keen to sustain the expansion; hence any further weakness in economic activity or decline in long rates could provide a clear signal for further easing.
“The economic mood continues to worry investors with the threat that the global manufacturing slowdown spreads to the service economy, the yield curve inversion, and ongoing trade tensions setting an ominous tone.”
She added: “Any fall-back in nonfarm payroll growth will also further infuriate the White House, with Trump determined to avoid a re-election campaign mid-recession. The fundamentals of the US economy remain robust on the consumer side, but Powell will likely respond to any threat to the expansion from these more global influences.”
12.15pm: Boris gets prorogation go-ahead
The high court in London has ruled in favour of Boris Johnson’s decision to prorogue parliament for five weeks ahead until October 14.
The prime minister was found to have acted lawfully in requesting the Queen’s permission to suspend parliament from next week.
Earlier this week a Scottish court rejected a similar challenge to overturn the prime minister’s decision. A third challenge is being heard in Belfast.
11.50am: G4S jumps on report of US takeover of cash handling arm
New-York listed The Brink’s Company is understood to be among the parties that have approached G4S about acquiring its cash solutions arm.
Shares in G4S jumped 6.5% to 186.6p following the report.
G4S revealed in its half-year results last month that it had received approaches from third parties about a deal. Its cash solution business accounted for about 15% of revenue last year and 23% of earnings (EBITA).
11.00am: Deutsche Bank downgrades Lloyds and RBS, prefers Barclays
Deutsche Bank has downgraded Lloyds Banking Group PLC (LON:LLOY) and Royal Bank of Scotland Group PLC (LON:RBS), saying these banks have more exposure than its peers to a tough UK mortgage market and the impact of a possible no-deal Brexit.
The German investment bank lowered its recommendation on Lloyds shares to ‘hold’ from ‘buy’ and cut its target price to 55p from 74p.
Deutsche Bank also reduced its rating on RBS to ‘hold’ from ‘buy’ and axed its target price to 215p from 290p.
A slowdown in the housing market and fierce competition in the UK mortgage lending, putting pressure on banks’ margins.
“Lloyds and RBS are more exposed to mortgage refinancing pressure given the size of their respective standard variable rate (SVR) portfolios, while Barclays and HSBC UK have relatively smaller SVR books,” Deutsche Bank said.
Lloyds shares have edged down 0.6% to 49.7p and RBS is down 1.7% to 187p.
It repeated a ‘buy’ recommendation on Barclays but lowered its target price to 175p from 212p.
10.20am: UK house prices rise despite Brexit uncertainty
UK house prices rose in August at the fastest annual pace in four months, Halifax has revealed.
House prices increased 1.8% year-on-year last month to GBP233,541 after a 1.5% rise in July. However, it was less than the 3.4% growth expected by analysts.
On the month, house prices grew 0.3% in August after a 0.4% gain a month earlier.
Changes in #UK #house prices reported by #Halifax after adjustment to its measure show much lower recent annual house price rises & less volatile movements. Had previously shown annual house price increase as high as 5.7% in 3 months to June. 2019 peak now shown as 2.8% in March https://t.co/7Fg9l5Uwbi
— Howard Archer (@HowardArcherUK) September 6, 2019
Halifax has reported the figures based on a new measure of annual price growth introduced this month. It no longer uses an average for the previous three months.
“The Halifax’s adjusted house price measure brings it much more in line with most other house price measures,” said Howard Archer, chief economic advisor to the EY ITEM Club.
“Previously, the Halifax has become very much an outlier reporting markedly higher annual house price increases and often more volatile month to month movements in prices.
“Specifically the Halifax had previously put annual house price inflation as high as 5.7% in the three months to July and still as high as 4.1% in the three months to June.”
9.40am: Brexit raises public inflation expectations
The British public’s expectations for inflation over the next year have risen as sterling comes under pressure from concerns about a hard Brexit, according to the Bank of England.
The Bank’s quarterly survey of public attitudes to inflation showed 50% of respondents expect inflation to rise in the next year due to Brexit.
For the next two years, 44% of those surveyed said Brexit has raised their inflation expectations.
Some 57% of people believe the economy will end up weaker rather than stronger if prices start to rise faster.
Asked about interest rates, 15% thought a hike would be best for the economy, 19% believed a cut would be better and 37% said rates should remain unchanged.
8.40am: FTSE 100 flat at the open
The FTSE 100 started the day flat as a pancake, ignoring positive performances on Wall Street and across Asia.
While overseas markets were buoyed by renewed trade hopes, the City’s price-makers chose to focus instead on issues closer to home.
