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(Alliance News) - London is pointed slightly lower on Friday, despite a significant jobs report beat in the US and China's service industry recording its best growth in a decade.
Trading volume is expected to be low on Friday, as the New York market is closed for a holiday.
In early UK company news, Rio Tinto's Oyu Tolgoi mine in Mongolia has been delayed by up to two years, Landsec is planning to reinstate its dividend, and Rank Group said the reopening of the Mecca bingo business will shave GBP3 million off its monthly cash outflows.
IG says futures indicate the FTSE 100 index of large-caps to open 3.96 points lower at 6,236.40. The blue-chip index closed up 82.40 points, or 1.3%, at 6,240.36 on Thursday.
Wall Street ended its shortened week on the front foot Thursday, with the Dow Jones Industrial Average ending 0.4% higher, and both the S&P 500 and the Nasdaq Composite gained 0.5%.
US nonfarm payroll employment surged by a more-than-expected 4.8 million in June, according to the latest figures from the Bureau of Labor Statistics. Consensus, according to FXStreet, had expected 3.0 million jobs to be added in June after May's 2.7 million increase. For context, though, April and March combined saw a loss of more than 21 million jobs.
The US unemployment rate declined to 11.1% in June from 13.3% in May. Economists had expected a more moderate reduction to 12.3%.
"Another decent jobs report proved to be the catalyst for US markets to finish the week with another strong finish," CMC Markets Chief Market Analyst Michael Hewson commented.
He continued: "Despite the decent numbers, which President Trump trumpeted from the rooftops, there was more than a whiff of underlying caution around the numbers, as weekly jobless claims saw a rise of 1.4 million, with continuing claims also rising slightly to 19.3 million, from the week before. The caution is well warranted given a continued rise in US virus cases, as they rose at their fastest rate since May 9, and the fact that these payrolls numbers are only up to the second week of June."
"This means they don't take into account the recent headlines around the rise in infection rates in the US sunbelt which has complicated the jobs and recovery picture enormously, particularly with respect to the re-opening of the economies in California, Arizona, Texas and Florida," Hewson added.
Financial markets in the US will be shut Friday, as the country celebrates Independence Day.
Hewson noted financial markets in Asia continued the "positive vibe", with China's Caixin services PMI coming in at its best rate of expansion in over 10 years.
The Nikkei 225 index in Tokyo closed up 0.7% on Friday. In China, the Shanghai Composite is up 1.2%, and the Hang Seng index in Hong Kong is 1.2% higher.
China's services sector grew at its quickest pace in more than 10 years as Covid-19 lockdown measures continued to ease, IHS Markit said on Friday. Caixin's seasonally adjusted headline business activity index came in at 58.4 in June, not only comfortably above the 50.0 no-change mark but also surging from 55.0 in May.
IHS Markit noted it was the fastest rate of expansion since April 2010, with new orders jumping at the fastest pace since August 2010.
"Work resumption in the services sector accelerated. The business activity index hit a 10-year high, and the gauge for total new business also reached its highest level since August 2010, indicating a good recovery services activities. Despite uncertainties over the pandemic overseas, the measure for new export business returned to expansionary territory, meaning that external demand has been a drag for the first time in five months," Caixin Insight Group Senior Economist Wang Zhe said.
Japan's services sector reached a four-month high in June but numbers on Friday showed it remained in decline. The Jibun Bank services purchasing managers' index jumped to 45.0 in June from 26.5 in May, helped by the state of emergency due to Covid-19 being lifted.
It was still below the 50.0 mark that separates growth from decline, and IHS Markit noted that "conditions remained fragile amid low customer numbers and operating rates" amid Covid-19.
IHS Markit added: "Latest survey data signalled a substantial slowing in the downturn as the state of emergency being lifted allowed for a resumption in economic activity. However, where output did rise, panel comments suggest that growth was limited due to below-capacity operations and low customer numbers. Nevertheless, the broad trend remained negative in June."
Against the yen, the dollar was quoted at JPY107.49, down versus JPY107.55 late Thursday.
Hewson commented: "This vibe doesn't appear to be translating to an upward lift for European markets this morning, with the result that the markets here in Europe look set to open slightly lower. This maybe isn't so surprising given that markets look set for a positive week in any case, while volumes could well be lower in the absence of US markets today."
In London, Rio Tinto's Oyu Tolgoi mine is expected to see a 21 to 29 month delay for first production, which will increase the development capital needed for the project by between USD1.3 billion to USD1.8 billion from the original USD5.3 billion.
The updated mine design is the result of the review announced by Rio Tinto in July 2019 when enhanced geotechnical and geological information obtained from drilling and mapping at depth suggested there may be "some stability risks" associated with the original mine design.
Rio Tinto's ownership share is 33.5% of Hugo Dummett North and 29.5% of Hugo Dummett North Extension - both at Oyu Tolgoi in Mongolia.
