(Alliance News) - The prospect of continued interest rate hikes cast a dark cloud over markets again at the start of the new week, following Friday's stronger-than-expected US jobs report.
Equity market investors had hoped for an employment figure which would persuade the central bank, fresh from three 75 basis point hikes in a row, to take its foot off the gas.
Instead, markets got 263,000 net new US jobs in September, beating expectations of 250,000 according to consensus cited by FXStreet. Jobs growth slowed from 315,000 in August.
"A robust US labour market and a Fed determined to push unemployment up leaves cross-asset risk sentiment vulnerable without an apparent near-term reprieve. A Fed pivot seems a distant memory now," SPI Asset Management analyst Stephen Innes commented.
"Adding to the gloom, China's services activity in September contracted for the first time in four months as Covid-19 restrictions dented already weak demand and dimmed business confidence. For China data, 'bad news is not good news for market'."
China's private sector slipped into contraction territory for the first time in four months in September.
The Caixin China composite purchasing managers' index fell to 48.5 points in September, from 53.0 in August. It was the first time the composite PMI declined to below the 50.0 no change mark since May.
The services PMI dropped to 49.3 points in September, from August's tally of 55.0.
Here is what you need to know ahead of the London market open on Monday:
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MARKETS
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FTSE 100: called down 61.0 points, 0.9%, at 6,930.09
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Hang Seng: down 3.1% at 17,194.44
S&P/ASX 200: down 1.4% at 6,667.80
Tokyo market closed to observe Sports Day holiday.
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DJIA: closed down 630.15 points, or 2.1%, at 29,296.79
S&P 500: closed down 104.86 points, 2.8%, at 3,639.66
Nasdaq Composite: closed down 420.91 points, or 3.8%, at 10,652.40
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EUR: down at USD0.9727 (USD0.9779)
GBP: down at USD1.1074 (USD1.1130)
USD: up at JPY145.37 (JPY145.15)
GOLD: down at USD1,685.14 per ounce (USD1,702.27)
OIL (Brent): up at USD97.34 a barrel (USD97.09)
(changes since previous London equities close)
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ECONOMICS
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Monday's key economic events still to come:
0930 BST eurozone Sentix investor confidence
Annual meetings of the International Monetary Fund and the World Bank begin on Monday.
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The UK government is planning for blackouts but it is an "extremely unlikely scenario", according to Nadhim Zahawi. The chancellor of the Duchy of Lancaster said it is "only right that we plan for every scenario", before ruling out a GBP14 million campaign advising people how to conserve energy. The National Grid Electricity System Operator, which oversees Britain's electricity grid, has said households and businesses might face planned three-hour outages to ensure that the grid does not collapse. Business Secretary Jacob Rees-Mogg is said to have backed plans for a government-led campaign to advise people how they can conserve energy.
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UK Prime Minister Liz Truss has sent a signal of her intent to bridge the divides blighting the Tory party as she prepares to make a plea for unity to colleagues filing back into Westminster. The prime minister handed a government job to Greg Hands, who had backed her rival Rishi Sunak in the Conservative leadership race, in a move that will be widely seen as a peace offering to critics who have accused Truss of surrounding herself with allies. The seasoned minister replaces Conor Burns, who was sacked from his post in the Department for International Trade on Friday following a misconduct complaint. Hands's appointment was notably welcomed by fellow Sunak supporter Grant Shapps, who was rumoured to be monitoring party unrest behind the scenes.
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Scottish independence will create a partnership of equals in the UK, Nicola Sturgeon is expected to tell delegates at the SNP conference in Aberdeen. Sturgeon will close the party's conference by telling delegates that the nations of the UK and the Republic of Ireland, will "always be the closest of friends, always be family". Speaking to journalists on Sunday, the first minister was asked about any announcements she would make in her speech. She said she will have "more to say" on the cost-of-living crisis "and a host of other things as well". She also rejected claims there was a lack of policy commitments during the conference. Sturgeon is expected to say: "Scottish independence can reset and renew the whole notion of nations working together for the common good. "England, Scotland, Wales, the island of Ireland. We will always be the closest of friends. We will always be family. But we can achieve a better relationship, a true partnership of equals, when we win Scotland's independence."
