LONDON MARKET MIDDAY: London And NY Flat Ahead Of US Job Report

LONDON (Alliance News) - UK stocks were slightly lower, with CRH and IAG as the best large-cap performers and BHP Billiton leading the blue-chip fallers, while Wall Street was called for a flat open ahead of the US non-farm payrolls report, due at 1330 GMT.

The FTSE 100 index was down 0.1% at 6,358.04 points, the FTSE 250 also was off 0.1% at 17,101.67 and the AIM All-Share down 0.1% at 745.90.

In Asia on Friday, the Japanese Nikkei 225 index closed up 0.8%. In China, the Shanghai Composite finished up 1.9%, while the Hang Seng in Hong Kong ended down 0.8%.

US stocks pointed to a flat to lower open, with the Dow 30 index and the S&P 500 pointed down 0.1% and the Nasdaq 100 seen flat. Shares in New York also ended flat to lower on Thursday, with the DJIA flat, the S&P 500 down 0.1% and the Nasdaq Composite down 0.3%.

"Pre-US-non-farm jitters appear to be contributing to an overall bearish tone this Friday, especially with estimates suggesting that today's number will put an end to the consecutive four month decline seen in the unemployment change figure," said Spreadex analyst Connor Campbell. "However, it must be said, analysts had been wrong in their forecasts for each of those four months, so nothing is set in stone just yet."

According to FXStreet.com, consensus is for the US economy to have added 180,000 jobs in October, moderately higher than the 142,000 jobs added in September.

Lloyds Bank looks for a 182,000 rise. "That would be above the disappointing gains of the past two months but still below the average rise in both 2014 and 2015. October ADP, ISM non-manufacturing and the weekly unemployment claims data all point to the risk of an upward surprise but even an out-turn close to the consensus would probably still be sufficient to leave a December US Federal Reserve move on the cards," the bank said.

The US unemployment rate, also released at 1330 BST, is expected to remain unchanged at 5.1%.

Investors also will pay attention to speeches by Federal Reserve Bank of St. Louis President James Bullard and Federal Open Market Committee member Lael Brainard at 1300 GMT and 2015 GMT, respectively.

UK industrial production declined in September, while manufacturing output growth doubled from August, data from the Office for National Statistics showed Friday.

Industrial production dropped 0.2% month-on-month in September. It was expected to fall by 0.1%. Manufacturing output growth improved to 0.8% month-on-month, exceeding the expected growth of 0.6%.

Meanwhile, the UK visible trade deficit narrowed by more than expected in September, the ONS reported. The deficit on trade in goods fell to GBP9.4 billion, while it was forecast to decline to GBP10.6 billion.

Germany's industrial production decreased unexpectedly in September, data from Destatis showed. Industrial production declined 1.1% in September from August, when it fell by revised 0.6%.

Economists had forecast a 0.5% increase. Production in industry excluding energy and construction declined 1.4%. Energy production gained 0.3% on the previous month, while production in construction fell 0.9%.

In Frankfurt, the DAX 30 index was down 0.2%, while in Paris the CAC 40 was down 0.8%.

On the London Stock Exchange, CRH was the top performer, up 4.0%. Analysts at Davy Research note that the rise in the building materials stock comes after the US House of Representatives voted in favour of a new six-year Highway Bill entitled the Surface Transportation Reauthorisation and Reform Act.

"The new bill provides USD325 billion of funding over the 2016-21 period and effectively maintains current levels of federal spending but importantly links the annual spend to inflation. It is expected that a new bill will be signed into law before Christmas," said Davy. "This is a significant positive for CRH which is the largest provider of raw materials into this end-market."

However, Augustin Eden, analyst at Accendo Markets, said part of the rally in the stock was also due to a construction sector upgrade by UBS, which set CRH as its preferred pick.

Peers Balfour Beatty and Kier Group were up 1.6% and 0.9%, repectively.

Meanwhile, International Consolidated Airlines Group was up 2.8% after it upgraded its long-term guidance on returns and margins and announced a reshuffle of its management team.

The owner of British Airways and Spanish carrier Iberia and recently acquired Irish airline Aer Lingus, said it has upgraded its sustainable return on invested capital target for 2016 to 2020 to 15% from 12% previously. It has also upgraded its guidance on operating margin target to between 12% and 15%, up from 10% to 14% previously, and is now targeting average annual growth in its earnings per share over the five-year period of 12%, compared to 10% before.

In a separate statement, IAG said its group traffic, measured in revenue passenger kilometres, rose 17% in October to 20.7 billion, up from 17.8 billion a year earlier. On a pro-forma basis, including the results from Aer Lingus, traffic increased 7.6%. The group's load factor for the month increased by 2.4 percentage points to 83.4% from 81.0% a year earlier and was up 2.5 points on a pro-forma basis.

BHP Billiton was the worst performer in the FTSE 100, down 5.3%, after it said there has been a "serious incident" at its iron ore operation in Brazil which is run by a joint venture company with Brazilian giant Vale. The miner holds a 50% stake in Samarco Mineracao, the joint venture entity that operates the project, and said it is "concerned for the safety of employees and the local community".

Media reports have suggested a burst tailings dam has flooded the local community which has led to fatalities. The Financial Times said Samarco has confirmed the dam had burst at its Germano unit located in the municipalities of Ouro Preto and Mariana in the state of Minas Gerais.

Significantly, the FT also reported that the burst dam has "submerged" the Bento Rodrigues community, leading to "at least" 15 fatalities. However no fatalities have been confirmed by any of the companies involved.

In the FTSE 250, the two biggest gainers were ICAP, up 7.8%, and Tullett Prebon, up 6.5%, after the pair confirmed that Tullett is in talks to acquire ICAP's global broking business.

Tullett said that the talks also cover ICAP's associated technology and broking platforms, including iSwap and Fusion, its associated information services revenue and some of its joint ventures and associates. New shares would be issued by Tullett Prebon to its rival to finance the deal, giving ICAP a minority stake in Tullett. The new Tullett shares would more than 100% of its existing share capital.

Meanwhile, Amec Foster Wheeler was down 4.4%. After its profit warning on Thursday, the engineering stock was downgraded by Citigroup and UBS to Neutral from Buy, with its price target cut by four other brokers.

On AIM, Pantheon Resources was up 17%. The oil and gas company said it has found a new oil and gas bearing zone on its acreage in the US that is separate from its existing targets. The company has been drilling the VOS1 well on its acreage in Tyler County in the US with the aim of testing the Eagle Ford/Woodbine sandstone and the Austin Chalk.

However, on Friday, Pantheon said it has encountered another oil and gas bearing zone at 12,600 feet which is in addition to those primary and secondary targets, which has flowed natural gas and oil. Pantheon did not state how much oil and gas the new zone has produced.

Reach4Entertainment Enterprises was down 13%. The media and marketing company said it has proposed a series of amendments to restructure its GBP14.8 million loan facility with Irish lender AIB Group.

Under the terms of the amendment, ABI will no longer convert GBP5.2 million worth of the debt into shares in Reach4Entertainment or receive a European put option on the shares. Instead, it will be granted warrants over the same value of shares, exercisable within five years at a price equal to the group's proposed equity fundraising, which it still remains in talks on. AIB is considering the proposals, Reach4Entertainment said.

By Daniel Ruiz; danielruiz@alliancenews.com

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