logo-loader

FTSE 100 retreats as US jobs growth surprises on the downside

Last updated: 11:25 02 Jun 2017 EDT, First published: 11:54 02 Jun 2017 EDT

people waiting for a job interview
  • FTSE 100 up 4 points to 7,548

  • TomCo sparkles after concluding framework deal for its TurboShale unit

  • Mixed day for miners

  • US economy adds 138,000 jobs in May

The FTSE 100’s gains all but ebbed away in the afternoon after disappointing US jobs numbers.

The top-share index finished the week at 7,548, up 4 points on the day and more or less unchanged on the week.

The pound was slightly stronger versus the US dollar which weighed a little on the plethora of multi-nationals in the Footsie.

The dollar’s softness boosted gold miners as the gold price jumped on the US jobs figures and the dollar's subsequent downturn.Elsewhere, copper miners were hurt by the falling copper price (down another 1% or so today)

South African insurance and pensions group Old Mutual rose 3.3% to 197p as it completed the acquisition of financial adviser network, Caerus Capital Group.

TomCo Energy Plc (LON:TOM) shot up 41% after it agreed the new framework for its new TurboShale Inc business unit.

US jobs report gives bulls pause for thought

US jobs growth slowed last month according to the latest non-farm payrolls, which showed that US businesses added just 138,000 posts.

That compares with the average of 181,000 over the past year, with the US labour department adding that the manufacturing, retail and government sectors all lost jobs in May.

The figures are likely to be scrutinised by Fed officials as they decide whether or not to raise interest rates again later this month, a move which is still widely expected by the market.

“Following the weak June 2 US jobs report, speculation will grow that the FOMC may deliver a dovish rate hike, i.e. reduce the expected number of future rate hikes,” said Saxo Bank’s head of commodity strategy Ole Hansen.

Pounds recovers against dollar

The poor growth helped to boost the pound against the dollar, which clawed back some of its earlier losses to sit just 0.1% down on the greenback at US$1.287.

Sterling was unable to make any ground up on the euro and was still down by 0.6% to €1.141.

The slightly stronger pound weighed on the FTSE 100’s exporters, which benefit when sterling is weak as it boosts their foreign-denominated earnings.

As a result, the blue chip index was just about keeping its ahead above water; up 6 points to 7,550.

That’s a far cry from earlier this morning when the index set a new all-time high and seriously threatened to break through the 7,600 level.

Mixed day for commodities

The dodgy US jobs data brought about a change in fortune for a few of the miners after gold – which typically rises when the dollar falls – jumped higher to US$1,278 an ounce.

Precious metals miners Fresnillo PLC (LON:FRES) (up 3.5% to £16.45) and Randgold Resources Limited (LON:RRS) (up 3.4% to £76.10) went from languishing in the midfield straight to the top of the list of blue chip risers.

For those miners primarily focused on copper, it was a totally different story with the metal shedding another 1% or so.

Unsurprisingly then, that hurt Chilean copper miner Antofagasta PLC (LON:ANTO) which is down 2% to 800p – making it the top faller on the FTSE 100.

Oil stocks have also continued to come under pressure on the back of sliding oil prices, with both BP PLC (LON:BP.) (down 1.2% to 464p) and Royal Dutch Shell PLC (LON:RDSB) (down 1% to £21.37) both underperforming. 

UK retailer Marks and Spencer Group Plc (LON:MKS) was also in the red today as yesterday’s bad run extended into a second day. Shares were off 2.5% to trade at 366p.

IAG regains most of its losses

A quick word for British Airways owner International Consolidated Airlines Group PLC (LON:IAG) which was hammered at the start of the week following BA's electrical problems over the weekend.

Despite the incident having the potential to cost the group tens of millions in compensation and refunds, shares have rebounded well. It is up 1% for the day and has regained almsot all of the losses it sustained on Tuesday.

US markets open flat

That pesky jobs data was also affecting the US stock markets which had been tipped to open significantly higher.

