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(Alliance News) - The contrarian boost from Friday's weak US jobs report is set to continue into the new week, with stocks in London pointed higher on Monday.
In early UK company news, baker Greggs said full-year profit could reach pre-pandemic levels, energy supplier Centrica said trading conditions have remained tough, and lender Provident Financial is mulling a sale of the home credit business.
IG says futures indicate the FTSE 100 index of large-caps to open up 26.89 points, or 0.4%, at 7,156.60 on Monday. The FTSE 100 closed up 53.54 points, or 0.8%, at 7,129.71 on Friday.
"European and US stock futures are moving higher as traders feel a lot more optimistic about ongoing dovish monetary policy support from the Federal Reserve after the weak US NFP data released on Friday," said Naeem Aslam, chief market analyst at AvaTrade.
On Friday, stocks were supported after April's US nonfarm payrolls figure substantially undershot expectations.
The US economy added 266,000 new jobs in April, slowing sharply from a downwardly revised 770,000 rise in March. The latest figure was well below market consensus, cited by FXStreet, of 978,000, though many forecasts were for one million jobs or more being added. March's figure was first reported as 916,000.
The Labor Department said job gains in leisure, hospitality and local government education were partially offset by employment declines in temporary help services and in couriers and messengers.
The data helped to soothe recent fears about the economy overheating and inflationary pressures growing, as the US rebounds from the pandemic.
Aslam commented: "It is clear that the US labor market still has a deep hole to fill in."
Wall Street ended in the green on Friday following the figures, with the Dow Jones Industrial Average closing up 0.7%, the S&P 500 up 0.7% and Nasdaq Composite up 0.9%.
The dollar weakened on Friday after the jobs data, but was more mixed at the start of a new week - though the pound continued to climb.
Sterling was quoted at USD1.4056 early Monday, higher than USD1.3995 at the London equities close on Friday.
UK Prime Minister Boris Johnson has invited SNP leader Nicola Sturgeon for crisis talks on the Union after the Scottish first minister warned he would be standing in the way of democracy if he denies Scotland a second independence referendum.
The Scottish National Party fell one seat short of an overall majority in the Scottish parliament elections, securing 64 seats, but the final result still leaves Holyrood with a pro-independence majority.
"Although the Scottish National Party looks to have won the election, it appears it will not command an outright majority and another coalition government is on the way. Markets have decided that this reduces the risk of Scotland asking for another independence referendum," said Oanda's Jeffery Halley.
The dispute over a follow-up referendum came as Labour recriminations began over its poor showing in the Super Thursday elections on Thursday.
Deputy Labour leader Angela Rayner was sacked on Saturday from her role as chairman and national campaign coordinator.
It comes after the UK opposition party lost the Hartlepool by-election – with the North East town voting for a Tory MP for the first time in 60 years – and incurring a net loss of six councils and more than 200 seats in the local elections as voters in its traditional heartlands deserted the party. However, there were some surprise victories for Labour in the West of England and Cambridgeshire and Peterborough mayoral contests.
In early UK company news, Greggs said full-year profit could reach pre-pandemic levels.
The baker said it has seen a strong recovery in sales since restrictions began to ease across the UK, with like-for-like sales in the 18 weeks to May 8 down 14% on the same period in 2019. In the ten weeks to March 13, sales were down 23% on two years ago, but this narrowed to a decline of just 3.9% in the eight weeks to May 8.
Since non-essential retail shops were allowed to reopen in England on April 12, two-year like-for-like sales have been positive, Greggs said.
"Sales have recovered well in recent weeks as out-of-home activity levels have increased, albeit in the absence of competition from indoor seated catering operators. If restrictions continue to ease in line with current plans, then we now expect our overall sales performance for the year to be stronger than we had previously anticipated," the sausage roll maker said.
While there is still uncertainty over trading conditions, Greggs believes that 2021 profit is likely to be materially higher than previous expectations and could be around 2019 levels in the absence of further restrictions.