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BROKER RATING CHANGES
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JPMorgan cuts RS Group to 'neutral' ('overweight') - price target 1,050 (1,250) pence
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RBC raises Moneysupermarket.com to 'outperform' ('sector perform') - price target 250 (230) pence
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Jefferies starts Balfour Beatty with 'buy' - price target 375 pence
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HSBC raises Fevertree Drinks to 'hold' ('reduce')
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COMPANIES - FTSE 100
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Unite Group said it has sold more beds than expected for the current academic year, and it cautioned on rent hikes due to inflationary pressure. The student accommodation developer has sold 99% of its beds for the 2022-23 academic year, up from 94.1% in 2020-21. It had expected to sell 97%. "In addition, the group has significant waiting lists in many of its largest markets, where there remains a shortage of high-quality, purpose-built student accommodation close to university campuses," Unite said. It has seen rental growth of 3.5% for the academic year. It expects further rental growth for 2023-24, targeting a climb in the range of 4.5% to 5.0%, in a bid to "offset inflationary cost pressures". In addition, Unite said it has acquired 180 Stratford, a 178-unit purpose-built build-to-rent property in east London, for GBP71 million. For 2022, Unite now expects adjusted earnings per share at the top end of 40p to 41p guidance.
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DS Smith lifted annual guidance, hailing "effective cost mitigation". The packaging company expects adjusted operating profit of GBP400 million in the six months to October 31, up 45% from GBP276 million a year earlier. For the full year, its performance is "expected to be ahead of our previous expectations". "I am very pleased with the performance in the year to date and the momentum in our business. We remain focussed on delivering for our customers and managing our costs in an inflationary environment," Chief Executive Miles Roberts said.
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COMPANIES - FTSE 250
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Energean on Sunday began testing pipes between Israel and the Karish offshore gas field, a key step towards production from the eastern Mediterranean site, a source of friction between neighbours Israel and Lebanon. Israel has maintained that Karish falls entirely within its territory and is not a subject of negotiation at ongoing, US-mediated maritime border talks with Lebanon. In a statement Sunday, Energean said that "following approval received from the Israeli Ministry of Energy to start certain testing procedures, the flow of gas from onshore to the [floating production storage and offloading vessel] has commenced". The tests, set to take a number of weeks, were "an important step" towards extracting gas from the Karish, Energean said. Lebanon and Israel have engaged in on-off indirect talks since 2020 to delineate their Mediterranean border, which could allow both countries to boost offshore natural gas exploration.
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Quilter said Paul Feeney will step down as chief executive later this month. The London-based wealth manager said he will be replaced by Steven Levin, who takes over from November 1. "Steven has led Quilter's Affluent segment since its formation and has deep business experience across Quilter and successfully managed Quilter's platform transformation programme. He has been with the group (and its predecessor companies) since June 1998," the company explained. Feeney will remain available after his October 31 departure to support the handover.
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OTHER COMPANIES
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Retailer Joules said it is continuing to assess its financing needs. "Whilst this remains the board's focus, the company also continues to consider a range of other potential options which may be available to it," it added. One of these options includes a company voluntary agreement, which would reduce rent bills. Joules said it has not yet determined if such a move is needed. According to a regulatory filing posted on Thursday, Richard Teatum has picked up a 9.8% stake in the company. Teatum owns motor dealer Stoneacre Motor Group, based in Doncaster.
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Bonhill Group has put itself up for sale as it grapples with "market turbulence" and weaker-than-expected digital revenue. The London-based media company, specialising in business information, events and data analytics, said its strategic review may result in the sale of the group as a whole, or in part. It has not yet received an approach, Bonhill said. Back in September, it warned "market turbulence" meant customers held off on discretionary marketing spend. "The company announces that since then, trading conditions have continued to deteriorate resulting in weaker than expected digital revenues, in particular in the US, and, as a result, the board's confidence in the outlook for trading in Q4 2022 has weakened," it warned on Monday.
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Offshore energy services firm Tekmar has received "indications of interest" from possible suitors. The company had kicked off a strategic review back in June. It is now exploring options with possible buyers. "There can be no certainty that an offer will be made, nor as to the terms on which any offer will be made," it said.
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By Eric Cunha; ericcunha@alliancenews.com
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