The deadlock over Brexit, and the prospect of a general election meant London bucked the global trend.
The recovery of the pound, battered by the prospect of a No Deal exit from the EU, also helped apply the brakes with many of the UK’s top 100 firms big overseas earners (and, therefore, subject to the whim of forex markets).
“While the weakness of the US dollar is part of the story here, it also appears that recent political events have encouraged markets in the belief that a No Deal Brexit is much less likely. This seems a little premature in the current febrile political environment,” said Michael Hewson, analyst at CMC Markets.
The precious metals firms, led by Mexico-focused Fresnillo (LON:FRES), down 1.9%, tracked gold and silver prices lower.
A solid trading statement from Berkeley Group (LON:BKG) gave the house builders a boost, though it was rival Barratt Developments that hogged the limelight with a with a 1.6% rise versus Berkeley’s 1.4% gain.
6.45am: FTSE 100 called lower
The FTSE 100 is seen slightly lower on Friday morning ahead of the all-important non-farm payroll data from the US.
Spread-better IG expects the FTSE 100 to open 7 points lower after closing down 40 points at 7,271 on Thursday.
The equities markets have suffered somewhat this week as the ongoing moves to block no-deal Brexit in Parliament have added strength to the pound, which was at US$1.2322 against the dollar on Friday morning after having started the week closer to US$1.20.
The US non-farm payrolls data could provide some more catalysts for the pound, with the numbers likely to influence the strength of the dollar.
Meanwhile, global markets overnight were given a boost by the news that the US and China announced plans to begin trade negotiations in early October.
In the US on Thursday the Dow closed 1.41% higher while the S&P 500 was up 1.3% and the Nasdaq rose 1.75%.
The optimism over trade continued into Asian markets today, with the Japanese Nikkei 225 up 0.48% and Hong Kong’s Hang Seng rising 0.38%.
US non-farm payrolls dominate macro agenda
The US jobs report comes with investors anticipating a Federal Reserve rate cut in September of 25 basis points – or possibly 50bps if policymakers were to be swayed by President Trump.
But despite “rampant negativity”, economists at RBC Capital Markets said there was “nothing” in recent employment data to suggests that a deceleration in job growth is in the offing, with initial jobless claims and insured unemployment remaining at all-time lows, consumer confidence in the labour market at a fresh cycle high and the unprecedented phenomenon of openings still outnumbering hiring by about 1.6mln.
However, Ipek Ozkardeskaya, senior market analyst at London Capital Group, said that despite expectations of strong payroll data, a deeper look at the US jobs market hinted that things “may not be going as well in the coming months”.
She cited a report from staffing firm Challenger, Gray & Christmas, which warned that US companies plan to eliminate more than 10’000 jobs due to ongoing “trade difficulties”.
Proactive news headlines
Ethernity Networks Ltd‘s (LON:ENET) interim results statement marked an expected step-change in the business as it transitioned into a solutions provider for virtual networking and security appliances.
Kibo Energy PLC‘s (LON:KIBO) Mbeya coal-to-power project is “rapidly gaining momentum” now that it has made the required statutory payments to the Tanzanian authorities. The payments relate to the final processing and issuance of seven mining rights for Mbeya, which were approved and granted last month.
Battery materials producer Strategic Minerals PLC (LON:SML) has received a research and development grant worth just shy of A$300,000 from the Australian tax office. The payment recognises a portion of the works carried out at Strategic’s Leigh Creek copper mine in South Australia.
Major announcements due for Friday September 6:
Economic data: Halifax UK house prices, US non-farm payrolls
Around the markets:
Sterling: US$1.2322, down 0.06%
Brent crude: US$60.97 a barrel, up 0.03%
Gold: US$1,517.1 an ounce, up 0.12%
Bitcoin: US$10,742.5, up 1.08%
Jeremy Corbyn and the SNP last night agreed to block any poll until the Prime Minister Boris Johnson has secured an extension to the Brexit deadline – Times
WeWork is considering pricing its forthcoming IPO as low as $20 billion, less than half the $47 billion figure reached in its last round of funding from Japan’s SoftBank – Financial Times
The pound hit its highest level in five weeks against the US dollar on Thursday as investors reacted to the diminishing likelihood of a no-deal Brexit – Guardian
New orders slumped again over the summer, denying the embattled manufacturing sector of Germany any relief from its year-long struggle – Telegraph
Nearly 1,600 flights are at risk of being grounded next week as British Airways faces the most damaging strike in its history – Times