FTSE 100 finishes Friday a touch higher as Wall Street stays mixed after strong US jobs report

• FTSE 100 closes just 2 points higher
• US July payrolls beat expectations
• Wall Street stays mixed 

4.55pm: US jobs beat double-edged

The FTSE 100 index closed higher on Friday supported by gains from US blue-chips as July non-farm payrolls beat estimates, although London’s gains were muted as other US indices struggled amid concerns the Federal Reserve could now taper sooner.

At the close, the UK blue-chip index was ahead 2.52 points, or 0.04% at 7,122.95, below the day’s peak of 7,135.39 but above the session low of 7,103.71.

On Wall Street around London’s close, the Dow Jones Industrials Average was 134 points, or 0.4% firmer at 35,200, having earlier hit a new record high.

The broader S&P 500 index also reached a new peak early on but slipped back to be just 0.1% higher, while the tech-laden Nasdaq Composite shed 0.5%.

Edward Moya, senior market analyst, The Americas, at OANDA commented: “US stocks are mixed following an impressive jobs report that triggered a return of the reopening trade and alleviated some inflationary concerns.  The Russell 2000 index was the outperformer given the buying spree of reopening stocks.  The Nasdaq turned underperformed given the surge in Treasury yields, while the S&P 500 barely held onto gains.”

Moya added: “The Fed will be pleased with this payroll report and will likely seek one more robust reading before announcing tapering at the September policy meeting.  Yes, the Fed said the will continue to assess progress in the coming meetings, but if the unemployment rate falls to 5.1% before the September meeting, they could move earlier. 

“The US labor market recovering is entering high gear after adding 943,000 jobs in July, a decent beat of the 870,000 consensus estimate. The range of estimates was wide, varying from 350,000 to 1.2 million jobs.

“The Fed will be especially encouraged by the strong declines in both temporary layoffs and permanent job losses.  Temporary layoffs declined by 572,000 to 1.2 million, while permanent job losses fell by 257,000 to 2.9 million (which is still above the 1.6 million seen in February 2020).”

3.30pm: Strong jobs data raises questions

Stocks on both sides of the Atlantic are not quite sure about what to make of the impressive US jobs numbers.

On Wall Street the tech-heavy Nasdaq is now down 0.3%, while the other major indices started higher but are losing energy, with the S&P 500 up just 0.1%.     

All the ten biggest tech names, from Apple and Amazon.com to Tesla and Adobe, are in the red.

As someone said below, a strong NFP number is going to make investors cautious about stocks as it increases the odds of earlier tapering by the Federal Reserve, something that is not expected to be good for growth stocks.

Back in the old country, the Footsie is just about in the green, up four points at 7,124, but is the least impressive of the European indices today.

Biggest blue-chip losers at the moment are Hikma Pharmaceuticals PLC, Experian PLC and Fresnillo PLC.

The mid caps of the FTSE 250 have erased most of their losses from earlier but are still 35 points in the red at 23,471.

Bottom of the list are Savills PLC, Mike Ashley’s Frasers Group PLC and Hilton Food Group Plc.

2.50pm: The gulf of Wall Street

Wall Street has tottered off to a mixed start after the strong non-farm payrolls (NFPs) report earlier, where almost 0.1mln more jobs were added in the economy last month than predictedd. 

The Dow Jones and S&P 500 indices both jogged higher but the tech-packed Nasdaq had a false start, falling 0.2%.

Risers include Virgin Galactic Holdings Inc (NYSE:SPCE), Richard Branson’s space tourism group, which said it has started selling tickets to space with prices starting at $450,000 per seat, nicely grabbing the headlines as it reported another lossmaking quarter.

Amazon.com Inc was in the red even though it enjoyed a major victory in the Indian courts, where it is seeking partner Future Group from selling multi-billion-dollar assets to a rival.

Amazon.com Inc has pushed back plans for its workers to return to the office to January next year as a result of the ongoing coronavirus pandemic.

Rupert Murdoch’s media group News Corp was also in the green as it said it had returned to profit in the year to the end of June, with the owner of the Wall Street Journal and The Sun reporting net income of US$389mln compared to a loss the year before of US$1.6bn.

