7th Oct 2024 07:47
(Alliance News) - London's FTSE 100 is called to open higher on Monday, as last week's US jobs report aided soft landing hope.
According to the Bureau of Labor Statistics, nonfarm payroll employment increased by 254,000 in September, markedly ahead of the FXStreet cited consensus which predicted job additions of 140,000.
Nonfarm payrolls picked up from 159,000 in August. August's reading was upwardly revised from 142,000.
The unemployment rate edged down to 4.1% from 4.2%.
"What a US jobs report! Not only was the actual number higher than any of the economists in the Bloomberg survey had expected, but the previous two months were revised sharply higher and the unemployment rate surprisingly fell. As a result, average job growth in the final quarter was actually quite a bit higher than the average in the second quarter. And the July jobs report, which sent shock waves through the market in early August, looks less scary after the revision," Commerzbank analyst Michael Pfister commented.
The data may have all but ensured the Federal Reserve decides against another bumper 50 basis point rate cut at its meeting next month.
This week, the focus will be on US consumer price index data on Thursday. According to consensus cited by FXStreet, numbers are expected to show the rate of annual inflation eased to 2.3% last month, from 2.5% in August.
In early UK corporate news, Shell reported a decline in its refining margin ahead of full third-quarter results. Rio Tinto is mulling a lithium deal, while 3i Infrastructure and FD Technologies announced deal-making plans of their own. Applied Nutrition confirmed plans for a Main Market float.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called up 0.2% at 8,295.33
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Hang Seng: up 1.1% at 22,977.94
Nikkei 225: up 1.8% at 39,332.74
S&P/ASX 200: up 0.7% at 8,205.40
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DJIA: closed up 341.16 points, 0.8%, at 42,352.75
S&P 500: closed up 0.9% at 5,751.07
Nasdaq Composite: closed up 1.2% at 18,137.85
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EUR: higher at USD1.0967 (USD1.0962)
GBP: higher at USD1.3120 (USD1.3102)
USD: lower at JPY148.47 (JPY148.59)
GOLD: lower at USD2,642.57 per ounce (USD2,655.27)
(Brent): lower at USD77.66 a barrel (USD78.08)
(changes since previous London equities close)
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ECONOMICS
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Monday's key economic events still to come:
10:00 BST eurozone retail sales
18:00 BST US Federal Reserve Governor Michelle Bowman speaks
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UK house price growth picked up to a near two-year high last month, according to mortgage lender Halifax. Halifax's September report showed UK house prices rose 0.3% from August and 4.7% year-on-year. In August, house prices rose 0.3% from July and 4.3% on-year. September's annual climb was the strongest since November 2022, Halifax said. "It's essential to view these recent gains in context. While the typical property value has risen by around GBP13,000 over the past year, this increase is largely a recovery of the ground lost over the previous 12 months. Looking back two years, prices have increased by just 0.4%," Halifax analyst Amanda Bryden commented. "Market conditions have steadily improved over the summer and into early autumn. Mortgage affordability has been easing thanks to strong wage growth and falling interest rates. This has boosted confidence among potential buyers, with the number of mortgages agreed up over 40% in the last year and now at their highest level since July 2022."
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UK Prime Minister Keir Starmer has reshuffled his Number 10 team after Sue Gray quit as chief of staff, citing concerns that questions over her position were becoming a distraction. Parliament is set to return on Monday after a conference recess that saw the government wrapped up in rows over Gray's salary and freebies for ministers and MPs. Gray quit on Sunday after weeks of reports of tensions in Number 10. Less than 100 days since Labour's general election victory, she will now take on a job working with the prime minister alongside the leaders of the devolved nations and regional mayors. She will be replaced as the chief of staff by Morgan McSweeney who led Labour's general election campaign, and with whom she was reported to have clashed. There are two new deputy chiefs of staff in Vidhya Alakeson, the political director at Number 10, and Jill Cuthbertson, who has been director of government relations in Downing Street since their election win in July. She had previously worked for former Labour leaders Gordon Brown and Ed Miliband.
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The UK is working "in lockstep" with international allies on calls for Israel to exercise "restraint", a Cabinet minister has said. Science & Technology Secretary Peter Kyle said calls for "actions that lead towards a restrained political solution based on a ceasefire" were "unanimous" among the UK's allies, as he took questions about conflict in the Middle East from broadcasters on Sunday morning. From the opposition, Conservative Shadow Foreign Secretary Andrew Mitchell claimed UK recognition of Palestine too early could "look like a reward" for Hamas's attack on southern Israel one year on. Kyle told the BBC's Sunday With Laura Kuenssberg programme: "We are working in lockstep with our international allies. "We can't instruct Israel as a sovereign state to do anything, but as key allies we can advise them and the advice is very clear and it is unanimous from our international allies that we must exercise restraint."
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UK firms are at a "positive inflection point" with a new government in place and amid a tech-fuelled boom but uncertainties loom large ahead of the US election and as Middle Eastern tensions escalate, according to HSBC's commercial banking boss. Stuart Tait, head of commercial banking at HSBC UK, said the bank's latest annual capital expenditure report reveals that "optimism is climbing and ambitions are rising to match". More than half of UK businesses (55%) are positive about growth in the year ahead, up 9% on last year, according to the study. The report, which is compiled from a survey of 1,583 HSBC business customers, showed that two thirds of firms have growth ambitions, up from 64% last year, with more than a fifth (22%) looking to grow by at least 20% – the highest recorded since the report was launched four years ago. Tait said the poll – conducted at the end of July, following the UK election – showed a "bounce in optimism" and "offers many signs of a positive inflection point".
