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FTSE 100 Live: US payrolls growth eases, helping global stocks and cooling the dollar

·14-min read
 (Evening Standard)
(Evening Standard)

The pound is finding some relief as traders mull the implications of jobs figures from the US economy, which have boosted the mood on global stock markets, helping the FTSE rise over 1% at the end of a rough week.

The US payroll report is the fourth in a row to beat expectations, but has done so by a smaller margin in August, showing a softer rate of jobs growth, giving the Federal Reserve food for thought on the impact of its rate hikes. Wall Street futures are stronger and the dollar’s strong run higher is easing.

It has helped pound bounce up off a two-year low against the greenback which came amid fears about a prolonged recession in the UK.

FTSE 100 Live Friday

  • Research reveals worst performing City funds

  • Housebuilding shares slide on UK outlook

  • Starbucks appoints outgoing Reckitt Benckiser chief as its next CEO

  • City job cuts looming

Financial and resource companies cheer FTSE 100 after US jobs data boost global stocks

14:54 , Michael Hunter

London’s FTSE 100 took heart from a rebound on Wall Street after highly influential US jobs data helped global stock markets find support after a rough week.

The main UK stock index was up 100 points in afternoon trade at 7,243.80, a rise of 1.5%. It was led by financials -- including the fund manager Abrdn, up 7.2% to 152p, and Prudential, up 4.5% at 921p -- and resource stocks, with BP up 3.6% at 457p and Antofagasta, up 3.9% at 1091p.

Housebuilders could not break their run lower after a broker downgrade for the sector from HSBC. Berkeley Group fell 5% to 3411p and was the biggest single faller. Persimmon lost 4.4% at 1406p.

The headline reading on the US August non-farm pay roll report was stronger than forecast, but only marginally, and the rise in average earnings was softer than expected while the overall unemployment rate rose, defying expectations that it would stay steady. The data has global implications for stock makets via the way it may influence the Federal Reserve’s fight against inflation in the world’s biggest economy.

“The August employment report paints a very positive picture regarding the current state of the US economy with solid jobs growth yet signs that supply strains are easing as workers return to the labour force, said James Knightley, chief international economist at Dutch bank ING.

“With wage growth coming in lower than expected it points to a slower pace of rate hikes after September’s expected 0.75% basis point move.”

S&P 500 opens higher after US jobs numbers reassure global stock markets

14:35 , Michael Hunter

New York stocks started the last session of a torrid week with decent gains after closely watched US jobs data reassured investors about the extent to which the Federal Reserve will have to go in its fight against inflation.

The headline reading on the August non-farm pay roll report was stronger than forecast, but only marginally, and the rise in average earnings was softer than expected while the overall unemployment rate rose, defying expectations that it would stay steady.

Wall Street’s S&P 500 gained 22 points in opening trade to 3990.70, a rise of 0.5%. The index tracking the dollar against a series of other currencies eased back by 0.4% to 109.25.

The US economy created 315,000 jobs in August outside the agricultural sector, marginally stronger than forecasts of 298,000 in a sign that the labour market remains robust as interest rates rise in the world’s biggest economy, while stalling average hourly earnings growth of 0.3% was down from 0.5% in July and weaker than the 0.4% forecast, a tentative sign the Fed’s medicine may be working.

US non-farm payrolls report modestly ahead of forecasts but overall growth slows

13:35 , Michael Hunter

The US economy created 315,000 jobs in August outside the agricultural sector, marginally stronger than forecasts of 298,000 in a sign that the labour market remains robust as interest rates rise in the world’s biggest economy.

Stock market futures ticked higher -- pointing to an opening rise of 0.6% for the S&P 500 -- and the dollar index slipped back -- by 0.3% to 109.35 -- after a strong run into the data. Sustained jobs growth has been seen as a key factor in giving the US Federal Reserve more room to use agressive rate hikes to fight inflation.

City experts said before the data that surprises to the data were more likely to be to the upside, and while the reading was stronger than the middle of forecast ranges, it was under the more bullish predictions and showed a slowdown from the previous month’s level of  528,000.

The unemployment rate ticked up to 3.7%, missing forecasts of remaining steady at 3.7% while the rise in hourly earnings was 0.3%, slowing from a revised 0.5% in July and expectations of 0.4%.

US stock futures muted in final run-up to non-farm payrolls report

13:19 , Michael Hunter

Wall Street stock market futures are treading water as investors wait for hotly-anticipated jobs numbers, which will help shape the market’s thinking on the pace and extent of rate hikes in the US.

The non-farm payroll report for August is due out at 1.30 p.m. London time and is expected to show the creation of 298,000 jobs outside the agricultural sector and an unemployment rate of 3.5%. It smashed forecasts last month, with a reading of 528,00, more than double the number expected, in a reading which looked to open the way for the Federal Reserve to signal a more aggressive approach to fighting inflation via interest rate rises.