More thoughts on those NFPs from Marshall Gittler at BDSwiss, who noted that the higher than expected jobs number was mostly due to government jobs, with private payrolls almost exactly in line with expectations.

“The key point was a big drop in the unemployment rate with the participation rate rising – that’s great! Also average hourly earnings growth rose from the previous month (on a mom basis) which shows a tightening labor market.

“Average weekly hours also rose – people don’t pay much attention to that but that’s important, because there are a lot of people who are working and if each of them works a bit longer, it means in total they get a lot more money. One-tenth of an hour on the average workweek (which is what we got this month) is equivalent to around 250k new jobs in terms of aggregate income creation.”

He said this alone won’t qualify as the ‘substantial further progress’ that the Federal Reserve is looking for but “it certainly is progress”.

Back in the City of London, the Footsie was given a tiny bit of a boost to its highest levels of the session, up 14 points to 7,134.

Top of the list is London Stock Exchange after its strong half-year numbers earlier, followed by several companies that are in the dairy to announce their own results next week.

1.37pm: OMG it’s the NFPs

The FTSE 100, having traded today in an extremely confined range, spiked slightly after US jobs numbers came in higher than expected.

Non-farm payrolls increased 943,000 in July, compared to the 870,000 consensus estimate from economists on Wall Street.

US unemployment also fell to 5.4% last month from 5.9% in June.

“The payroll number has beaten the drum a bit harder again and today we have a clear warning sign that excessive loose monetary policy is going to leave the town soon,” says market analyst Naeem Aslam at AvaTrade.

“The US NFP number has pushed the gold price sharply lower as traders believe that the fed will not maintain its current monetary stance—change is coming.”  

Market reactions so far include a small spike for the US dollar index. The pound is down 0.2% against the greenback at 1.3900, which is a boost for the Footsie, which is up five points at 7125.

12.13pm: Mixed start predicted for US stocks 

London’s blue-chip index is remaining less than one point in the green at 7,120.74, though a gain of just 3 points is anything but bullish, and this tentative position is mirrored across the Pond, where Wall Street futures are pointing to a similarly edgy start. 

The Dow Jones and S&P 500 are set to open an uninpressive 0.07% and 0.04% higher, while the tech-powered Nasdaq is seen reversing 0.1%. 

With the big US jobs report due shortly, most traders are understandably unwilling to make a big bet either way.

Reflecting the excitement among market analysts, Marshall Gittler at BDSwiss begins: “OK, gang – it’s NFP day! The markets are likely to be holding their collective breaths today until the fabled US nonfarm payrolls hit the wires.”

And although the NFP is the big number that everyone watches, he points out that the Federal Reserve when determining policy has “nearly limitless data available” about the US labour market, having said it wants to see “substantial further progress” toward their goal of “maximum employment” before they begin tapering down their bond purchases.

Gittler continues: “The NFP is far from the only number they would use to evaluate labor conditions. Nonetheless, it does seem to sum everything up for the market: is the number of jobs increasing, and if so, at how rapid a pace?”

The median of forecasts on Bloomberg is currently for payrolls to be up 858K, but with forecasts ranging from 350K to 1200K, he says the consensus would be “a good number but still a little disappointing” as it would show little improvement from June and would still be below the +916k added in March.

Over at ThinkMarkets, analyst Fawad Razaqzada suggests that if the NFP number trounces expectations, “we would favour looking for long dollar trades against low-yielding currencies such as the euro. But we would be cautious on stocks in the event of a big beat because it would increase the odds of an early taper of QE, something which the markets may not like – especially growth stocks.”

If it comes in line with the expectations, “we would look to trade long indices and other risk-sensitive currency pairs such as GBP/JPY on the long side” and if it NFP badly disappoints, “selling the dollar against the pound would make sense in this potential scenario. Looking for long setups in gold and silver would also be favoured by us”.

11.13am: Tiny gain

Nobody move, the FTSE has crept into a precarious positive position and we’re not 100% sure why.