Suffice to say, once the jobs growth (or lack of) came out shortly before the Stateside open those projections immediately changed. The Dow Jones and S&P 500 are both broadly flat.

By contrast, the tech-heavy Nasdaq took the report in its stride and is currently up 23 points to 6,270.

2.45pm...London blue chips steady after US jobs 

London's blue chip index shed a few points after the disappointing US jobs data, but has now stabilised as investors settle down for the real election fight next week.

FTSE was up 11 at 7,555.

2.35pm...US jobs growth disappoints

More disappointment on the US economy as May's non-farm payrolls number came in well short of expectations. Just 138,000 jobs were created against predictions of up to 200,000. Even so, the unemployment rate fell to 4.3% from 4.4%, which is its lowest level since 2001.

Spread bet firms predict the Dow Jones Indutrial Average will open up 21 at 21,163.

1.20pm...FTSE loses its early spark 

After coming within a whisker of the 7,600 mark this morning to set another new intraday high, the FTSE 100 has gradually lost its mojo as the day has worn on.

The blue chip index is currently 21 points higher at 7,565. That’s still a decent gain for the day but is far cry from the 7,598.99 it briefly touched early on this morning.

The reason for the fall back is some sharp losses in the commodity sector, with miners Antofagasta PLC (LON:ANTO) and Anglo American PLC (LON:AAL) topping the list of blue chip fallers.

They’re down 3.1% (to 792p) and 2.3% (to £10.10) respectively as the price of copper took another tumble.

Oil price dives on Trump's Paris agreement snub

Oil super majors BP PLC (LON:BP.) (down 1% to 465p) and Royal Dutch Shell PLC (LON:RDSB) (down 0.8% to £21.47) are also nursing losses after the price of a barrel of Brent crude slipped 2.5% to just above US$49.

The price slide follows on from Donald Trump pulling the US out of the Paris climate agreement which has sparked fears that the US will ramp up its drilling, possibly negating any production cuts enforced by OPEC.

The top riser among the blue chips was Old Mutual PLC (LON:OML) which jumped almost 2.5% to 195.2p.

The financial services firm revealed this morning that it had completed the takeover of the Caerus Network after receiving shareholder and regulatory approval.

Acquisition on the cards for AstraZeneca?

Shares in AstraZeneca PLC (LON:AZN) were up once again (up 1% to £53.72) on some decent traded volumes with a whisper swirling around the market hinting at M&A activity.

We’re not talking about the return of US$200bn industry giant Pfizer Inc (NYSE:PFE) to the fray a few years after it launched a hostile £65bn bid for the Anglo-Swedish group.

No, the rumours, and we stress this is just market tittle-tattle, suggest Astra has been sniffing around US outfit Horizon Pharma PLC (NASDAQ:HZNP). With a market cap of around £1.3bn, Horizon would be a bite-sized deal for AZ.

When approached neither AstraZeneca nor Horizon would comment on the speculation.

While Horizon was up 5.5% overnight, it is recovering from earnings alert early in May which felled the stock. Analysts, meanwhile, were struggling to see the strategic rationale.

Dow Jones to open at all-time high

Over in the States and fresh from their record-breaking run on Thursday, the US equity markets are set to open up even higher today.

The Dow Jones is tipped to break through the 21,200 mark and open 65 points higher at a record high of 21,204.

Spread betting quotes suggest the S&P 500 will follow suit and open 5 points higher 2,435.

“The Dow Jones is set to break its own records when the bell rings on Wall Street, with the futures suggesting the index will cross the 21200 mark,” said Spreadex analyst Connor Campbell.

“That’s because investors are getting excited about this afternoon’s non-farm jobs report. A huge ADP non-farm figure means the current forecasts for a 181k change in the number of employed people may be conservative, while for the past 2 months in a row the unemployment rate has unexpectedly shrank.

