LONDON MARKET MIDDAY: USD37 Oil Supports Stocks Before US Jobs Report

LONDON (Alliance News) - Firm oil prices kept the UK stock market's head above water midday Friday as investors awaited the key US jobs report later this afternoon.

The US Labor Department's releases its monthly nonfarm payrolls report at 1330 GMT, which is expected to show an increase of about 190,000 jobs in February following the addition of 151,000 jobs in January. The US unemployment rate is expected to hold at 4.9%, while average hourly earnings are forecast to rise 0.2% month-on-month, slowing from the 0.5% seen in January.

Economists from Societe Generale were much more optimistic than the wider consensus, expecting an increase of 230,000 jobs in February, citing strong recent jobless claims as a primary reason behind its bullish call.

"Initial claims averaged at 273,000 in the four weeks leading up to the February survey week, up from a 282,000 average in the prior period. Continuing claims have risen modestly this year compared to the October/November lows, but were essentially unchanged between the February and January survey periods," SocGen said.

"Moreover, the quits rate increased to 2.1% in the same month which marked a new cyclical high and which suggests growing confidence in the strength of the labour market and which is generally consistent with increased bargaining power," the French bank added.

Conall Mac Coille, economist at Irish stockbroker Davy Group, said a strong non-farm payroll number will address any lingering concerns about a US recession and will switch the focus back onto the US Federal Reserve's path to a tighter monetary policy and the divergence with the European Central Bank, which is expected to ease policy next Thursday.

Ahead of the jobs data, futures indicated a higher open for US stocks. The Dow Jones Industrial Average and the S&P 500 were both pointed up 0.2% and the Nasdaq 100 up 0.3%.

In London, the FTSE 100 index was up 1.0%, or 58.20 points, at 6,188.66, supported by gains in the oil price.

At midday Brent oil was quoted at USD37.24 a barrel, a touch above the USD36.95 seen at the London stock market close on Thursday.

"Once again the correlation between oil prices and equity markets is striking, as both continue to head higher contrary to what the fundamentals might suggest," said Alastair McCaig, market analyst at IG.

The FTSE 250 also was higher, up 0.8% at 16,883.85 and the AIM All-Share was up 0.6% at 701.03. The CAC 40 in Paris was up 0.8% and the DAX 30 in Frankfurt up 0.9%.

The price of gold also was in the spotlight, as it hit its highest price in 13 months Friday at USD1,274.70 an ounce, helped by a fall in the dollar and ongoing concerns about the global economy.

"It will be interesting to see, however, if the current gold rush can endure a sustained improvement in sentiment; yet with a potential Brexit looming and China's economic slowdown showing no signs of, well, slowing down, there are still plenty of reasons for investors to seek something a bit safer as the year goes on," said Connor Campbell, financial analyst at Spreadex.

The higher gold price helped to support shares in precious metals miners, with Acacia Mining, up 8.4%, and Randgold Resources, up 3.1%, the pick of the bunch.

The broader mining sector also was rallying, with miners dominating the top gainers in the FTSE 100.

WPP was down 0.5% as the advertising and marketing group said its pretax profit rose in 2015 despite a currency drag on its revenue, but WPP said that while 2016 had started well, the general sense of optimism in the industry for the coming year looks misplaced.

Pretax profit for the year to the end of December was GBP1.49 billion, up 2.8% year-on-year from GBP1.45 billion. Pretax profit would have increased 7.3% in constant currencies.

WPP said 2016 started well, with like-for-like revenue growth of 4.2%, ahead of budget. However, the group said the general optimism in the advertising industry for 2016 does appear misplaced, with general client behaviour not reflecting this amid "tepid" global GDP growth, weak inflation and a consequent lack of pricing power.

London Stock Exchange Group reported higher annual operating profit, as merger talks with Deutsche Boerse continue.

"We have recently confirmed that we are in detailed discussions with Deutsche Boerse regarding a potential merger of equals. This represents a compelling opportunity to strengthen each other in an industry-defining combination, by creating a global market infrastructure group with significant benefits for our customers and shareholders," Chief Executive Xavier Rolet said.

LSE reported a 27% rise to adjusted operating profit to GBP709.6 million in 2015, as total revenue increased by 72% to GBP2.38 billion.

LSE also declared a final dividend of 25.2 pence per share, resulting in an implied 20% increase in the total dividend to 36.0p per share. However, its share price was down 0.7% Friday following its big recent gains.

Cineworld Group led the fallers in the FTSE 250, down 4.7%, after UBS initiated coverage of the multiplex cinema chain with a Sell rating. The Swiss bank said it is cautious on the cinema chain's roll-out, particularly in Eastern Europe, and the weaker 2016 film slate following a strong 2015.

In the AIM All-Share SeaEnergy shares were down 45% after the offshore energy services company said it is in discussions to sell its R2S Visual Asset Management business, as its cash position is becoming constrained by the impact on SeaEnergy of the decline in the oil and gas industry.

The company said it was looking into a disposal of its software business and, if this does not go ahead, it will need additional funding to be able to continue to trade beyond May. It is currently generating a loss.

Aside from the US jobs report, still ahead in the economic calendar are the US trade balance at 1330 GMT and the Baker Hughes US oil rig count at 1800 GMT.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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