LONDON MARKET MIDDAY: Stocks Subdued As Traders Await US Nonfarm Data

(Alliance News) - Equities trade in London was cautious on Friday ahead of the latest US jobs report and a speech by Federal Reserve Chair Jerome Powell.

The FTSE 100 was just 0.29 of a point lower at 7,270.88 Friday midday. The FTSE 250 was 14.88 points lower, or 0.1%, at 19,634.68, while the AIM All-Share was up 0.1% at 881.39.

The Cboe UK 100 index was 0.1% higher at 12,329.44. The Cboe UK 250 was down 0.1% at 17,497.88, and the Cboe UK Small Companies was down 0.2% at 10,820.02.

In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were flat and up 0.3%, respectively.

"European markets are largely flat in early trade, with investors holding off ahead of a job report-fuelled bout of volatility. Overnight upside throughout Asia comes amid rising hopes of a future resolution to the US-China trade talks, yet the scepticism of failed meetings gone by is likely to ensure that boost remains somewhat short-lived," commented Joshua Mahony, senior market analyst at IG.

The monthly US jobs report is due at 1330 BST. Consensus, according to FXStreet, is for 158,000 jobs to be added in August, down slightly from 164,000 in July.

This follows figures from payroll processor ADP on Thursday which beat market expectations, with 195,000 jobs added in August versus a forecast of 149,000.

"Our US economics team, despite publishing a Global Economic Outlook entitled 'Pessimism Overdone' are looking for a softer 142k increase with the unemployment rate steady at 3.7% and wages up another 0.3%, which would take the annual wage growth rate down from 3.2% to 3.1%," commented Kit Juckes at Societe Generale.

Ahead of the key US data, the Dow Jones and S&P 500 are pointed slightly higher, up 0.2%, while the Nasdaq Composite is on course for a 0.2% rise.

Elsewhere in the US economic calendar on Friday, Federal Reserve Chair Jerome Powell speaks in Zurich at 1730 BST.

Powell's speech is likely to be his last opportunity to nudge market expectations before the Fed enters its pre-meeting blackout period, noted Lloyds Banking. The Fed next meets on September 17, announcing its interest rate decision the day after.

In European data on Friday, eurozone economic growth slowed in the second quarter of 2019.

The economy expanded by 0.2% in both the euro area and the EU28 during the second quarter of 2019. The reading was in line with the consensus estimate provided by FXStreet. In the first quarter of 2019, the eurozone economy had grown by 0.4%, while the wider EU28 economy expanded by 0.5%.

Earlier, figures showed German industrial production slumped again in July.

Industrial production in July fell 4.2% on a year before and slipped 0.6% on the previous month. This compares to June's 4.7% year-on-year fall and 1.2% monthly fall. The June figures were revised, positively, from 5.2% and 1.5% falls respectively previously reported.

IG's Mahony said the latest data points towards growing fears that the German economy could slip into a recession in the third quarter.

"Hopes of a recovery seem some way off, with talk of October negotiations between the US and China doing little to raise hopes that global trade and growth will improve anytime soon," said Mahony.

In the UK, Prime Minister Boris Johnson's hopes of securing an election on his own terms appear to be fading as opposition parties continued to resist a vote before the prospect of a no-deal Brexit on October 31 is eliminated.

The PM is back on the campaign trail for the election he is yet to successfully call after a torrid day in which his brother resigned from government while describing being torn between family and "the national interest".

Labour, the SNP and Liberal Democrats could refuse to back the PM's second attempt to get an early election on Monday, because of concerns the poll should be delayed until a Brexit deadline extension has been secured.

The pound was quoted at USD1.2292 at midday, down from USD1.2323 late Thursday, but still having gained just over 1% this week.

In London, utilities firms were bunched at the bottom of the FTSE 100.

United Utilities was down 3.2% after RBC cut the water firm to Sector Perform from Outperform. Severn Trent was down 2.3% in a negative read-across, as were electricity suppliers Centrica and SSE.

At the top of the index was Berkeley Group, up 2.0% after the housebuilder said market conditions in London and the south east of England were consistent with its June update and prices were stable.

Berkeley said the wider market is still "constrained by high transaction costs and the uncertainty in the macro political and economic environment", although there is underlying demand for "new homes built to a high quality that are well located and properly priced to meet the local housing need, supported by good availability of mortgages".

In the FTSE 250, SIG was down 5.0% as the building materials supplier warned of a a marked deterioration in construction activity in the UK.

SIG, which supplies insulation and interiors products, posted pretax profit of GBP5.2 million for the six months to June 30, down 73% from GBP19.6 million profit a year ago. The profit drop was primarily due to GBP22.1 million in exceptional charges.

The firm noted a "marked deterioration" in the level of construction activity in the UK, adding that that "key indicators are pointing to further weakening of the macro-economic backdrop, notably in the UK and in Germany". In response to this, management is "taking actions in anticipation of further market weakness".

Meanwhile, Dunelm shares rose 3.0% after HSBC raised the home furnishings retailer to Hold from Reduce.

Dunelm on Wednesday reported a double-digit rise in annual profit but said it is cautious on its future outlook as a result of Brexit uncertainty.

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