“Wage growth is the only real laggard, with average hourly earnings set to fall from 0.3% to 0.2% month-on-month.”

12.45pm...Snapchat specs make their way to UK

Snap Inc. (NYSE:SNAP), the owner of Snapchat, has released its video-recording Spectacles sunglasses in the UK and Europe, in the social media company’s first foray into dedicated hardware.

The glasses, which allow users to record 10-second video clips and upload them onto their Snapchat accounts, will be sold in vending machines for £129.99.

Vending machines will be placed at the London Eye and various locations in Paris, Berlin, Barcelona and Venice. The glasses will also be available at Spectacles.com for shipping.

12.10pm...Trump puts his foot in it (again)

Not a day seems to go by without President Trump angering, upsetting or offending at least one section of society.

He’s been widely criticised by big businesses and the public for pulling out of the Paris climate deal.

Trump said he was elected to represent the people of Pittsburgh, not Paris. Strictly speaking he’s right, but what do the people of Pittsburgh really want..?

11.55am...Mears and Unite in row over…beards?

Yep, that’s right.

Construction firm Mears has clashed with trade union bosses after staff working at a site in East London were told they had to shave off their beards under new health and safety measures.

Mears said its workforce needed to be clean-shaven so that they could wear protective dust masks safely, although exceptions will be made if there are medical or religious reasons why staff couldn’t shave.

A goatee might be acceptable as long as it doesn’t impact the fitting of the dust marks, a letter to employees reportedly said.

Trade union Unite wasn’t happy with Mears for making the decision for its workers, adding that the move “amounts to ‘penny pinching stupidity’”.

The construction firm hit back, saying it was “surprised” that Unite had taken “this disappointing stance”.

“The simple fact is that no dust mask can work effectively unless it forms a seal against the skin. That is not possible with a beard or even heavy stubble,” said Mears’ health and safety director Mark Elkington.

10.30am: FTSE 100 slips back from opening surge

After the initial surge to a new record high close to 7,600, the FTSE 100 settled back to a more modest gain in mid morning trading as investors focused ahead to this afternoon’s key US jobs data.

Around 10.30am, the UK blue chip index was about 21 points higher at 7,564 having opened at a new all-time peak of 7,598.99 following a wave of record highs by global markets after strong US private payrolls numbers.

David Morrison, senior market strategist at SpreadCo said: “Yesterday the ADP Payroll number came out at 253,000 - way above the 181,000 expected. This may not be the most reliable of guides for today’s update but it helps to support the notion that the US is at or near full employment.

"This supports the consensus view that the US Federal Reserve will hike rates by another 25 basis points in a fortnight’s time.”

But, he added “analysts will also be looking out for today’s update on Average Hourly Earnings. If these slip below the +0.2% expected it would show that wage growth is tepid and isn’t adding to inflation even as the data suggests that there is effectively full employment in the US.”

On currency markets, the dollar was firmer ahead of the May US jobs data, with sterling down 0.2% versus the greenback at £1.2857. The pound was also 0.2% lower against the euro at €1.1461, reflecting uncertainties ahead of next week’s UK general election.

There was little reaction to news UK construction activity grew at its fastest rate since the end of 2015 last month, as a pick-up in housebuilding helped builders shake off a lacklustre start to the year.

The Markit/CIPS construction purchasing managers' index reading for May jumped to 56.0 from 53.1, its highest since December 2015 and above forecasts.

On the stocks front, high street discount retail chain B&M European Value Retail SA (LON:BME) was a big FTSE 250 faller, down 2.8% at 360p after private equity firms CD&R and SSA sold a 12.5% stake in the firm.

8.30am: FTSE 100 hits record high near 7,600

The market appeared heartened rather than alarmed by President Donald Trump’s decision to dump the Paris climate agreement as the FTSE 100 surged to a new intra-day high.

