A largely positive week for London shares and the pound is ending with the focus on developments in the US economy.
Today’s non-farm payroll figures should go some way to determining whether the Federal Reserve opts for an interest rate rise of 0.5% at its December meeting.
Expectations for a slower pace of US monetary policy tightening have helped the pound to rally to $1.22, while the UK-focused FTSE 250 index also surged yesterday.
FTSE 100 Live Friday
John Lewis unveils £500m property joint venture
US economy jitters slow London shares
Premier Miton savers pull £1bn
FTSE 100 closes flat: Evening wrap
Friday 2 December 2022 17:02 , Simon Hunt
The FTSE 100 closed down just two points to 7,556 after gains made by real estate stocks were offset by losses in utilities and energy stocks.
Associated British Foods made the biggest gains of the session, up 5%, while Abrdn shares climbed 0.6% after the investment firm announced a £500 million partnership with John Lewis to build 1,000 rental homes at Waitrose sites.
The Evening Standard City desk will be back at 7am on Monday.
Stocks open lower on Wall Street after strong jobs numbers
Friday 2 December 2022 15:06 , Simon Hunt
Stocks opened lower in the opening minutes of trade on Wall Street after US nonfarm payroll numbers came in higher than expected, raising investor fears of larger Fed rate rises on the horizon.
The Dow Jones fell 0.38%, at the open to 34265.4, while the S&P 500 fell 0.89%, at the open to 4040.17.
Ronald Temple, Co-Head of Multi-Asset and Head of US Equities at Lazard Asset Management, said: “Another strong jobs report and high wage growth confirms that the Fed’s job isn’t complete yet.
“The US economy continues to have strong momentum that the Fed will need to slow to get inflation back to its 2% inflation target. Investors need to reassess their optimism regarding the end of policy tightening – both the level of terminal rates, and how long the Fed keeps rates there.”
US economy adds over a quarter of a million jobs in November, topping estimates
Friday 2 December 2022 14:34 , Simon Hunt
The US economy added 263,000 jobs in November, well ahead of the 200,000 consensus estimate. Private payrolls rose 221,000, led by 88,000 jobs in leisure and hospitality and 82,000 in education and health.
James Knightley, Chief International Economist at ING, said: “Given the Fed’s repeated warnings that rates are likely to stay higher for longer to ensure inflation is defeated, officials will be hoping that today’s numbers will be the jolt needed to get market participants to finally believe the Fed’s intent.
“The Fed has more work to do and we look for further 50bp rate hikes in December and in February, with the potential for tightening needing to go on for longer.”
Stop blaming Covid for slow delivery times, Ofcom tells Royal Mail
Friday 2 December 2022 13:01 , Simon Hunt
Royal Mail has been slammed by communications regulator Ofcom over its continued failure to reach key targets ahead of the crucial Christmas delivery season.
The watchdog said the company was using Covid as an “excuse” for the delays, and it was possible to have met the targets but the firm instead “fell well short of where it should be.”
Lindsey Fussell, Ofcom’s Group Director for Networks and Communications, said Royal Mail has had “plenty of time to learn lessons from the pandemic, and cannot continue to use it as an excuse.
Upgrade boosts Primark owner AB Foods, FTSE 100 lower
Friday 2 December 2022 09:50 , Graeme Evans
Primark owner Associated British Foods led the FTSE 100 index today after City bank Goldman Sachs removed its “sell” recommendation and raised its target price by 30% to 1900p.
The shares, which hit a low of 1223p in the aftermath of September’s mini-Budget, rallied by more than 3% or 51p to 1638.5p. Sports Direct owner Frasers also benefited from the improved sentiment by lifting 12.5p to 908p, while JD Sports Fashion added a more modest 1.1p to 129.1p.
Other City recommendations struck a resilient tone on the retail sector as Morgan Stanley gave supermarket Tesco an “equal-weight” rating and target of 263p, up from today’s 227p.
Backing for B&Q owner Kingfisher came from Deutsche Bank, which has a “buy” stance and 275p estimate. The bank believes the current level of 249.8p already reflects the risk of a spending slowdown, noting management focus is on cost control and investing for future growth. Shares rose 1% or 2.6p.
In the FTSE 250, Peel Hunt highlighted the transformation of WH Smith into the third largest operator of retail space in US travel locations. The broker has a price target of 2300p, which compares with 1429.9p after an improvement of 22.9p today.
It said: “We expect it to be a retailer that not only emerges from Covid-19 stronger, but comes out with spots almost entirely changed. To us the current valuation does not reflect the growth potential or the cash generation.”
The retail focus came during a lacklustre session for the London market amid jitters over the health of the US economy.
Weaker commodity stocks including Rio Tinto and BP meant the FTSE 100 index dropped 26.67 points to 7531.82, but the UK-focused FTSE 250 index built on yesterday’s 1.3% rise by lifting another 60.36 points to 19,469.78.
Airlines on the up, but strike threat looms
Friday 2 December 2022 09:15 , Simon English
STRIKE action could disrupt air travel over Christmas, but for the moment airlines are profiting from pent-up demand.
