LONDON MARKET MIDDAY: Caution dominates ahead of US nonfarm payrolls

(Alliance News) - Stock market moves were muted in Europe ahead of Friday's key US jobs report in the early afternoon London time, though the FTSE 100 managed to edged higher at midday after spending half of the morning in the red.

The FTSE 100 index was up 4.93 points, or 0.1%, at 7,125.36 midday Friday. The mid-cap FTSE 250 index was down 56.61 points, or 0.2%, at 23,449.50. The AIM All-Share index was up 0.2% at 1,258.54.

The Cboe UK 100 index was up 0.1% at 709.55. The Cboe 250 was down 0.2% at 21,222.69, and the Cboe Small Companies down 0.2% at 15,381.03.

In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were both up 0.2% on Friday.

Markets were moving cautiously ahead of the afternoon's US nonfarm payrolls data.

"Even if most investors expect higher market volatility later today, many aren't sure of the direction stock prices will take. It is a complicated case here as the US NFP could be considered as bad news in both outcomes: poor data could suggest the economic recovery is losing momentum while a solid jobs report could bring the tapering of the massive stimulus closer to us than many expected," said Pierre Veyret, technical analyst at ActivTrades.

Friday's monthly labour market report, due at 1330 BST, is expected to show the US added 870,000 jobs in July, up from 850,000 in June. A reading in excessive of consensus forecasts could stoke inflationary fears - though nonfarm figures over the past few months have been mixed, and Wednesday's ADP jobs data disappointed.

A strong nonfarms print could lift expectations for the US Federal Reserve's messaging at the Jackson Hole gathering later this month.

The summer meeting of central bankers in Jackson Hole, Wyoming is hosted by the US Federal Reserve Bank of Kansas City. This year's event, formally called the Economic Policy Symposium, is being held in-person from August 26 to 28. The event has been held every year since 1978, and the Fed chair traditionally gives a policy speech.

Ahead of Friday's jobs data, Wall Street was on course for a subdued start. The Dow Jones was called up 0.1%, the S&P 500 seen flat and the Nasdaq Composite tracking for a 0.2% fall.

The dollar was on the front foot heading into the economic data release.

Sterling was quoted at USD1.3917 on Friday, lower than USD1.3935 at the London equities close on Thursday. Against the yen, the dollar rose to JPY109.81 versus JPY109.71.

The euro traded at USD1.1812 on Friday, falling from USD1.1843 late Thursday. The single currency suffered from the strong dollar, as well as disappointing German industrial production.

Figures from Destatis on Friday showed industrial production was down 1.3% month-on-month in June, a steeper fall than May's 0.8% decline and confounding expectations, according to FXStreet, for 0.5% growth.

June's data means industrial production has now fallen in each month of the second quarter, which started off with a 0.3% dip in April.

Gold softened to USD1,797.81 an ounce on Friday from USD1,802.55 on Thursday. Brent oil was trading at USD72.17 a barrel, higher than USD70.85 late Thursday.

In London, London Stock Exchange Group was helping to bolster the FTSE 100 index, with the stock exchange operator's shares rising 5.0% on a strong start to the year.

Revenue for the first half of 2021 jumped to GBP2.99 billion from GBP877 million a year ago, with pretax profit nearly doubling to GBP510 million from GBP262 million.

"LSEG has delivered a good financial performance in the first half of the year, reflecting revenue growth across all divisions," said Chief Executive David Schwimmer.

LSEG added it progressed its integration of Refinitiv in the half-year, and its cost synergy programme is ahead of plan with GBP77 million realised in the period. As a result, it raised full-year run-rate cost synergy guidance to GBP125 million from GBP88 million.

Hikma Pharmaceuticals shares traded 5.7% lower despite raising full-year guidance for its Generics arm.

Revenue for the first half of the year rose 7.4% to USD1.22 billion from USD1.13 billion a year prior as all three of its divisions - Generics, Global Injectables and Branded - performed well. Pretax profit rose 16% year-on-year to USD319 million from USD274 million, reflecting a solid performance from all three Hikma divisions.

It now expects Generics revenue in the range of USD810 million to USD830 million for 2021 as a whole, up from previous guidance of USD770 million to USD810 million. The guidance boost reflects a strong performance from recently launched products, Hikma explained.

Cairn Energy shares rallied 8.9%, adding to Thursday's 26% jump, after the government of India set out amendments to rescind retrospective tax provisions which were introduced in 2012.

The Scottish oil and gas company has been involved in a long-running tax dispute with India which stemmed from the 2012 law. In 2014, Indian tax authorities used the new legislation to claim unpaid taxes from Cairn India's 2006 corporate reorganisation.

"We have noted the introduction to the Indian parliament of the Taxation Laws (Amendment) Bill 2021, which proposes certain amendments to the retrospective taxation measures that were introduced by the Finance Act 2012. We are monitoring the situation and will provide a further update in due course," Cairn said on Thursday afternoon.

Wm Morrison shares rose 2.2% to 278 pence after suitor Fortress Investment Group upped its takeover offer for the grocer to fend off any counter bid from private equity firm Clayton Dubilier & Rice.

Fortress is owned by Softbank Group and the Morrisons bidding consortium also includes the Canada Pension Plan Investment Board and Koch Real Estate Investments.

Under the latest offer, shareholders will receive 272p for each Morrisons share they own, valuing the supermarket chain at GBP6.7 billion. Morrisons shares closed at 272p on Thursday in London.

The offer comprises of a 270p cash payment from the consortium and a 2p special dividend. The latest tilt is a 7% premium to the previous Fortress offer of 254p, which included 252p in cash per share, plus the 2p dividend. This valued Morrisons at GBP6.3 billion.

Morrisons in June rejected a GBP5.5 billion approach from New York-based CD&R on the basis it was too low. However, CD&R has until August 9 to announce whether or not it plans to make a firm offer for Morrisons.

With Morrison shares trading just above the fresh takeover deal following Friday's Fortress announcement, it means shareholders still could be hoping for a bidding war.

By Lucy Heming; lucyheming@alliancenews.com

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