The probable ore reserves for Hugo Dummett North have been revised down to 400 million tonnes from 447 million at the end of 2019, while the North Extension seen its reserves revised upwards to 40 million tonnes from 32 million tonnes.
Land Securities noted it has only collected 60% of the net rent due on June 24 compared with 94% for the equivalent period last year. Landsec said GBP122 million of rent was due on June 24.
"Covid-19 has resulted in some customers taking longer to pay their rent and we continue to have supportive and constructive dialogue with our customers," the company added.
It noted 75% of the rent due on March 25 has now been received, with GBP30 million outstanding.
As of June 30, 79% of Landsec's retail units were trading and 16 of its 18 leisure parks were open.
"In line with government guidance, our shopping centres, outlets and retail parks are open, with encouraging levels of footfall," the company said.
Landsec noted it remains in a financially "robust" position. At June 30, its adjusted net debt was GBP3.92 billion with GBP1.20 billion of cash and available facilities.
As a result, Landsec is planning to reinstate its dividend following its interim results in November.
Plastic and fibre product supplier Essentra said its second-quarter performance saw a "profound impact" from the Covid-19 pandemic, but the hit was in line with internal expectations.
Group like-for-like revenue declined 17% in April, but this improved as the quarter progressed.
In May it was down 10%, whilst in June it is expected to only record a 1% drop.
Essentra therefore expects that like-for-like second quarter performance will be down 10%, whilst its interim like-for-like revenue is guided to fall 9%.
Looking ahead, Essentra anticipates some continued disruption to its trading in the coming months but believes that it is still too early to outline the full impact on full year financial performance.
Rank Group said will begin the reopening of its Mecca bingo clubs from Saturday.
Initially it will be opening 35 venues in England, with further 30 venues are expected to open in a phased approach throughout July and August including, when permitted, its venues in Scotland and Wales.
The remaining 12 venues will remain closed until October whilst Rank Group assesses their ongoing viability.
"Some restructuring of the cost base and format of these venues is likely to be necessary to allow them to reopen, including renegotiation of rents," the company said.
Underlying operating profit for the year ended 30 June is expected to be at the lower end of its previously provided guidance range of GBP48 million to GBP58 million, Rank Group said.
The company said this is due to the venues reopening costs being expensed.
Monthly net cash outflow has also been in line with previous guidance, Rank Group added, with cash and available facilities at July 1 of about GBP140 million. With the reopening of Mecca, the company expects its monthly cash outflow will reduce from about GBP10 million per month to GBP7 million per month and to be cashflow positive upon the reopening of Grosvenor.
Online trading platform CMC Markets said its "entire business has continued to perform very well" in its first quarter.
Client trading activity remains around double that of the same period the year before, CMC added, with client income retention "materially" higher than the 82% reported in the first half of the previous financial year. Stockbroking net trading revenue also continues to benefit from the market conditions, the company added.
As a result, net operating income for the first quarter of financial 2021 is in excess of that reported for the first half of financial 2020 of GBP102.3 million.
"The board is confident that, even in the event that more normalised client trading activity returns, with the strong underlying performance of the business, 2021 net operating income will exceed the upper end of current market consensus," CMC added.
Fuller, Smith & Turner was scheduled to release its annual results Friday but noted its auditors require "additional time to complete the formalities of the audit process".
"The delay is a result of the auditors' internal processes, with Grant Thornton continuing to cite the complexities surrounding Covid-19 and related abnormal working arrangements as the reason behind the time taken to complete the audit," the pub chain said.
Sterling was quoted at USD1.2478 early Friday, up from USD1.2465 at the London equities close on Thursday. The euro traded at USD1.1237 early Friday, flat compared to USD1.1236 late Thursday.
The latest round of talks between the UK and the EU on a post-Brexit trade deal broke up early on Thursday with "significant differences" remaining between the two sides.
The talks this week - which have been taking place in Brussels with the negotiating teams meeting face-to-face for the first time since the Covid-19 outbreak - had been due to continue to Friday.
In a statement, the UK's chief negotiator David Frost said that while the ability to meet in person had given "extra depth and flexibility" to the discussions, there was more to do.
"The negotiations have been comprehensive and useful. But they have also underlined the significant differences that still remain between us on a number of important issues," he said.
His EU opposite number Michel Barnier said that while Brussels had engaged "constructively", officials needed to see an "equivalent engagement from the UK side".
"After four days of discussions, serious divergences remain."
Gold was quoted at USD1,774.70 an ounce early Friday, down slightly from USD1,775.75 on Thursday. Brent oil was trading at USD42.76 a barrel early Friday, down slightly from USD42.30 late Thursday.
The economic events calendar on Friday has services PMI readings from France, Germany, the eurozone and the UK at 0850 BST, 0855 BST, 0900 BST and 0930 BST respectively.
By Paul McGowan; paulmcgowan@alliancenews.com
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