7th Aug 2015 11:05
LONDON (Alliance News) - UK stocks and US futures are mostly posting modest losses midday Friday ahead of key nonfarm payrolls data later this afternoon which could help to indicate the immediacy of a US Federal Reserve rate hike.
Investors await the key nonfarm payrolls report at 1330 BST amid heightened speculation that the US Federal Reserve may start to raise interest rates as early as next month. The Fed said in the minutes of its most recent policy meeting that it "anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the US labour market and is reasonably confident that inflation will move back to its 2% objective over the medium term".
The central bank's emphasis on "some" job improvement places greater importance on the nonfarm payrolls number than usual. The consensus according to FXStreet.com shows economists expect an addition of 222,000 jobs in July, following the 223,000 added in June. The Federal Reserve Open Market Committee will next meet in September, meaning August's jobs data will also come under heavy scrutiny.
Investors will also be paying close attention to the simultaneously released July unemployment rate, which is expected to remain steady at 5.3% and average hourly earnings data, which is forecast to grow 0.2% on the month.
Societe Generale analyst Brian Jones is more bullish than consensus, expecting the nonfarm payrolls number to show 240,000 jobs were added in July, with the unemployment rate will drop to 5.2%.
"Several factors underpin our call for a pick-up in job growth. While both initial and continuing jobless claims were little changed between the two latest canvassing periods, improved hiring breadth and modestly better weather conditions in July point to an increase from the 222,000 positions created in June," Jones says.
"Indeed, purchasing managers' reported a marked widening in hiring breadth last month, which boosted our composite Institute for Supply Management employment measure by almost six points to a decade high 58.9%. Meanwhile, the Aruoba-Diebold-Scotti (ADS) Business Conditions Index improved over the five weeks leading up to the July survey, entering positive territory for the first time since last December" he adds.
Nomura analysts also highlight the importance of the average earnings figure for the Fed.
"This measure of wages for July will be important, especially as the Employment Cost Index for Q2 increased by less than expected," Nomura says. "Although, the FOMC has signalled that it doesn't need to see a pick-up in wage growth before raising rates, it would prefer not to see weaker wage growth when deciding to first raise rates."
Nomura expects wages to show 0.24% growth in July, bouncing back from flat in June. For nonfarm payrolls the Japanese bank forecasts 230,000 jobs and a 5.3% unemployment rate.
The FTSE 100 is up 0.1% at 6,750.51, the FTSE 250 is down 0.1% at 17,722.58 and the AIM All-Share is down 0.2% at 751.19.
European stocks are also trading lower, with the CAC 40 in Paris down 0.3% and the DAX 30 in Frankfurt down 0.4%.
US stock indices are expected to open lower. Futures point the DJIA, S&P 500 and the Nasdaq 100 all down 0.1%.
On the domestic front, UK visible trade deficit widened in June, data from the Office for National Statistics showed. The visible trade deficit increased to GBP9.2 billion in June from GBP8.4 billion in May. But it was smaller than the expected shortfall of GBP9.3 billion. Exports fell by GBP0.3 billion, while imports rose by GBP0.5 billion in June from May.
Miners and oil companies are amongst the best performers in London's main stock indices, rebounding from some recent weaknesses, despite continued pressure on commodity prices. Brent oil hit a new six-month low on Thursday at USD48.85 a barrel and while it trades above that now at USD49.37 a barrel it is still below the key USD50 a barrel mark.
Travis Perkins is one of the worst blue-chip performers down 2.1% after Panmure Gordon downgraded the company to Sell from Buy. Travis Perkins hiked its interim dividend by 20% as it posted a rise in pretax profit on Tuesday. However, though the broker says the multi-brand strategy is "clearly" working, it warns that trends are unlikely to surprise on the upside.
William Hill is the biggest faller in the FTSE 250, trading down 7.3% after the bookmaker reported a drop in profit in the first half of 2015 as it was hit by tax hikes and a tough comparative period, and said it has bought a stake in online lottery company NeoGames, as its shares slumped in early trade.
The company reported a 35% drop in pretax profit in the 26 weeks ended June 30 to GBP78.7 million from GBP121.8 million in the first half of the prior year. Revenue, however, grew to GBP808.1 million from GBP805.2 million.
William Hill said that an increase in machine games duty and the introduction of the point of consumption tax cost the business GBP44 million in the half year, which in turn hit its profit. The half-year also faced a tough comparative which included the 2014 FIFA World Cup, the company added.
In the AIM All-Share index, AorTech International is up 44%. The biomaterials and medical device intellectual property company said it expects to make further progress in its current financial year, as it posted a narrowed pretax loss for its recently ended financial year.
For the year to end-March the biomaterials and medical device intellectual property company posted a loss from continuing operations of USD326,000, narrowed from a loss of USD823,000, on revenue of USD844,000, compared to USD418,000.
Getech Group is up 9.8% after the geoscience services business said it expects its pretax profit to double on surging revenue in its financial year to the end of July. It expects pretax profit for the year to the end of July will be GBP2 million, compared to GBP1 million it posted a year earlier. It expects its revenue to rise to GBP8.5 million from GBP6.6 million.
Aside from the US data, still ahead in the economic calendar is US consumer credit at 2000 BST.
By Neil Thakrar; [email protected]; @NeilThakrar1
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