LONDON MARKET MIDDAY: Stocks rise as poor US nonfarms ease taper fear

(Alliance News) - European equities were in positive territory on Monday as investors bet on last week's disappointing US nonfarm payrolls figure slowing the US Federal Reserve's stimulus tapering plans.

Against a backdrop of accelerating inflation and signs of economic recovery, Fed Chair Jerome Powell in August said that the central bank could begin to withdraw its stimulus measures soon. Friday's US jobs report figure may put the brakes on tapering plans, however.

The US economy added just 235,000 jobs in August, down sharply from a revised 1.1 million additions in July. August's figure massively undershot the consensus estimate, cited by FXStreet, of 750,000.

"The shockwaves are still reverberating from the sickly US jobs numbers on Friday, but the markets appear taking the positives from the news on Monday," AJ Bell analyst Russ Mould commented.

"The US Federal Reserve has consistently reiterated that its decision making will be heavily led by the unemployment situation and therefore a weakening in the labour market could see it hold off on tapering its support for the economy for a bit longer."

The FTSE 100 index surged 50.50 points, or 0.7%, to 7,188.85 midday Monday. The mid-cap FTSE 250 index was up 39.84 points, or 0.2%, at 24,234.45. The AIM All-Share index was up 2.79 points, or 0.2%, at 1,312.94.

The Cboe UK 100 index was up 0.7% at 714.84. The Cboe 250 was up 0.1% at 22,025.04, and the Cboe Small Companies was up 0.4% at 15,580.13.

In mainland Europe, the CAC 40 stock index in Paris and the DAX 30 in Frankfurt were both up 0.7%.

Financial markets in the US are closed on Monday for the Labor Day holiday.

The pound faded against the dollar midday Monday. The greenback advanced after plummeting in the wake of Friday's nonfarms. In addition, figures on Monday suggested a slowdown in growth for the UK's construction sector.

The UK's construction sector expanded again in August, though numbers on Monday signalled growth faded to its lowest level since February.

The headline seasonally adjusted IHS Markit/CIPS UK construction purchasing managers' index fell to 55.2 points in August, from 58.7 points in July. Though still above the 50.0 threshold which separates growth from decline, August's figure suggests the level of expansion has waned.

August's tally, while the lowest since February, was enough to extend the growth streak to seven months.

New work expanded for the 15th month running, and while order books continued to swell, growth ebbed to its slowest pace since March.

London-listed construction firms still enjoyed a largely positive session, however. Breedon Group was 0.1% lower, though Balfour Beatty was up 1.0% and Costain rose 3.3%.

Sterling fell to USD1.3833 from the USD1.3866 it fetched at the London equities close on Friday. Against the yen, the dollar rose to JPY109.87, from JPY109.64.

The euro slipped to USD1.1865 Monday afternoon from USD1.1883 at the European equities close on Friday, even as provisional figures from Destatis showed new manufacturing orders in Europe's largest economy surged to a record high in July.

According to Destatis, new manufacturing orders in Germany climbed 3.4% monthly in July, building on June's 4.6% climb, and topping FXStreet-cited forecasts of a 1% decline. Annually, new orders surged 24%, following June's upwardly revised 27% hike. July's yearly figure breezed past forecasts of a 14% rise.

"However, we doubt that this marks a turnaround for industry as it was strongly driven by a jump in pharma turnover. We think that bottlenecks will continue to way out activity well into 2022 even if there is some room for them to ease over the coming months," analysts at Oxford Economics commented.

Back in London, Dechra Pharmaceuticals pared earlier losses but was down 5.2% midday Monday. The veterinary products firm cautioned on fewer vet visits in the US and also said Chair Tony Rice will step down.

Earnings for the year ended June 30 improved, however. Revenue climbed 18% to GBP608.0 million from GBP515.1 million. Pretax profit jumped 81% to GBP74.0 million from GBP40.9 million.

Looking ahead, Dechra said: "Although Covid-19 related travel restrictions have limited acquisition activity, we have still been able to identify and progress numerous strategic opportunities to strengthen our product portfolio and development pipeline. We therefore remain confident in our ability to successfully execute our strategy and in our future prospects.

"In the UK, there have been reports of an increased number of dogs; however, recent information from the US indicates that veterinary practice visits by pet owners have marginally declined. What is clear is that people have been spending more time with their pets and have therefore been more cognitive of their welfare, and with disposable income being higher than normal due to lockdown, expenditure per pet has increased."

Dechra said Chair Rice will step down once the company finds a successor. A search to find a replacement has kicked off.

At the other end of the mid-caps, Baillie Gifford Japan Trust was among the best performers, up 2.4%. The investment firm tracked Tokyo's benchmark Nikkei 225 higher. The Nikkei rose another 1.8% on Monday, adding to its gains since Prime Minister Yoshihide Suga announced on Friday he will not run for his ruling party's leadership, effectively ending his tenure as PM.

Elsewhere in London, Glencore rose 2.0%, on the back of stronger aluminium prices following a coup in Guinea.

Special forces in Guinea seized power on Sunday, arresting the president and imposing an indefinite curfew in the west African country.

"We have decided, after having taken the president, to dissolve the constitution," said a uniformed officer flanked by soldiers toting assault rifles in a video sent to AFP.

Analysts at Berenberg noted the event has boosted aluminium prices, explaining Guinea ships about 25% of global bauxite, an ore needed to produce aluminium.

Rio Tinto, a bauxite miner, failed to benefit. The stock was down 0.6%.

"While iron ore is the driver of Rio Tinto's share price, we expect the movements in the aluminium market to be a net beneficiary to the group. The aluminium division comprises 17% of revenue and 9% of earnings before interest, tax, depreciation, and amortization (marginally higher at spot), so any near-term disruption in the aluminium value chain has scope to support and augment aluminium division earnings," Berenberg explained.

Elsewhere in commodities, Brent oil fetched USD72.18 a barrel midday Monday in London, down from USD72.96 late Friday. Gold was trading at USD1,823.89 an ounce, down from USD1,831.95.

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