The index of blue-chip shares had jumped 45 points to 7,588.70 by 8.30am (and hit 7,598.99 at the open) as a buoyant Wall Street gave way to a decent showing in Asia, where the Nikkei 225 topped 20,000.

Jasper Lawler, of London Capital Group, summed up sentiment: “Dumping the climate deal hasn’t really hurt of hindered investor’s appetite for risk.

“If anything, ‘The Donald’ taking a difficult decision to fulfil a campaign pledge is welcome if the same can be done with respect to tax policy.” 

The Costa Coffee and Premier Inn owner Whitbread (LON:WTB) was an early casualty (down 2%) after the Goldman Sachs took out the red pen to move the stock to ‘sell’.

On the flipside, Kaz Minerals (LON:KAZ) was boosted by an upgrade to ‘outperform’ by Credit Suisse. It advanced 2%.

Generally the mood on the markets was subdued ahead of US jobs data, with Royal Bank of Scotland (LON:RBS) an early riser (up 1%).

Among the small-caps, project manager WYG (LON:WYG) advanced 7% after it said it landed new contracts worth a bumper £50mln.

 

Proactive news headlines....

Project management and technical consultancy WYG PLC (LON:WYG) has landed deals worth around £50mln over the next three years in the UK and Africa.

Drug developer Motif Bio Plc (LON:MTFB) has unveiled plans to raise £19.4mln via a share placing - cash that will be used develop its late-stage antibiotic. Specifically, it will fund to completion the second of two phase III clinical studies on iclaprim.

Kibo Mining PLC (LON:KIBO) has surrendered most of its early stage licences in the Lake Victoria region of Tanzania as it focuses more on the Mbeya coal mine/power station project and Haneti nickel site. In total, 79 licences were surrendered over 800 sq km.

Greka Drilling Limited (LON:GDL) has arranged a US$2.5mln loan with its chief executive Randeep Grewal. The loan pays interest rate at 7% per annum and is repayable between 1 January 2018 and 31 May 2018 through the transfer of leases of an office building in Zhengzhou, China.

TomCo Energy Plc (LON:TOM) has agreed the new framework for its new TurboShale Inc business unit to unlock the potential of the Holliday shale block in Utah. The agreement has been agreed between TomCo, TurboShale Inc, Tomco subsidiary OMC, JR Technologies LLC and Venture Development Partners Ltd (VDP).

Stem cell storage specialist WideCells Group PLC (LON:WDC)  has described as 'momentous' the decision to include it in the DISRUPT 100 index as the 21st most disruptive firm in the world. The index ranks businesses with the most potential to influence, change or create new global markets and is judged by global brands including Google, UberOracle, Silicon Valley Bank and Virgin StartUp.

Ormonde Mining plc (LON:ORM) has pressed go on commissioning its Barruecopardo tungsten mine with a revised timetable in the light of rising tungsten prices. Commissioning of the mine in Salamanca, Spain is now earmarked for the third quarter of 2018.

Growing demand for its Dermapure skin graft helped Tissue Regenix PLC’s (LON:TRX) revenues jump by nearly 80% in the year just ended, with the Leeds-based medtech now eyeing the US sports medicine market. Most of the sales originated in the US where Tissue’s wound care business now covers 93% of beneficiaries of US healthcare system Medicare.

E-sports promoter Gfinity (LON:GFIN)  will host the final of Microsoft's Forza Racing Championship at the Le Mans 24-hour endurance race event this month. The ForzaRC season 3 Elite finals will take place on 17 and 18 June 2017 at the Circuit de la Sarthe in Le Mans, France.

 

6.45am: Strong start predicted

The  FTSE 100 index is expected to open at an all-time peak close to the 7,600 level on Friday after global stocks hit record highs overnight as upbeat data boosted investor optimism ahead of today’s key US jobs report.

Spread betting firm CMC Markets expects the FTSE 100 index to open around 50 points higher at 7,595, having gained 23.82 points yesterday.