It could be financial sector stocks leading the rebound, with life insurers Prudential PLC, Legal & General Group PLC and Aviva PLC near the top of the leaderboard, and the presence of debt-laden utilities BT Group PLC and Vodafone PLC implies this might be something to do with bond yields. 

Several of these names have results out next week, as do Flutter Entertainment PLC and Entain PLC, which are also on the leaderboard.

There is an extra boost for these bookmaker groups with speculation re-emerging about bid interest from the US, with Entain, the owner of bookmakers Ladbroker and Coral, having rejected an US$11bn (£7.9bn) offer from MGM Resorts earlier this year.

The US casino giant, which partners Entain with an i-gaming joint venture Stateside, has raised $4.4bn of extra cash after selling a stake in a real estate company.

Talking of real estate, UK house prices as measured by Halifax rose a 0.4% month-on-month in July, which offers a more bullish contrast with the fall in Nationwide’s index.

It « offers some tentative, early, evidence that the housing market has not been seriously impeded by the tapering of the stamp duty holiday in June », says economist Martin Beck at the EY ITEM Club.

Annual growth slowed to a four-month low of 7.6%, but Beck said this partly reflected the strength of price growth last summer, as the market began to recover from the first lockdown.

« The full end of the stamp duty holiday in September will give a better idea of how important the tax concession has been in supporting the market. But demand for properties and house price growth may not tail off much. The economic consequences of the pandemic appear to have prompted an upward shift in house prices. Some of those consequences, such as government support to households and ultra-low interest rates, will fade. But others, such as increased demand for larger properties in a world of more home working, could prove long lasting.

« The outlook for prices faces some headwinds. On some metrics, affordability is looking increasingly stretched. And higher inflation and the risk of a rise in unemployment when the furlough scheme ends mean the outlook for growth in household incomes is not all positive. But the odds of a significant correction in the housing market anytime soon look small. »

9.57am: FTSE slips further 

The big focus today is going to be the US jobs data later, but even though that’s all that market analysts are talking about, before then we have to find some other news.   

In London, before everyone wakes Stateside, the Footsie is creeping lower, down 16 points to below 7105.

The FTSE 250 initially rose to a new all-time high of 23,526.78 but is now down 98 points or 0.4% to 23,408. 

Bottom of the mid-cap fallers list are financial sector companies (Ashmore Group PLC, Network International Holdings, () Holdings PLC and ()), travel and leisure related names (SSP Group plc,  (), easyJet PLC,  () and ()).

Yesterday the leisure sector was one of the best performing after the government lifted some of the travel restrictions, including those against the extra quarantine requirements for travellers from France, which had lifted IAG, Whitbread and ().

“US non-farm payroll figures could put a bit of life in the markets later today, » said Russ Mould at AJ Bell, noting the consensus forecast is for 925,000 jobs to have been added in July and unemployment at 5.6%.

“A worse than expected figure might trigger a positive market reaction as it would suggest the economy is not overheating. Conversely a better-than-expected figure might trouble investors if it suggests the economy is racing ahead, which would stoke fears of interest rate hikes happening sooner than currently guided by the US Federal Reserve. »

With the markets now entering the summer lull, Mould said investors will be taking stock of their year-to-date performance and creating a game plan for the autumn, with US stocks continuing to be the place where a lot of UK investors are making money.

“Joe Biden’s $1 trillion infrastructure plan will provide impetus, together with the fact that businesses and consumers are busy spending, all creating a tailwind for economic growth. Equally there is also a headwind in the form of inflationary pressures which is starting to eat into corporate profit margins. For now, investors seem happy to stick with the US market in the search for investment returns, » Mould said.

He said UK shares have done remarkably well relative to the performance in the past decade, with the FTSE 250 the star performer, up 14.1% so far this year, helped by a swathe of takeover activity, while the FTSE 100 has lagged its smaller sibling but still delivered an 8.2% gain that is slightly better than the historical annual returns seen from the market.

“Asia has been the laggard, with a regulatory clampdown in China putting investors off the region. Hong Kong’s Hang Seng index has fallen 4.6% so far this year, and China’s SSE index is down 1.3%, » he added.

