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London open: Stocks rise ahead of payrolls; IAG flies higher
London stocks rose in early trade on Friday following heavy losses in the previous session, as investors eyed the latest US non-farm payrolls report, with upbeat results from BA owner IAG helping to lift the mood.
At 0825 BST, the FTSE 100 was up 0.8% at 7,762.40.
The payrolls report is due at 1330 BST, along with the unemployment rate and average earnings.
CMC Markets analyst Michael Hewson said: “Having seen the Federal Reserve hike by another 25bps rate hike earlier this, a strong number today would keep the prospect of another rate hike in June, although it would need to be a bumper number to do that.
“There is a school of thought after Wednesday that the Fed is now on pause, and the only real question is not whether we saw another hike, but when we see the first rate cut.
“A strong, or in line number today, along with next week’s April CPI, will shape the discussion here, but for now, even with the current banking turmoil, the timing of when the Fed starts cutting is likely to shape market direction from here on in.”
Investors were digesting the latest data out of China, which showed that growth in the services sector was a little weaker than expected in April.
The Caixin services purchasing managers’ index dipped to 56.4 from 57.8 in March, coming in below consensus expectations for a reading of 57.0. Still, it remained above the 50.0 mark that separates contraction from expansion for the fourth month in a row. It also marked the second-highest figure recorded since November 2020.
Wang Zhe, senior economist at Caixin Insight Group, said the reading indicates that services activity is still “undergoing a fast recovery”.
“There was still a lot of optimism in the services sector in April, with the reading for expectations for future activity remaining well above the neutral 50.0 level,” he said, adding that “businesses continued to express confidence in a better market environment as the impact from Covid waned”.
The Caixin China general manufacturing purchasing managers’ index fell to 49.5 in April from 50.0 in March. This was the first reading below 50 in three months.
On home shores, data out earlier showed that footfall jumped on high streets last month, despite the ongoing cost-of-living crisis and record inflation.
According to the latest BRC-Sensormatic IQ footfall monitor, total UK footfall dipped 1.5 percentage points on March in April but was 5.3% higher than April 2022.
Within that, footfall on high streets jumped 10.5% year-on-year, while shopping centres reported a 7.9% improvement. Retail parks saw a 6.9% decline.
Helen Dickinson, chief executive of the British Retail Consortium, said: “Footfall [improved year-on-year] mainly in high streets and shopping centres, which were the most affected during the pandemic and still have the furthest to catch up.
“Retail is finding a new balance, as the rise in online shopping and spread of hybrid working has changed consumer shopping habits. As a result, while we expect footfall to continue to improve, it may never reach the levels seen prior to the pandemic.”
In equity markets, British Airways and Iberia parent IAG flew to the top of the FTSE 100 as it lifted its full-year earnings forecasts on the back of strong summer demand as its first-quarter profits performance beat expectations.
The group, which also owns Aer Lingus, now expects annual profit at the top end of a €1.8 – 2.3bn range given in February. Operating profit for the three months to March was €9m, compared with a €718m loss a year earlier and smashing the €179m loss forecast by analysts.
IAG said the summer outlook was encouraging, adding that capacity in the North Atlantic and Latin American markets was now back at pre-pandemic levels, driven by leisure demand.
Shell and BP were among the top performers. Shell was in focus after Ithaca Energy said it had struck a deal with the oil giant to market its 30% stake in the giant Cambo North Sea oil and gas prospect.