Ryanair said today it flew 11.2 million passengers in November, a million better than the same month a year ago.
Wizz Air, a rival which badges itself as a “sustainable” airline carried 3.7 million customers in November, a 70% jump on last time.
Ryanair’s Michael O’Leary has claimed Wizz Air and easyJet can only survive if they merge. The airlines reject this analysis.
Trade unions in France and Belgium are threatening airline walkouts over Christmas. They have told Ryanir that “staff will express their anger” if demands are not met.
Commodity stocks lead FTSE 100 lower, sterling holds gains
Friday 2 December 2022 08:39 , Graeme Evans
European markets have opened on the back foot ahead of today’s US jobs market figures, with the FTSE 100 index down 35.60 points at 7522.89.
Asia-focused stocks including Prudential and Standard Chartered were among the biggest fallers after a disappointing finish to the week for markets in the region.
Commodity-focused stocks under pressure included mining giant Rio Tinto, which weakened 2% or 132p to 5466p, and BP after a fall of 9.95p to 479.5p.
The risers board was led by Associated British Foods after Goldman Sachs removed its “sell” recommendation and raised its price target on the Primark owner to 1900p. The shares rose 3% or 48.5p to 1636p.
The FTSE 250 fell 33.16 points to 19,376,26, having rallied 1.3% yesterday on the back of a stronger pound. Sterling held on to those gains this morning to trade at just below $1.227.
Premier Miton savers pull £1bn
Friday 2 December 2022 08:23 , Simon English
NERVY investors pulled £1 billion in funds from Premier Miton this year as choppy markets and dark economic predictions saw a race to cash.
That outflow leaves Premier, based at St Paul’s in the City, managing £11.3 million on behalf of tens of thousands of investors. Most of them buy the funds via a financial adviser.
Chief executive Mike O’Shea was sanguine. “Given the macro backdrop it is hardly surprising investors and their advisers were being cautious,” he said.
He thinks that Premier’s performance stats have been decent – they certainly look favourable when compared with better known names Schroders or Jupiter.
Shea thinks those just buying index trackers which follow the market are going to find conditions “difficult” for a while. “Having strategies that will allow us to access small and mid-cap stocks will be helpful,” he said.
Premier floated on AIM in 2016. Today the shares rose 12p to 103p.
Asos interim CFO to leave
Friday 2 December 2022 07:47 , Michael Hunter
The interim chief financial officer of online retailer Asos, Katy Mecklenburgh, is leaving, to join Softcat, the IT company.
The fast fashion retailer, known for its young customer base, has been dealing with a tough trading environment and recently agreed a £350 million loan deal with banks, around the time it reported an annual loss of almost £10 million.
It has been looking for a long-term CFO since October 31, when Mat Dunn left the job and Mecklenburgh stepped up on a temporary basis. She will serve a notice period of six months.
Softcat’s current CEO, Graham Charlton, will become chief executive when she arrives.
US jitters ahead of jobs data, FTSE 100 seen lower
Friday 2 December 2022 07:40 , Graeme Evans
US markets finished lower last night, with banking one of the worst performing sectors as bond yields continued their decline on expectations for a slowing in rate rises.
Technology was a relative outperformer and the FANG+ index of mega cap tech stocks lifted 0.5% to set a two-month high.
However, the risk rally that fuelled Wall Street following Wednesday’s speech by Federal Reserve chair Jerome Powell appears to be fading due to concern about the state of the economy.
This follows the latest ISM manufacturing figure, which fell into negative territory for the first time since May 2020.
According to Deutsche Bank, today’s non-farm payrolls are expected to slow to 200,000 in November from 261,000 the previous month. The unemployment rate is forecast to be in the region of 3.6%.
Deutsche Bank strategist Henry Allen said: “A downside surprise would only add to the jitters in markets given the negative survey data for November that we’ve already had.”
The FTSE 100 index dropped 0.2% yesterday due to dollar weakness, but the FTSE 250 index rose by 1.3%. CMC Markets expects London’s top flight to open eight points lower at 7550.
John Lewis enters rental property market with £500 million Abrdn joint venture
Friday 2 December 2022 07:37 , Simon Hunt
John Lewis is to enter the rental property market with £500 million joint venture with investment firm Abrdn.
The multi-decade joint venture is set to deliver around 1,000 new homes across three local communities and is part of the partnership’s ambition to build 10,000 new homes over the next decade.
In Bromley and West Ealing in Greater London, subject to planning permission, Waitrose shops will be redeveloped to provide new homes and improved stores, while in Reading, a vacant John Lewis warehouse will be redeveloped. The sites were chosen according to their central location and proximity to transport links, John Lewis said.
Nina Bhatia, Executive Director for Strategy and Commercial Development at the John Lewis Partnership, said: “Our partnership with abrdn is a major milestone in our ambition to create much-needed quality residential housing in our communities.
“Our residents can expect homes furnished by John Lewis with first-rate service and facilities. The move underlines our commitment to build on the strength of our brands to diversify beyond retail into areas where trust really matters.”