As the data loomed, the S&P 500 was set to open flat at 3970.50, a number likely to change after the jobs report, which is published an hour before the start of New York trade.

Starbucks appoints outgoing Reckitt Benckiser chief as its next CEO

11:50 , Simon Hunt

The outgoing chief executive of Reckitt Benckiser has been named as the next CEO of Starbucks, the coffee giant which has almost 34,000 outlets across the globe.

Laxman Narasimhan’s departure from the FTSE 100 maker of Gaviscon and Cillit Bang surprised the City when it was announced yesterday after just three years in charge, sending shares down by as much as 6%. The stock rebounded by 2% on Friday to 6410p.

Speculation was rife that the US executive, who joined Reckitt from PepsiCo, was headed home for another top job. It was proved right with the announcement from the world’s largest coffee chain, made overnight.

read more here

Ryanair breaks passenger record in August flying 17 million people

11:17 , Simon Hunt

Ryanair has reported record passenger numbers for August, as the Irish low-cost airline lives up to its ambition to grow faster into a recession and burnishes its reputation for competent handling at a time of airport disruption.

It flew almost 17 million people in August, more than its pre-Covid peak of almost 15 million in the same month of 2019 and up from just over 11 million in 2021. It was the fourth consecutive month of record traffic.

Ryanair also recently unveiled  its biggest ever winter schedule to and from the UK but also faces a series of strikes from staff in Spain.

Ted Baker says return to high street boosted sales

10:46 , Simon Hunt

British fashion brand Ted Baker has said customers flocking back to the high street helped boost sales as it gears up for its US takeover deal.

The firm, which is set to be bought by US Reebok-owner ABG, said revenues in its stores shot up over 20% in the 14 weeks to July 2022, while e-commerce sales dipped 13.2%. Overall revenues grew 3.4%.

The company posted a near-£60 million loss in the year to January 2022 but said it expects to turn a profit by January 2023.

A shareholder vote on the proposed £211 million takeover is scheduled for September 29, with the deal set to be completed in the final quarter of 2022.

It comes as British Retail Consortium figures showed high street footfall had decreased by 12.4% in August compared with 2019 levels, a 1.8 percentage point improvement from July.

Oil set for weekly loss despite 3% rally

10:18 , Graeme Evans

Brent crude is on track to post another weekly loss, despite rebounding 3% to $95 a barrel today.

A weakening demand outlook meant the price declined 12% in August, the worst performance since November and the first time since the pandemic that it has fallen for three months in a row.

Attention now turns to Monday’s OPEC+ meeting, where ministers will discuss production quotas and potentially address the recent speculation about possible cuts to output.

Victoria Scholar, head of investment at Interactive Investor, said: “Not only is the market concerned about slowing demand amid a growing threat of a global recession, but the supply trajectory also looks increasingly plentiful thanks to US shale and the possibility of an Iran nuclear deal.

“On top of that, investors continue to drive towards the US dollar, lifting the greenback to a 20-year high, putting further pressure on oil and gold.”

City job cuts looming

10:14 , Simon English

Credit Suisse is considering around 5000 jobs cuts, a source tells Reuters.

New chief executive Ulrich Koerner has been open about needing cost cuts, though there has been nothing official on jobs.

The bank is in so much strife there must be a risk it is taken over and broken up.

Credit Suisse doesn’t like that idea very much.

It seems likely that CS won’t be the only bank culling positions.

Rumours grow of cuts across town....

Pound at $1.155, housebuilding stocks slide

09:52 , Graeme Evans

The pound remains near its lowest level in over 30 years as investors also dumped housebuilding stocks in a flight from UK assets.

The presure came as the British Chambers of Commerce said it now thinks the economy will be in recession by the end of the year and that weakness in growth will linger into 2024.

Sterling remained within sight of its March 2020 low of $1.146 at $1.155 today, having just endured its worst month since the aftermath of the Brexit referendum.

Expectations that the Federal Reserve will raise interest rates by a further 1% before the year-end have fuelled the weakness ahead of today’s US payrolls report, with the Japanese yen also at its lowest versus the greenback in 24 years.

Capital Economics reckons there’s further to go after this week forecasting a record low for the pound of $1.05, adding to inflation risks through higher import costs.

The falling pound is beneficial for overseas-earning companies, however, and has led to the outperformance of the FTSE 100 index after a 2.8% decline so far this year.

The top flight, which fell 1.9% yesterday amid a global sell-off caused by new China lockdowns and recessions fears, was today 48.71 points higher at 7197.21.

There was no respite for housebuilding stocks after HSBC downgraded the sector to send Berkeley Group 6% or 212p lower at 3377p and Barratt Development off 5% or 20.3p to 394.9p.