British Gas-owner Centrica said trading conditions have remained tough but cost savings are on track.
The energy utility said its restructuring is on track, with year-on-year operating cost savings of more than GBP100 million expected in 2021.
Less positively, the pandemic has seen electricity demand from UK business customers hit by around 15% in the first quarter, residential boiler installations were down 11% and non-essential service visits were postponed.
"As expected, trading conditions have remained tough in the year to date. However, the modernisation of our group remains on track and the difficult, but necessary process to move colleagues onto new terms and conditions is now complete," said Chief Executive Chris O'Shea.
"Although the external environment remains uncertain, our tight focus on cash and on fixing the basics across the group leaves us well placed as we continue the turnaround of our company."
Centrica had net debt of GBP500 million at the end of the first quarter, down from GBP3.0 billion at the start of the year.
Subprime lender Provident Financial saw revenue slump in 2020 as it swung to a loss.
Total revenue for the year amounted to GBP807.8 million, down sharply on GBP996.1 million the year before as both interest income and fee income fell. Provident turned to a pretax loss of GBP113.5 million from a profit of GBP119.0 million.
Covid-19 had an "immediate impact" on customer demand for credit, said Provident, which tightened underwriting standards in April in response to a "changing consumer landscape". As a result, new bookings for 2020 fell and so did receivables.
Provident added it has decided to withdraw from the home credit market "entirely" and is considering a sale of the Consumer Credit Division.
"The home credit business will be placed into a managed run-off, which would be expected to conclude by December 2021. We expect to manage the IT infrastructure and support service expenditure lower as the receivables book falls. At the end of March 2021, CCD had approximately 2,100 employees and an internal consultation for these employees has started today. It is anticipated that the cost to the group of placing the business into managed run-off or disposing of CCD will be up to circa GBP100 million," the company said.
Polymer supplier Victrex said it is comfortable with its full-year expectations after reporting a decline in profit for the first half.
Revenue for the half-year to March 31 edged down 0.4% to GBP150.9 million, but pretax profit declined 7% to GBP46.6 million. The gross margin nudged down to 53.9% versus 57.3% a year ago.
Despite the profit fall, Victrex declared an interim dividend of 13.42p, versus nothing a year prior. The interim dividend for the 2020 financial year was deferred and subsequently cancelled as part of cash conservation measures. The payout just declared is at the same level as the interim dividend for 2019.
"Whilst there may yet be upside to our anticipated full-year performance, with the continued impact of post-Brexit inventory unwind on fixed cost recovery, and accrual for our all-employee-bonus scheme, at this stage we remain comfortable with current full year expectations," said Chief Executive Jakob Sigurdsson
The euro traded at USD1.2158 early Monday, flat on USD1.2156 late Friday. Against the yen, the dollar was quoted at JPY108.86, rising from JPY108.52.
In Asia on Monday, the Japanese Nikkei 225 index closed up 0.6%. In China, the Shanghai Composite was down 0.1%, while the Hang Seng index in Hong Kong was down 0.2%. The S&P/ASX 200 in Sydney closed up 1.3%.
Gold was quoted at USD1,837.51 an ounce early Monday, edging up from USD1,834.71 on Friday.
Brent oil was trading at USD68.82 a barrel, up on USD68.20 late Friday. The US government declared a regional emergency Sunday as the largest fuel pipeline system in the US remained largely shut down, two days after a major ransomware attack was detected.
The Colonial Pipeline Co ships gasoline and jet fuel from the Gulf Coast of Texas to the populous East Coast through 5,500 miles of pipeline, serving 50 million consumers. The company said it was the victim of a cybersecurity attack involving ransomware – attacks that encrypt computer systems and seek to extract payments from operators.
The economic calendar on Monday has UK Halifax house prices at 0830 BST and eurozone Sentix investor confidence at 0930 BST.
By Lucy Heming; lucyheming@alliancenews.com
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