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(Alliance News) - Stock prices in London were expected to open higher on Friday ahead of key US non-farm payrolls data and a services PMI print from the nation.
Investor are hoping that the data, which will offer insight into the health of the US economy, may help provide further hints for the future moves of the US Federal Reserve.
On Thursday, US private employment rose way above market consensus, adding 235,000 jobs in December, according to figures from payroll firm ADP.
CMC Markets' Michael Hewson said that the "resilience" in these numbers has lent support to the idea that the Fed will likely hike rates by another 50 basis points at the start of February.
Another strong print on Friday may offer further basis for this expectation.
Meanwhile, in Japan, the service sector ended the year with a further expansion in output and order books. Analysts at S&P Global attributed the rise to an uplift in tourism and sustained improvement in Covid-19 conditions.
In the UK corporate space, shipping services provider Clarkson said it expects a full-year performance ahead of expectations and oil major Shell noted the impact of increased taxation.
Here is what you need to know ahead of the London market open:
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MARKETS
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FTSE 100: called up 23.75 points, or 0.3%, at 7,657.20
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Hang Seng: down 0.2% at 21,016.82
Nikkei 225: closed up 0.6% at 25,973.85
S&P/ASX 200: closed up 0.7% at 7,109.60
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DJIA: closed down 339.69 points, 1.0%, at 32,930.08.
S&P 500: closed down 44.87 points, 1.2%, at 3,808.10
Nasdaq Composite: closed down 153.52 points, 1.5%, at 10,305.24
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EUR: lower at USD1.0518 (USD1.0525)
GBP: higher at USD1.1904 (USD1.1890)
USD: higher at JPY134.16 (JPY133.89)
Gold: higher at USD1.837.60 per ounce (USD1,828.35)
(Brent): higher at USD78.81 a barrel (USD78.48)
(changes since previous London equities close)
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ECONOMICS
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Friday's key economic events still to come:
11:00 CET EU flash estimate inflation
11:00 CET EU retail trade
11:00 CET EU economic sentiment indicator
11:00 GMT Ireland retail sales
09:30 GMT UK S&P Global construction PMI
08:30 EST US employment report
10:00 EST US ISM services PMI
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According to data from Halifax, the average UK house price fell in December against the prior month, though at a more moderate decline than seen previously. The average UK house price was GBP281,272 in December, a fall of 1.5% against the previous month. In November, house prices fell by 2.4% to GBP285.425. Against the previous year, house prices grew by 2.0%. Halifax said that the cost of the average home remains greater than it was at the start of 2022, however, and more than 11% higher than house prices at the beginning of 2021. "As we enter 2023, the housing market will continue to be impacted by the wider economic environment and, as buyers and sellers remain cautious, we expect there will be a reduction in both supply and demand overall, with house prices forecast to fall around 8.0% over the course of the year," Halifax commented.
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Higher borrowing costs are leading to fewer US home sales, but prices are staying elevated in a holdover from the torrid peak-pandemic market. In November, existing home sales were down more than a third from the January 2022 level, according to the National Association of Realtors. That came shortly after the borrowing rate for a 30-year fixed mortgage – the reference lending product in US real estate – hit 7.16% in late October, the highest level in 21 years. Interest rates have retreated slightly since then, but stand well above their levels for most of the last decade and a half, a reflection of the Federal Reserve's monetary policy pivot to counter inflation.
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BROKER RATING CHANGES
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Credit Suisse cuts Next to 'underperform' ('neutral') - target 6,100 pence
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Exane BNP starts Experian with 'outperform' - price target 3,200 pence
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Morgan Stanley cuts Diageo to 'equal-weight' ('overweight') - price target 3,900 pence
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COMPANIES - FTSE 100
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Oil major Shell noted the impact of recently announced additional taxes in the EU and the deferred tax impact from the increased UK energy profits levy on its fourth quarter earnings. It said it expects the impact to total around USD2 billion. These impacts will not impact its adjusted earnings for the quarter, however, and will have a "limited" cash impact in the period, given the expected timing of payment, the firm explained.
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Sports Director-owner Frasers said its current stake in luxury fashion house Hugo Boss now 3.9%, covered via the sale of call options. The firm also holds 25% of the Hugo Boss via the sale of 17.6 million put options. After taking into account the premium it will receive under the put and call options, Frasers maximum exposure in connection to Hugo Boss is around EUR660 million.
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COMPANIES - FTSE 250
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Shipping services provider Clarkson reported strong trading throughout its final quarter, particularly from its Broking division. As a result, it now expects its results for 2022 to be ahead of market expectations, with underlying pretax profit anticipated at no less than GBP98 million.
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Components producer Essentra said it expects to deliver a "robust" performance in 2022, with like-for-like revenue expected to grow by 6.5% against the previous year. It said it expects adjusted operating profit for the year to remain in line with company expectations. Essentra noted that its business saw a slower period of economic growth in 2022 as a result of toughening market headwinds. Coupled with a strong comparative for its final quarter, it said LFL trading day adjusted sales have consequently fallen by 3.0% compared with the year prior. Looking ahead, Essentra said it was focused on maintaining profit margins.
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OTHER COMPANIES
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The Irish Minister for Finance Michael McGrath announced a further extension to AIB's share trading plan into a third phase. The trading plan to date has been successful in reducing the Irish state's investment in the company and improving the liquidity of its shares. Proceeds generated from phase two of the trading plan amounted to EUR121.5 million, with an average price per share of EUR2.85. The Irish state's current holding in the bank is now 57%, reduced from 71% at the beginning of 2022. The extension will end no later than July 23, unless further extended by the minster.
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By Heather Rydings, Alliance News senior economics reporter
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