“Japan’s Nikkei 225 index has bucked the negative trend in Asia with a 2.1% gain since the start of January, but hardly a reason to celebrate. The IMF recently downgraded its 2021 economic forecast for Japan as it struggles to deal with Covid. It now expects 2.8% growth this year, the weakest of all the advanced economies.”

8.38: Lower start

The FTSE 100 has continued in the same vein for the second day in a row by starting marginally lower on Friday.

However, London’s main share index has dropped just under nine points to 7112, extending its incremental losses having finished yesterday three points down.

Commodities stocks are the main weight on its neck, led by precious metals miner () falling more than 2% as gold struggles under pressure from the recent rebound in the US 10-year yield.

With more detail on the yellow metal is Alexey Kirienko of fintech Exante, who says: “Gold has consistently run into resistance each time it has attempted a breakout. Traders seem happy to keep fading the rips in gold because of a stronger dollar and lack of demand for safety as global indices continue to trade at all-time highs.

“Soon, stocks will correct themselves and we may see increased haven flows into gold and silver as a result. For now, low bond yields are helping to keep precious metals’ downside risks contained. Gold bulls will be hoping to see some soft numbers from the jobs sector, later.”

Leisure and retail shares are also prominent in the blue chip fallers, including British Airways owner IAG, Kingfisher, Next and JS Sports.

Top of the leaderboard is () after an upbeat set of half-year results, including good news on cost-cutting efforts from its acquisition of Refinitiv.  

6.40am: FTSE wait-and-see

To the surprise of few people, traders are in wait and see mode ahead of this afternoon July US jobs report.

The FTSE 100 is expected to open practically unchanged.

“There has been plenty of speculation about the importance of today’s jobs report in terms of the timing of a possible tapering of asset purchases, as well as when to expect a possible rate hike, whether it be early 2023, or late 2022,” said CMC’s Michael Hewson, setting the scene.

“The reality is, whatever today’s number is, the picture is unlikely to be any clearer after the numbers drop, than it is now, which means this month’s Jackson Hole symposium probably won’t offer investors the steer on monetary policy they hope it will.

“This is because no one on the FOMC really has any idea what the US economy will look like a month from now, let alone a year from now,” he suggested.

Economists have pencilled in a figure of 870,000 after the US economy added 850,000 jobs in June, with the unemployment rate expected to ease to 5.7% from 5.9%.

US markets had a good session yesterday with the Dow Jones jumping 272 points to 35,064 and the S&P 500 advancing 26 points to 4,429.

Asian markets this morning have been more equivocal; Tokyo’s Nikkei 225 is up 77 points at 27,805 but Hong Kong’s Hang Seng index is off 11 points at 26,193.

In the UK, results from the () are expected to be the main event early doors.

After a strong time for new listings in the past year, the initial public offerings pipeline is continuing to channel new companies onto the market in 2021, while the Refintiv addition has strengthened the group’s revenue streams into data, trading tools, analytics and risk management across financial markets.

“The shares remain a show-me story as we think it will take some time for the market to give the company credit for the acquisition-related earnings growth and cash flow generation in the coming three-five years,” said UBS.

Around the markets

• Sterling: US$1.3922, down 0.05 cents
• Gilt: US$0.528%, up 94 basis points
• Gold: US$1,802.20 an ounce, down US$6.70
• Brent crude: US$71.38 a barrel, up 9 cents
• Bitcoin: US$40,285, down US$623

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were mixed on Friday as the Reserve Bank of India (RBI) kept interest rates unchanged, a decision that was largely in line with expectations of economists in a Reuters poll.

The repo rate, the key lending rate at which the RBI lends to commercial banks, remains unchanged at 4%.

The Shanghai Composite in China fell 0.36% while Hong Kong’s Hang Seng index gained 0.04%

In Japan, the Nikkei 225 rose 0.33% but South Korea’s Kospi dipped 0.20%.

Shares in Australia lifted, with the S&P/ASX 200 trading 0.36% higher.