LONDON MARKET MIDDAY: Stocks Rise As All Eyes Turn To US Jobs Report

(Alliance News) - Stocks in London were in the green at midday on Friday, having reversed earlier losses following a sell-off in the US on Thursday, as investors look ahead to the upcoming US jobs report later in the afternoon.

In London, the blue-chip FTSE 100 index was up 47.57 points, or 0.8%, at 5,898.53 at midday - rebounding after dipping below the 5,800 mark shortly after opening.

The mid-cap FTSE 250 index up 168.50 points, or 1.0%, at 17,628.19 on Friday. The AIM All-Share index was up 0.3% at 956.71.

The Cboe UK 100 index was up 1.0% at 589.69. The Cboe 250 was up 1.0% at 15,041.68, and the Cboe Small Companies was up 0.1% at 9,458.65.

In mainland Europe, the CAC 40 index in Paris was up 0.4%, while the DAX 30 in Frankfurt was up 0.2%.

"Things have calmed down a little since yesterday's US-led market collapse, with European markets on the rise ahead of today's US jobs report. For those that have grown accustomed to constant profits, yesterday would have come as a shock to the system. Interestingly, we are seeing the domestically-focused FTSE 250 lead the main market, highlighting the outperformance from domestically-focused stocks despite the continued Brexit fears worries," commented IG Group's Josh Mahony.

New York is set to open mostly higher on Friday following the tech-led sell-off on Thursday, ahead of the closely-watched US jobs report for August at 1330 BST.

The Dow Jones Industrial Average was called up 0.8% and the S&P 500 up 0.4%, but the tech-rich Nasdaq Composite was called down 0.2%, based on futures trading.

According to FXStreet, US nonfarm payrolls are forecast to rise 1.4 million in August, down from 1.8 million jobs added in July. The unemployment rate is predicted to drop to 9.8% in August from 10.2% in July.

On Thursday, the US Labor Department said in the week ending August 29, the advance figure for seasonally adjusted initial jobless claims was 881,000, down from 1.0 million in the week prior, after a new government method in measuring claims.

However, using non-seasonally adjusted data, initial claims actually increased to 1.6 million from 1.4 million the week prior.

Analysts at BK Asset Management said: "On a raw data basis, there were 2 million more workers collecting unemployment than the month prior suggesting that whatever rebound in labor demand we've seen in July has already started to stall in August. This dynamic suggests that fewer businesses are reopening than expected and more importantly those that are reopening are doing so at reduced capacity with smaller labor forces than before the pandemic.

"The theme this week, therefore, has been that while aggregate demand has certainly made strong V-shaped recovery jobs have not, and without further stimulus or job growth the demand recovery is likely to stall dampening growth expectations into the end of the year. That's why today's NFP report could prove crucial to equity prices going forward."

In the FTSE 100, Hikma Pharmaceuticals was up 3.8% after Barclays upgraded the generic drugmaker to Overweight from Equal Weight.

Gold miners Fresnillo and Polymetal International were up 2.8% and 1.0% respectively, tracking spot gold prices higher.

The precious metal was quoted at USD1,937.33 an ounce Friday midday, up from USD1,926.09 an ounce at the London equities close Thursday.

International Consolidated Airlines was up 2.1% after the UK government said on Thursday that there would be no change to its coronavirus quarantine exemption list.

There had been speculation that Westminster would reimpose the quarantine requirement on Portugal due to a spike in Covid-19 cases, leading many holidaymakers to pay hundreds of pounds to fly home this week.

Conversely, housebuilders were among some of the worst performers in the large-cap index after the UK competition regulator said it has found "troubling evidence" house developers have handed out "potentially unfair" terms concerning ground rents in leasehold contracts and potential mis-selling.

As a result, the Competition & Markets Authority has launched an enforcement action as it believes housebuilders may have broken consumer protection law.

The CMA has written to four London-listed developers over the action, outlining its concerns: Barratt Developments, Countryside Properties, Persimmon and Taylor Wimpey.

Barratt Developments was the worst blue-chip performer down 2.4%, Persimmon was down 2.0% and Taylor Wimpey was down 1.1%. FTSE 250-listed Countryside Properties was up 0.1%.

In response, Barratt said it is "committed to putting its customers first and will continue to cooperate with the CMA whilst it completes its investigation".

High Wycombe-based Taylor Wimpey also noted the enforcement action, adding: "The board takes this very seriously and Taylor Wimpey will continue to fully cooperate with the CMA, provide the further information to be requested by the CMA in the coming weeks and work with them to better understand their position."

Persimmon said some of its properties were sold on a leasehold basis in the past but noted - following consultation with government, stakeholders and customers - it took the decision to stop selling leasehold houses where Persimmon owns the land freehold in 2017. The company added it would be engaging fully with the CMA.

The CMA will also be investigating certain firms who bought freeholds from these developers and have continued to use the same unfair leasehold contract terms.

Countryside echoed its larger peers, commenting: "We are committed to resolving this issue to the satisfaction of our customers and will continue to co-operate fully with the CMA's ongoing investigation."

On the economic front, activity in the UK construction sector unexpectedly slowed in August as companies pointed to a shortage of new work, IHS Markit said.

The seasonally adjusted IHS Markit/CIPS UK construction purchasing managers' index registered 54.6 in August, down from 58.1 in July. The reading missed the consensus estimate, cited by FXStreet, of 58.5. Still, the score remained above the 50.0 mark which separates expansion from contraction.

"Today's figures pointed to a setback for the recovery in UK construction output, with growth easing from the near five-year high seen during July. However, housebuilding has registered the strongest rebound since the stoppages of work on-site in late March due to Covid-19. One of the biggest issues facing the sector, which has largely remained active during the pandemic, is the shortage of access to materials and appropriate subcontractors. Looking ahead, the sector should prepare for a few difficulties as furlough schemes come to an end," said Kate Kirby, partner in the Construction & Infrastructure practice at DWF.

The pound stood at USD1.3310 at midday on Friday, up from USD1.3272 at the London equities close Thursday.

The euro stood at USD1.1843, up from USD1.1825, despite the decline in the eurozone's construction sector picking up pace in August, registering its sharpest fall in three months.

The IHS Markit eurozone construction purchasing managers' index slipped to 47.8 in August, deeper below the 50.0 no-change mark, from 48.9 in July.

"Survey data showed a broad-based downturn in output across the three sectors, with the sharpest decline recorded in civil engineering activity, followed by commercial building output," Markit noted, adding that the single-currency area's August construction decline was its fastest in three months.

Against the yen, the dollar was trading at JPY106.19, flat from JPY106.17.

Elsewhere in commodities, Brent oil was quoted at USD44.38 a barrel Friday midday, up from USD43.42 late Thursday.

Financial markets in the US will be closed on Monday to celebrate Labor Day.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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