10th Jan 2025 12:05
(Alliance News) - The FTSE 100 traded lower at midday on Friday although the pound stabilised ahead of key US jobs figures.
The FTSE 100 index was down 32.62 points, 0.4%, at 8,287.82. The FTSE 250 was down 135.35 points, 0.7%, at 19,869.79, and the AIM All-Share lost 0.64 of a point, 0.1%, at 719.32.
The Cboe UK 100 was down 0.4% at 829.83, the Cboe UK 250 lost 0.7% at 17,304.23, and the Cboe Small Companies was 0.2% lower at 15,364.59.
The mood was brighter in Europe. The CAC 40 in Paris rose 0.4% while the DAX 40 in Frankfurt was up 0.3%.
On Wall Street, markets are seen little changed at Friday's open. The Dow Jones Industrial Average is called flat, while the S&P 500 and the Nasdaq Composite are seen 0.1% lower.
US equity markets were closed on Thursday for the funeral of former president Jimmy Carter.
Nonfarm payrolls figures are due at 1330 GMT.
Kathleen Brooks at XTB said the December payrolls report is expected to show a sharp reduction in jobs growth at the end of 2024.
Analysts are expecting a 165,000 increase in payrolls, this compares to a 227,000 increase for November, she noted, while the unemployment rate is expected to remain steady at 4.2%, the highest level since August. Average hourly earnings are expected to stay at a 4% annual rate.
"Although jobs growth is expected to moderate, there are still pockets of strength in the labour market that could be inflationary. This is why the average earnings data is also a vital piece of information for this report. Monthly average hourly earnings data has been trending higher in recent months, compared with earlier in 2024. Although annual wage growth has been stable, the monthly figure could suggest that there is upward pressure brewing for wage inflation down the line," Brooks commented.
ING thinks the balance of risks is tilted to the upside for the dollar, as robust jobs figures could prompt markets to price out a March cut and potentially push the first fully-priced move beyond June.
"We would still argue that with inflation concerns back on the rise – although the Fedspeak has been quite heterogeneous on that topic – next Wednesday’s CPI report could have deeper market ramifications," the broker said.
Ahead of the data, the pound was little changed at USD1.2303 early Friday afternoon, from USD1.2304 late Thursday. Sterling fell as low as USD1.2239 on Thursday, its worst level since November 2023. The euro was higher at USD1.0301 from USD1.0295. Against the yen, the dollar rose to JPY158.12 from JPY157.96.
UK bond yields nudged higher once more on Friday, after stabilising on Thursday. The yield on the UK 10-year gilt rose to 4.85% from just below 4.8% at the time of the London close on Thursday.
ING thinks there could be short-term respite for sterling but warns of further pain ahead.
"In the coming months, we expect fresh pressure on GBP on the back of much larger easing by the Bank of England compared to pricing."
"Today, the US leg could add some extra pressure on GBP/USD, but if gilts have another quiet session, the pair should attract buyers in the 1.225-1.230 area," the bank suggested.
On the FTSE 100, insurers were a weak feature. Beazley and Hiscox fell 3.6% and 2.3% respectively, while Aviva eased 0.8% and Legal & General declined 1.3%.
Sainsbury also weighed on the blue-chip index, falling 3.4%.
The UK's second-largest grocer said third-quarter total retail sales, excluding fuel, advanced 2.7% in the 16 weeks to January 4 year-on-year. Including fuel, sales were flat.
Excluding fuel again, like-for-like sales rose 2.8% on a year prior.
For the Sainsbury's brand alone, sales rose 3.7%, including a 4.1% rise in the grocery offering. Sainsbury's general merchandise & clothing sales fell 0.1%. Argos sales, meanwhile, declined 1.4% on the prior year.
For the final six weeks of the period, which includes key festive trading, Sainsbury's brand sales rose 3.8% year-on-year, with grocery sales climbing at the same pace. Sainsbury's general merchandise & clothing advanced 3.4% on-year, while Argos sales rose 1.1%.
Russ Mould at AJ Bell observed: "The story with Sainsbury's is the same as it has been for the past year: Groceries are great, Argos less so.
"This would be fine if the supermarket chain wasn't fussed with non-food interests, but Argos is a central part of its strategic growth plan so it has a problem on its hands."
Citigroup's Monique Pollard noted grocery sales were up in line with consensus, as the group continues to gain market share.
But General Merchandise growth came in weaker than expected at minus 1.5% on-year compared to Citi's estimate of 0.9% growth. Within this Argos at minus 1.4% confounded consensus expectations for a 0.6% increase and Pollard's own 1.0% growth estimate.
Reckitt Benckiser topped the FTSE 100 risers, climbing 2.2%, as Morgan Stanley upgraded to "overweight' from 'equal weight' and named the firm as its top pick in the Consumer Staples sector.
The broker described Reckitt, which owns brands such as Nurofen and Dettol, as a "self-help story at a compelling valuation discount." Morgan Stanley moved Haleon, which fell 1.7%, the other way to 'equal weight' from 'overweight'.
Housebuilder Persimmon, up 1.2%, also benefited from positive broker commentary as UBS upgraded to 'buy' from 'neutral'.
"We upgrade to buy with valuation now more compelling. Key will likely be how quickly affordability improves (through lower mortgage rates). We expect Persimmon's shares to re-rate as it delivers site growth and margin recovery," the broker said in a note to clients.
Centrica on Friday said that high demand for gas amid the ongoing cold snap in Europe has reduced UK winter gas storage to "concerningly" low levels.
The Windsor, England-based energy provider and owner of British Gas highlighted that gas storage was already lower than usual heading into December due to the early onset of Winter.
"Combined with stubbornly high gas prices, this has meant that it has been more difficult to top up storage over Christmas," Centrica said.
It added: "As energy demand spikes due to the freezing weather, the UK has seen a particular strain on its gas storage. Despite being full ahead of winter, current gas inventory at Rough, the country's largest gas storage site, which is operated by Centrica, is 20% lower than at the same time last year."
Centrica shares were up 0.5%.
Elsewhere, Alliance Pharma soared 38%, after it agreed to a takeover by its largest shareholder, DBAY Advisors Ltd.
The Chippenham, Wiltshire-based distributor of consumer healthcare brands and prescription medicines said the deal prices each share in the company at 62.5 pence, a 41% premium to its 44.4p closing price on Thursday.
The deal values the company at around GBP349.7 million.
Brent fetched USD79.60 a barrel, rising from USD77.11. Gold firmed to USD2,681.82 an ounce, from USD2,667.81.
By Jeremy Cutler, Alliance News reporter
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