8th Nov 2013 11:00
LONDON (Alliance News) - London's stocks indices are trading lower Friday, with the FTSE 100 heading for a fourth straight day of losses, as UK trade numbers show an wider deficit and traders tread cautiously ahead of US non-farm payrolls this afternoon.
By mid morning Friday the FTSE 100 is down 0.3% at 6,675.60, the FTSE 250 is down 0.6% at 15,305.35 and the AIM All-Share is down 0.5% at 809.67.
The UK trade deficit widened in the third quarter, with exports decreasing by 3.5%, official data has shown. The UK's September global trade deficit widened to GBP9.8 billion, up from GBP9.6 billion. Economists had expected the deficit to narrow to GBP9.2 billion.
The disappointing numbers gave a small knock to the pound, currently trading at USD1.6065 and EUR1.1965, but the forex market remains fairly quiet ahead of the US non-farm payroll numbers later in the day.
The euro is steady against the dollar following Thursday's heavy sell off, despite France receiving a downgrade to its sovereign debt rating from S&P this morning, to AA from AA+. The euro is currently at USD1.3425.
"Muted price action in the FX, commodity and bond markets belies a broader reticence to commit to a directional bias ahead of October?s much-anticipated US employment report", says DailyFX Strategist Ilya Spivak.
Within UK equities, Rolls-Royce is pushing the Aerospace and Defense sector higher. Shares are up 3.4% after the UK engineering group released a statement that showed the company trading in line with expectations. Strong recent UK industrial production figures help the likes of Rolls-Royce, says Shore Capital analyst Gerard Lane. Liberum analyst Ben Bourne says the upcoming Dubai Air show is the next catalyst for the company.
International Consolidated Airlines Group (IAG) is the only blue chip outperforming Rolls Royce. IAG shares are up 4.8% after the parent company of British Airways and Spain's Iberia reported a jump in profits and revenues for the first nine months of the year, buoyed by its acquisition of Spanish carrier Vueling, and as its turnaround of Iberia started paying off.
At the other end of the spectrum, Aberdeen Asset Management is leading the blue chip fallers, down 4.6%. Having jumped 6% two weeks ago on the announcement that it is in talks with Lloyds over the possible acquisition of the bank's Scottish Widows Investment Partnership, shares are now paring gains on concerns over Aberdeen's acquisition history. Jefferies is skeptical of any potential deal, saying Aberdeen's past success has been "despite its acquisitions rather than because of them".
Still to come Friday, the afternoon focus is firmly on the US and the release of the October non-farm payroll report. The consensus expectation is for a reading of 125,000, down from 148,000 in September, although given that this is the report that covers the period of the 16-day government shutdown, expectations vary quite widely from as low as 50,000 to as high as 175,000 as economists and analyst remain unsure over the true cost of the shutdown. The overall US unemployment rate is expected to have increased to 7.3%, from 7.2%.
CMC Markets are reporting trading volumes on the morning of this non-farm payroll Friday well ahead of what would normally be expected. With Thursday's surprise ECB rate cut, surprise increase to US GDP, and the hype surrounding the Twitter floatation, traders reported volumes on Thursday afternoon 50% above the typical average. Volumes are likely to spike again on release of the US unemployment data at 1330 GMT.
By Jon Darby; [email protected]; @jondarby100
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