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UK firms are reluctant to hire new staff, leading to a further reduction in the number of jobseekers placed in work by recruiters, according to a new report. Employers remain cautious about the economic outlook, said the Recruitment & Employment Confederation. Its survey of hundreds of recruitment agencies suggested that the number of candidates placed in permanent jobs had been falling for two years. Vacancies for permanent jobs fell sharply in sectors including retail but increased in nursing and medical care, the study found. The availability of staff increased last month following more redundancies and lower demand for workers, said the REC. Chief Executive Neil Carberry said the jobs market was "waiting for a signal", adding: "Recruiters report that projects in client businesses are ready to go, but confidence is not yet high enough to push the button.
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More than half of the Irish public want a general election this month, a poll has indicated. While the current Fine Gael/Fianna Fail/Green Party coalition can continue until early 2025, there has been speculation the next general election may be called sooner. Taoiseach Simon Harris and his Fine Gael party are continuing to ride high in the polls, with the latest Sunday Independent/Ireland Think poll indicating he has the highest party leader support level on 53%, while Fine Gael support is at 26%. Harris said on Friday the next election will come "in due course", while Tanaiste Micheal Martin on Saturday said the three party leaders have said they want to go "the full distance". Martin said there are a number of bills the government wants to make progress on, including the finance bill, social protection measures, mental health bill, defamation bill, gambling bill and the planning bill. The poll found 55% of those surveyed want an election to be held this month or next, while 56% predict the polls will open in November.
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BROKER RATING CHANGES
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Barclays cuts DS Smith to 'underweight' (equal weight) - price target 435 pence
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Jefferies raises Experian price target to 4,600 (4,260) pence - 'buy'
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COMPANIES - FTSE 100
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Oil major Shell's refining margin weakened in third-quarter, its pre-results "update note" revealed. The indicative refining margin for its Chemicals & Products arm amounted to USD5.5 a barrel for the third-quarter of 2024, declining from USD7.7 in the second-quarter. Trading results in the unit are expected to be "lower" than the second-quarter. In the Integrated Gas arm, trading results are expected to be "in line" with the second-quarter. In Upstream, Shell expects adjusted earnings between USD2.3 billion and USD2.9 billion for the third-quarter, possibly a 24% rise from USD2.34 billion in the second-quarter. Shell will publish third-quarter results on October 31.
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Rio Tinto confirmed a potential acquisition of the US-based lithium producer Arcadium Lithium. Arcadium has a market capitalisation of around USD3.31 billion. Rio said in a statement it had approached the company regarding the potential "non-binding" acquisition. "There is no certainty that any transaction will be agreed to or will proceed," it said. If the deal goes ahead, it would transform Rio Tinto into the world's third-largest lithium supplier. But the lithium industry is struggling with an oversupply and falling electric vehicle sales, pushing prices down and leading mines around the world to shut or scale back production. Arcadium Lithium announced earlier this year it was mothballing a mine in Western Australia, citing low prices.
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COMPANIES - FTSE 250
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Healthcare property investor Assura said it made "strong strategic progress" in the first half ended September 30. The firm also noted a recent report which "starkly" outlined the need for investment in UK healthcare infrastructure. Assura's portfolio now stands at 625 properties, with an annualised rent roll of GBP179.1 million, increasing from GBP150.6 million at the end of March. "We have made strong strategic progress in the first half of the year. The GBP500 million acquisition in August of a private hospital portfolio accelerates the delivery of our broader healthcare strategy while our GBP250 million joint venture with USS diversifies our funding," Chief Executive Officer Jonathan Murphy said. "The need for investment in healthcare infrastructure was starkly outlined by the recent Lord Darzi report - which found the primary care estate to be plainly not fit for purpose and more than 1 million people to be waiting for community services. We are at an inflexion point in the UK, with structural changes to the delivery of healthcare services, the government targeting preventative services in a community setting, and rising demand for private providers." The report published in September had labelled the UK the "sick man of Europe" when it comes to health".
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3i Infrastructure said it has received a bid for its 33% stake in European renewable energy developer and power producer Valorem. The offer has come from "funds managed by AIP Management PS and from certain other co-investors". The infrastructure investment trust said it expects to receive net proceeds of EUR309 million, a 15% uplift on its March 31 Valorem valuation of EUR268 million. Scott Moseley and Bernardo Sottomayor, managing partners and co-heads of European infrastructure at 3i Investments, said: "We will always be disciplined in our approach to value realisation and balance sheet management. This divestment provides us with the opportunity to crystalise a significant uplift to the carrying value, the proceeds of which will be used to reduce our drawings on our revolving credit facility."
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OTHER COMPANIES
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Applied Nutrition confirmed plans to float on the Main Market of the London Stock Exchange. The nutrition supplements maker expects an initial public offering this month. Last week, Monday, it said it was mulling a float. Founded in 2014 by its Chief Executive Thomas Ryder, is backed by FTSE 100 listed JD Sports Fashion. Sky News last month reported an IPO could value Applied Nutrition at around GBP500 million. Applied Nutrition said Deutsche Numis is the sole sponsor, global co-ordinator and bookrunner of the float. It expects to be eligible for inclusion in the FTSE UK indices.
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FD Technologies said it has struck a deal to sell its First Derivative business in a deal that will be classed as a "fundamental change of business" according to listing rules. The AIM-listed owner of data-driven businesses said the division will be sold for GBP230 million to EPAM Systems Inc. Subject to shareholder backing, the deal is expected to be sealed this quarter. FD said the deal enables it to focus on KX, the part of the business it believes has the "largest value creation potential". The sale also "facilitates the return of excess cash to shareholders", with FD adding it will provide more details on that in its interim results next month. FD said both KX and First Derivative performed in line with board expectations in the first half ended August 31.
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By Eric Cunha, Alliance News news editor
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