Taylor Wimpey Share News (TW.)

LONDON (Alliance News) - Disappointment over the extent of the European Central Bank's monetary easing on Thursday hung over equity markets midday Friday, as focus for investors turns to the US jobs report this afternoon and the implications it will have for the US Federal Reserve's interest rate decision later this month.

The Fed will hold its final two-day monetary policy meeting of 2015 on December 15-16, with analysts expecting the Federal Open Market Committee to finally announce its first interest rate hike since June 2006. However, there remains one big hurdle in the shape of November nonfarm payrolls.

Analysts at Nomura believe that even a weak November jobs report will not be enough to derail the Fed from hiking rates this month.

"We doubt the November employment report, even if it is relatively weak, will disrupt the FOMC's apparent intention to raise short-term interest rates at its next meeting. We think another delay in lift-off will require not only very weak economic data but also a significant tightening of financial conditions," Nomura said.

The Japanese bank forecasts nonfarm payrolls to gain by a net 180,000 jobs in November, compared to the 271,000 for October.

"We see some upside risk to our nonfarm payrolls forecast as the ADP employment report came in better than expected. Also, due to changing consumer behaviour during the holiday season, residual seasonality may be biasing up job growth modestly in November," Nomura said.

The consensus for nonfarm payrolls according to FXStreet.com is a net 200,000 jobs.

The US jobs report, which consists of nonfarm payrolls, US unemployment rate and US wage growth, will be released at 1330 GMT alongside US trade balances.

Ahead of that, US futures were pointing to a higher open on Wall Street. The Dow Industrials and S&P 500 index were both indicated up 0.4%, while the Nasdaq 100 was aimed up 0.3%.

In London, the FTSE 100 traded down 0.1% at 6,268.71, the FTSE 250 index was down 0.2% at 17,351.44 and the AIM All-Share down 0.1% at 741.19. European stocks also were lower, with the CAC 40 in Paris down 0.5%, the DAX 30 in Frankfurt down 0.6% and the STOXX Europe 50 index down 0.3%.

The ECB's failure to deliver the stimulus package that markets expected on Thursday was continuing to drag on stocks Friday. The central bank cut its deposit rate by 10 basis points, deeper into negative territory to -0.30%, but the size of the reduction was at the lower end of the 10-20 basis points cut economists had forecast. The bank's Governing Council left the main refinancing rate unchanged at a record low of 0.05% and the marginal lending facility rate at 0.30%.

During the press conference after the meeting, ECB President Mario Draghi announced the central bank's EUR1.1 trillion asset purchase programme will be extended until March 2017, "or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its aim of achieving inflation rates below, but close to, 2% over the medium term."

The ECB left the size of the monthly asset purchases unchanged at EUR60 billion, contrary to economists' expectations for a boost to as much as EUR80 billion. The disappointment saw stocks give up earlier gains and fall deep into the red, while the euro jumped sharply higher off its near nine-month low against the dollar.

UBS economist Reinhard Cluse concluded that Draghi's comments at the press conference indicate that there will be no more easing from the ECB after this meeting.

"While Mr Draghi reiterated that the [quantitative easing] programme continues to provide sufficient flexibility in terms of form, size and maturity – thus leaving the door open for more easing – we think the implication of [Thursday]'s ECB communication is that further easing is unlikely unless the inflation and growth outlook suffers unexpected downside shocks," Cluse said.

Investors also will keep an eye on the outcome from the Organization of Petroleum Exporting Countries' meeting, which is underway. Craig Erlam, senior market analyst at Oanda, said that while there is a clear appetite within OPEC to cut oil production as prices linger around multi-year lows, no official cut is expected to be announced at this meeting.

"It has been suggested that Saudi Arabia, OPEC's most influential member, may be open to a coordinated production cut with non-OPEC members so as to retain market share, but this has not yet been confirmed and any deal could be difficult to broker," Erlam said.

"That said, should we get confirmation that the group is open to discuss a production cut, we should at the very least find stability in oil prices and they could even move off their lows," the Oanda analyst added.

At midday Friday, Brent oil was trading at USD44.57 a barrel and West Texas Intermediate at USD41.74 a barrel. Oil and other commodities rose sharply off their lows on Thursday as the comments by Draghi caused some weakness in the dollar.

On the London Stock Exchange, Berkeley Group Holdings was the standout performer in the FTSE 100, up 7.2%. The housebuilder, focused on London and the south east of England, said pretax profit dipped in the first half due to gains it made a year earlier from the sale of ground rent assets, though revenue increased and Berkeley also announced a boost to its dividend programme.

Berkeley said its pretax profit fell to GBP293.3 million in the six months to the end of October from GBP304.9 million a year before, primarily due to the one-off gain made a year earlier from the sale of ground rent assets.

The group said underlying demand in its markets remains robust and the operating environment is still stable and, illustrating its confidence on its outlook, said it would hike it dividend return programme to the tune of GBP500.0 million, with the target of returning GBP16.34 per share in total to shareholders by the end of September 2021. This is increased from GBP13.00 per share previously and means its dividend payout through to September 21, 2016 from now will be 200.00 pence per share, up from 144p.

The robust underlying results appeared to have a positive read-across on other blue-chip housebuilders, with Taylor Wimpey up 0.6%, Barratt Developments up 0.7%, and Persimmon up 0.4%.

Whitbread was the biggest faller in the FTSE 100, down 3.3% at 4,555.00 pence after Barclays downgraded the company, the owner of Premier Inn and Costa Coffee, to Equal Weight from Overweight and cut its target price to 5,200p from 5,800p.

Barclays downgraded the stock on expectations for slower revenue per available room growth at Premier Inn.

In the FTSE 250, JD Sports said late Thursday that it expects its headline profit before tax and exceptional items for the current financial year to January 31, 2016 is likely to exceed current consensus market expectations of GBP125.0 million by GBP10.0 million.

In giving its expectation, the sports retailer said it recognised the "critical importance" of trading through the remainder of December and early January, and noted "further infrastructure cost increases" during the year to support the increasing international development of the business. The company traded up 2.7% on Friday.

Escher Group Holdings was one of the worst performers in the AIM All-Share index, down 30%. The company, which provides software to the postal, retail and financial industries, warned its full-year earnings will be hurt as it will not complete some licence sales it had expected to close in the second half of the year. But Escher said its results will still be an improvement on last year.

The company said it will not close several anticipated licence sales before the end of the year, but did not state whether the sales would be pushed into 2016 or have been lost altogether.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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