LONDON MARKET OPEN: Stocks Move Into Green But Caution Remains

(Alliance News) - Stocks in London were higher in early trading on Friday but investor cautioned remained ahead of the US nonfarm payroll figures due this afternoon.

In London, insurers and retailers were struggling due to a damning report from regulators and weak high street sales, respectively.

The FTSE 100 index was up 18.65 points, or 0.3%, at 7,096.29 early Friday. The FTSE 250 was up 41.96 points, or 0.2%, at 19,390.12. The AIM All-Share was marginally lower at 858.25.

The Cboe UK 100 index was up 0.3% at 12,041.88. The Cboe UK 250 was 0.2% higher at 17,326.02 and the Cboe UK Small Companies was up slightly at 10,836.57.

"UK & European markets have opened higher on Friday. We are taking heart from the higher close on Wall Street and putting the whipsaw action that got us there to one side. Opening gains are being tempered by caution ahead of a key monthly US jobs report," said London Capital's Jasper Lawler.

Following the disappointing manufacturing date from the UK, eurozone and US earlier in the week, investor focus will shift towards the US nonfarm payrolls data due at 1330 BST.

"Ahead of today's US payrolls report and Fed Chair Powell's speech, market risk sentiment remains cautious. This follows another weak round of survey data with yesterday’s services PMI/ISM readings across Europe and the US raising further concerns over the health of the global economy. With Chinese markets closed for holiday, Asian equity markets are mixed overnight but most major indices are set to end the week lower," analysts at Lloyds Bank said.

In mainland Europe, the CAC 40 in Paris was up 0.3% in early trade. The DAX 30 in Frankfurt was up 0.4% following a day off on Thursday to celebrate German Unity Day.

In Asia on Friday, the Japanese Nikkei 225 index closed up 0.3%. Markets in China remain closed this week, though in Hong Kong the Hang Seng is 1.4% lower.

Lloyds Bank continued: "A string of weak US economic data this week is raising fears that the hitherto resilient US economy may be showing signs of cracking. The ISM manufacturing survey earlier this week dropped to 47.8, the weakest since the global financial crisis. Yesterday's ISM non-manufacturing survey also missed forecasts, falling sharply to 52.6 from 56.4."

"Against this background, today's official US nonfarm payrolls data for September will be another crucial piece of evidence. Strong jobs growth has, after all, underpinned consumer spending and the overall economy in recent quarters. For sure, the monthly payrolls series can be volatile, but the 'unofficial' ADP numbers released earlier in the week point to a softening trend of employment growth. Our central forecast for today's headline figure is a rise of 170,000, which is near the top of the range of economists' forecasts. The consensus forecast is 145,000. We also expect the unemployment rate to remain at 3.7%, but see a marginal rise in wage growth to 3.3% from 3.2%," Lloyds added.

The pound was quoted at USD1.2349 early Friday, down from USD1.2410 at the close Thursday.

On the LSE, insurers were anchored to the bottom of the blue chip index following the UK Financial Conduct Authority publishing its interim report of its market study into the pricing of home and motor insurance, saying that competition in the sector is "not working well for all consumers".

Direct Line was 1.3% lower, Legal & General 0.7% and Aviva 0.5%. Admiral shot 1.3% lower at the open but has since rebounded to trade up 0.1%.

The regulator said it is concerned about how pricing in the sector "leads to consumers who do not switch or negotiate with their provider paying high prices for their insurance".

The FCA set out a series of potential changes for insurers to remedy the situation and "ensure markets are truly competitive".

These include banning the practice of increasing prices for customers who renew policies year on year - which could involve insurers automatically moving customers to cheaper equivalent deals.

The FCA is also recommending insurers end the practice of discouraging customers to switch policies and also be more "clear and transparent" in their dealing with customers. This could include insurers publishing information about price differentials between customers.

Retailers were also struggling on poor high street sales figures from BDO's High Street Sales Tracker.

The high street has suffered its worst September in eight years as spending buckled under the weight of Brexit uncertainty, falling footfall and big-name closures, figures suggest.

Marks & Spencer was down 1.3%, Tesco 0.9%, J Sainsbury 0.7%, Next 0.6%. Adding further pressure to M&S was a rate cut from HSBC, which downgraded the retailer to Reduce from Hold.

In-store sales plummeted by 3.1% on a year ago after an already weak 2.7% drop, making it the poorest September since 2011, according to BDO's High Street Sales Tracker.

Weaker discretionary spending resulted in the lifestyle category suffering a 5.4% drop, its worst performance since the height of the recession in November 2008.

September also saw the end of a stronger run for fashion as sales fell by 2%, the first negative growth in three months for the category.

Footfall was down overall in September, starting with a decline of 2.5% and culminating in a drop of 5.8% as wet weather affected the country.

Oil major BP was 0.9% higher following the news CEO Bob Dudley will retire after 40 years at the company. He will step down following the release of BP's financial 2019 full year results on February 4, then will retire on March 31, 2020.

He will be replaced by Bernard Looney, current Upstream CEO. Looney will remain in his current role until February.

Looney has been Upstream CEO since 2016 and is in charge of BP's oil and gas exploration, development and production activities worldwide.

BP has also appointed Lamar McKay, currently deputy CEO as chief transition officer.

"These decisions are the result of a comprehensive and deliberate search process, including consideration of a range of internal and external candidates," BP added.

Dudley continues the trend of UK company chief departing this week, with Alison Cooper leaving FTSE 100-listed cigarette maker Imperial Brands, Andrew Pardey departing FTSE 250 miner Centamin Dave Lewis, whose surprise plan to step down as Tesco chief executive was announced on Wednesday, which also saw departure announcements for two founders, Martin Gilbert at Standard Life Aberdeen and Vernon Hill at Metro Bank.

Outside the US nonfarm payroll data, the economic calendar on Friday looks quiet. At 1330 BST there is US trade balance figures with US average hourly earnings out at the same time.

By Paul McGowan; paulmcgowan@alliancenews.com

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