The selling ahead of trading figures from the pair next week extends this year’s losses for Berkeley to more than 30% and to 47% for Barratt, leaving them back where they were in the early days of the pandemic.

Revealed: Worst City funds have lost £10bn

09:25 , Simon English

The ten worst performing big City funds have lost investors £10 billion since Christmas, the latest blow to the reputation of the active investment sector.

While markets have been rocky, the FTSE 100 is down only about 4% this year. The worst funds are down more than 40% in some cases, again calling into question the value of City stock pickers, against computers that just track stock markets.

Research for the Evening Standard by SCM Direct singles out the ten worst funds that are more than £1 billion in size.

Baillie Gifford, the Scottish asset manager that goes back to 1908, is in the embarrassing position of running four of the 10 fund flops.

read more here

Fund woe at Ashmore

08:32 , Simon English

LONDON based fund group Ashmore saw investors pull money out as poor stock picks led to

a “negative investment performance” of nearly $17 billion this year.

Investors took out another $13.5 billion to place elsewhere.

Funds under management fell by 32% to $64 billion.

That adds to the woes for the wider fund management sector, which has mostly struggled to cope with turbulent markets this year that have seen tech stocks plummet and other seemingly sure bets fall out of bed.

Ashmore, an emerging markets specialist, saw its own profits more than half to £185 million.

That was notably worse than the City expected.

The shares down 51% this year, fell another 2p to 192p today.

Mark Coombs, the billionaire founder of the business and CEO, thinks emerging market shares and other assets are now so cheap that buyers will return.

He said: "While the global macro environment still presents some near-term uncertainty, the situation in Emerging Markets is improving and the breadth of investment opportunity helps to mitigate the risks. Ashmore’s long-term investment approach has been proven across many different market cycles.”

But this year has been characterised by “widespread risk aversion due to Ukraine war, inflation and higher rates globally”.

Ashmore did manage to hold its final dividend at 16.9p a share.

When interest rates rise, investors typically pull money out of stocks since they can earn a reasonable yield from lower risk products such as bonds.

Peel Hunt, the broker, said in a note: “There remains many reasons for longer term optimism, albeit there are still clear shorter-term uncertainties.”

FTSE 100 steadies, housebuilders lower

08:25 , Graeme Evans

The FTSE 100 index is 24.94 points higher at 7173.44, having fallen by 1.9% in yesterday’s session.

A strong finish on Wall Street lifted the mood, with Rolls-Royce, Reckitt Benckiser and Shell among the stocks trading more than 1% higher.

But there was no respite for the housebuilding sector as UK recession fears sent Persimmon, Berkeley Group and Barratt Development down by over 2%.

Today’s rise leaves the FTSE 100 down by 2.8% this year. Richard Hunter, head of markets at Interactive Investor, said: “With no immediate end in sight to a raft of economic challenges, the volatility and uncertainty of recent months looks likely to persist.”

The FTSE 250 index lifted 0.5% or 89 points to 18,582.74, led by recoveries of 3% for ASOS and gaming group 888 Holdings.

Alliance Pharma boss faces disqualification after CMA probe

08:21 , Simon Hunt

The boss of Alliance Pharma faces disqualification as a director, the company has said, following an investigation by the UK competition regulator.

Peter Butterfield, who has been CEO since 2018, is set to face a Competition Disqualification Order by the Competition and Markets Authority for his involvement in alleged anti-competitive practices in relation to the sale of prescription drug prochlorperazine.

The company said in a statement: “Alliance fundamentally disagrees with the CMA’s actions, both in relation to the findings against the Company and in applying for a CDO against Mr. Butterfield.

“Alliance reiterates that it did not participate in, or profit from, any market sharing arrangement and refutes any involvement by the Company or Mr. Butterfield, who retains the full confidence and support of the Board as CEO.”

Alliance Pharma shares sunk 4.4% this morning.

FTSE 100 steadies after Wall Street recovery

07:42 , Graeme Evans

The FTSE 100 index lost 1.9% and the FTSE 250 index fell by 3% as recession fears and lockdowns in the Chinese city of Chengdu prompted a wave of selling yesterday.

CMC Markets expects the FTSE 100 index to open with a modest rise of 33 points to 7181, having seen US markets steady towards the end of Wall Street trading last night.

The Dow Jones Industrial Average finished 0.5% higher as attention turns to this afternoon’s payrolls report, with the US economy expected to have added 300,000 jobs compared with the surprise 528,000 recorded for July.

The last three reports have beaten Wall Street forecasts, with another strong figure set to add another layer to recent US dollar strength.

The pound fell to just below $1.15 yesterday and is in danger of breaching the March 2020 low of $1.146, although this morning’s session saw a recovery to $1.154.

Brent crude stood at $93.76, having lost about 7% at one point this week as the demand outlook is weakened by China lockdowns and rising interest rates. OPEC ministers are due to meet on Monday to discuss their latest production quotas.