Yesterday the US Institute for Supply Management said factory activity edged up to 54.9 last month from 54.8 in April, while ADP reported private payrolls grew by 253,000 last month, beating analysts' forecast for a 185,000 increase.

Michael Hewson, chief market analyst at CMC Markets UK, said: “While these figures point to a US economy ticking along quite nicely they also point to an economy that appears to still have a significant degree of slack, particularly since wage growth continues to remain on the low side.”

All eyes will therefore be on the latest US jobs data, due at 1.30pm GMT, particularly given expectations that June’s Federal Reserve policy meeting in around a fortnight’s time will sanction another US interest rate hike.

US non-farm payrolls rose by more than expected in April, increasing by 211,000 compared to economists’ estimates of 190,000, although the previous month’s figure was revised down to 77,000 from a previously reported 98,000.

For May, economists had been forecasting jobs growth to slow on the month with yesterday’s consensus forecast for payrolls to increase by 186,000, although the strong ADP number could point to a figure north of 200,000 said CMC’s Hewson.

Takeover vote, SFO probe news sort from Amec Foster Wheeler

No corporate results are scheduled for release on Friday, so the main company focus will be on a key annual general meeting for under pressure engineering contractor Amec Foster Wheeler PLC (LON:AMFW).

This will be the time  for the troubled group’s shareholders to vote on March’s agreed £2.225bn recommended all-share takeover bid for Amec from oilfield support services firm John Wood Group PLC (LON:WG.)

READ: Amec Foster Wheeler confirms the extent of its troubles with 2016 results

But investors will also want to know about reports last week that Amec is co-operating with the Serious Fraud Office over a criminal investigation into potential bribery corruption and money laundering in the contracting sector.

A circular on the takeover last week also revealed an internal probe by Wood Group into claims one of its joint ventures made payments to Unaoil, the Monaco-based contractor the SFO has been investigating.

Any prosecution from the SFO could result in large fines for the firms further putting the takeover under threat.

Significant events expected on Friday June 2:

AGMs: Amec Foster Wheeler PLC (LON:AMFW); Goldstone Resources Ltd (LON:GRL); Manx Financial Group PLC (LON:MFX);  Silence Therapeutics PLC (LON:SLN); Sphere Medical Holdings PLC (LON:SPHR)

US data: May non-farm payrolls, hourly earnings, balance of trade

UK data: June construction purchasing managers’ index

Around the markets:

  • Sterling: US$1.2872, down 0.05%
  • Gold: US$1,260.70 an ounce, down 0.5%
  • Brent crude: US$47.99 a barrel, down 0.8%

City Headlines:

  • BT to show Champions League final clips on Snapchat – Daily Telegraph
  • M&S targets food waste and social change in sustainability plan – The Guardian
  • Lloyds Boss Antonio Horta-Osorio is looking for a new PR Chief – Daily Mail
  • Rolls-Royce executive takes over L&G’s prefab homes plant – The Times
  • Gazprom Neft and Saudi Aramco discuss technology alliance – Financial Times
  • Facebook shareholders reject fake news proposal – Daily Telegraph
  • Snapchat launches camera-enabled Spectacles in UK – ITV News
  • Google to allow publishers to charge users who utilise ad-blockers – Financial Times
  • Facebook and Apple urge Trump not to pull out of Paris Agreement – The Independent
  • RBC freezes US bank acquisition plans on Trump doubts – Financial Times
  • George Soros says Brexit will take years and cause `immense damage’ – The Independent
  • Start-up founders vulnerable to health and relationship issues – The Independent

ARway.ai announces multiple new SaaS developer contracts in both the United...

ARway.ai (CSE:ARWY, OTCQB:ARWYF) Chief Executive Officer Evan Gappelberg joined Steve Darling from Proactive to announce multiple new SaaS developer sign-ups for its augmented reality experience platform, focusing on AR indoor navigation. These partnerships represent significant milestones in...

23 minutes ago