LONDON (Alliance News) - UK stocks' early gains had largely eroded by midday Friday ahead of the US jobs report, which could indicate the pace at which the US Federal Reserve tightens its monetary policy.
The FTSE 100 index was up 0.1% at 5,961.55, having briefly popped its head above the 6,000 mark. The FTSE 250 index was up 0.3% at 16,834.43 and the AIM All-Share was up 0.2% at 727.23.
Stock markets in Europe had also given up their early gains. The CAC 40 in Paris was down 0.5% and the DAX 30 in Frankfurt was down 0.1%.
Futures in the US were pointing to a higher open. The Dow 30 and S&P 500 were both indicated up 0.5% and the Nasdaq 100 up 0.6%.
The normally highly-anticipated US jobs report, due at 1330 GMT, had somewhat fallen down the pecking order in early trade, with the ongoing turmoil in Chinese markets taking top billing. Nevertheless, the state of the US labour market will help determine the pace of the Federal Reserve's monetary policy tightening.
"Today's jobs report may have been overlooked for much of the week but it could provide a timely reminder of the improvements being made in the labour market which should develop into higher wages and inflation now that the slack in the economy has been greatly diminished," said Craig Erlam, senior market analyst at Oanda.
"On the other hand, a weak jobs report would serve as bait to those who questioned the timing of the first hike, particularly if wage growth remains weak, as it did for large parts of last year," Erlam added.
The consensus, according to FX Street, expects US nonfarm payrolls to show 200,000 jobs were added in December, down from the 211,000 reported in November. The unemployment rate is expected to remain flat at 5.0%.
Elsewhere in the economic calendar, is US wholesale inventories are due at 1500 GMT.
Stocks in Europe had initially got off to a solid start after China's securities regulator suspended the its new circuit breaker mechanism and the country's central bank guided the yuan a shade higher for the first time in nine days, helping to prop up beaten-down shares.
In a statement late Thursday, the China Securities Regulatory Commission said the circuit breaker system would be halted starting Friday because it had produced "more negative impact than positive effects". The commission did not say how long the suspension would remain in place. It said it will undertake research and solicit opinions to improve the system.
Analysts said the circuit breaker rule was part of the reason why the Chinese stock market had experienced such heavy falls in the first trading week of 2016.
"The general souring of sentiment had been exacerbated by the Chinese circuit breakers," said Richard Hunter, head of equities at Hargreaves Lansdown.
"With the Chinese deciding that the idea of a circuit breaker is broken, withdrawing the facility after just four days with it having been triggered twice, some stability returned to Asian markets overnight and London in turn," Hunter added.
The Shanghai Composite closed up 2.3% on Friday, but ended down 11% for the week.
Furthermore, the People's Bank of China on Friday raised its guidance rate for the yuan for the first time in nine trading days.
Reuters reported the PBOC set its daily midpoint rate for the yuan at 6.5636 per dollar prior to the market open, Reuters said. Under China's currency regime the yuan is allowed to deviate 2.0% either side of the midpoint. The rate was set at 6.5646 to the dollar on Thursday, compared to 6.5314 on Wednesday.
In London, Sports Direct International shares declined 4.0% after it issued a late morning profit warning. The sporting goods retailer said it is no longer confident it will meet its adjusted underlying earnings before interest, tax, depreciation and amortisation target for its full financial year to April 26.
Sports Direct said it had taken a hit from a deterioration of trading conditions on the high street and a continuation of unseasonal warm weather over the key Christmas period.
It now thinks it may miss its target of GBP420 million of Ebitda and lowered its expectations to between GBP380 million and GBP420 million in anticipation of similar trading conditions between now and the end of April.
Tesco, up 4.7%, led the FTSE 100 gainers after Barclays upgraded it to Overweight from Equal Weight. The bank said while the UK food retail market faces "numerous headwinds", Tesco's valuation is now more attractive and there are a number of positive catalysts for the supermarket chain.
Aerospace and automotive engineer GKN was up 3.1% after it received a double upgrade from Bank of America Merrill Lynch, which hiked its rating on the company to Buy from Underperform.
In the FTSE 250, Vectura Group was up 8.0%, the best performer in the index. The pharmaceutical company said it has completed a clinical trial for VR315 in the US, its generic therapy for asthma, and provided an update on one of its other developments.
On VR506, another asthma treatment programme the company is working on in the US, Vectura has received an initial payment of USD4.0 million and a further USD8.0 million could be received once further development milestones are hit, and the company will also receive a royalty once sales start.
Spire Healthcare Group was up 2.1% after it reiterated its guidance for 2015, and forecast revenue growth for 2016, saying it expects a boost from a proposed rise in the National Health Service tariff.
The private hospital group had previously cut its guidance for 2015 for a second time in November, and on Friday it reiterated this guidance, continuing to expect revenue of between GBP882 million and GBP888 million for 2015, with an earnings before interest, tax, depreciation and amortisation margin of 18.0% for the year as a whole.
This is increased from revenue of GBP856.0 million in 2014.
Photo-Me International led the gainers in the FTSE All-Share, up 10%. The photo-booth and automated service provider stated its full year results could be significantly ahead of expectations if the strong trading recently experienced in Japan continues.
The company has struggled to grow its revenue in recent years, but trading in the six months ended October 31 led to a small rise in turnover on a constant-currency basis, which Chairman John Lewis said was a "real step change".
Photo-Me said the strong trading in Japan has continued in November and December, with takings up a staggering 90% from the previous year, well ahead of its own expectations.
Games Workshop Group was down 11% after it said pretax profit came in flat for the first half and trading over the Christmas period missed its expectations, leading it to caution profit for the full year is likely to fall.
The company, which makes Warhammer miniatures, said its sales in December were lower across the business and, as a result, pretax profit for the full year is unlikely to exceed GBP16.0 million, compared to the GBP16.6 million it posted a year earlier.
For the first half to November 29, Games Workshop said its pretax profit was flat at GBP6.3 million, as revenue dipped slightly to GBP55.3 million from GBP56.5 million. Due to the sluggish first half and its caution on the second, the company slashed its interim dividend to 20.00 pence per share from 36.00p a year earlier.
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
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