On the downside, InterContinental Hotels fell after it announced the departure of chief executive Keith Barr and said it had seen a “good start” to the year. Barr will be replaced by Elie Maalouf, who has led IHG’s Americas business as regional chief executive for the last eight years.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Ocado Group Plc | +3.50% | +16.90 | 499.10 |
| 2 |  |
International Consolidated Airlines Group S.a. | +2.92% | +4.30 | 151.40 |
| 3 |  |
Bp Plc | +2.60% | +12.40 | 488.90 |
| 4 |  |
Bhp Group Limited | +2.30% | +53.00 | 2,354.50 |
| 5 |  |
Johnson Matthey Plc | +1.91% | +36.50 | 1,943.50 |
| 6 |  |
Wpp Plc | +1.85% | +16.00 | 880.20 |
| 7 |  |
Smith (ds) Plc | +1.77% | +5.50 | 315.70 |
| 8 |  |
Persimmon Plc | +1.77% | +24.00 | 1,383.50 |
| 9 |  |
Itv Plc | +1.71% | +1.32 | 78.58 |
| 10 |  |
British Land Company Plc | +1.70% | +6.70 | 400.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Intercontinental Hotels Group Plc | -2.36% | -130.00 | 5,388.00 |
| 2 |  |
Bae Systems Plc | -1.69% | -16.80 | 976.40 |
| 3 |  |
Compass Group Plc | -1.52% | -32.00 | 2,068.00 |
| 4 |  |
Gsk Plc | -1.25% | -18.40 | 1,447.80 |
| 5 |  |
Astrazeneca Plc | -1.06% | -126.00 | 11,724.00 |
| 6 |  |
Experian Plc | -1.00% | -27.00 | 2,663.00 |
| 7 |  |
Diageo Plc | -0.95% | -35.00 | 3,649.50 |
| 8 |  |
Hikma Pharmaceuticals Plc | -0.91% | -17.00 | 1,852.00 |
| 9 |  |
Hargreaves Lansdown Plc | -0.80% | -6.40 | 794.00 |
| 10 |  |
Halma Plc | -0.71% | -17.00 | 2,371.00 |
US close: Stocks fall on economic, regional bank concerns
Wall Street saw another day of losses on Thursday, as worries about a slowing economy and concerns about regional bank liquidity dampened investor sentiment.
The declines followed the Federal Reserve’s decision to raise interest rates by 25-basis points overnight, marking the central bank’s 10th consecutive rate hike.
At the close, the Dow Jones Industrial Average was down 0.86% at 33,127.74, while the S&P 500 dropped 0.72% to finish at 4,061.22.
The technology-heavy Nasdaq Composite slipped 0.49%, ending the session at 11,966.40.
On the currency front, the dollar had a mixed performance against other major currencies.
It last remained unchanged on sterling at 79.53p, while it weakened 0.03% against the euro to trade at 90.78 euro cents.
The greenback also weakened on the yen, by 0.01%, to change hands at JPY 134.27.
“The Fed and the ECB might go on merrily hiking rates, but the renewed crisis in US regional banks is the main reason for the firmly ‘risk-off’ tone to today’s session,” said IG chief market analyst Chris Beauchamp earlier.
“Other US banks are coming under heavy pressure, threatening once again to upend the stability of the US financial system less than a day after Jerome Powell pronounced it healthy.”
Jobless claims rise moderately as unit labour costs increase
In economic news, US jobless claims rose moderately in the latest report from the US Department of Labor.
For the week ended 29 April, first-time unemployment claims increased by 13,000 to 242,000 on a seasonally-adjusted basis, exceeding economists’ expectations of 236,000.
Meanwhile, the four-week moving average declined by 1,000 to 229,000.
On the other hand, secondary jobless claims, which were not being filed for the first time, decreased by 38,000 to 1.805 million for the week ending on 22nd April.
“The rebound in initial jobless claims reverses most of the unexpected drop last week; the weekly data are erratic,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
“The trend in claims is rising, lagging the surge in layoff announcements in the usual way,” said.
“Firms facing much tighter bank credit conditions will have to cut variable costs, of which labour and inventory are the key elements.”
Elsewhere, a gauge of price pressures reflecting the state of the US jobs market exceeded expectations over the start of the year.
The Labor Department said that in the first quarter, unit labour costs increased 6.3% on a seasonally-adjusted basis.
That quarter-on-quarter pace exceeded economists’ forecast of 5.6%.
The increase in labour costs was due to a rise of 3.4% in hourly compensation, despite a shrink in labour productivity at a pace of 2.7%.
Output, on the other hand, rose by only 0.2%, while hours worked declined by 3.0%.
The annual terms reveal that productivity was down by 0.9%, hourly compensation rose by 4.8%, and unit labour costs by 5.8%.
PacWest Bancorp drops like a stone, Shopify charges ahead
In equity markets, PacWest Bancorp fell by a whopping 50.62% after the regional bank revealed it was exploring strategic options, including a possible sale.
First Horizon also saw a significant fall in its share price, declining 33.16%.
The company cancelled its merger agreement with TD Bank, which was initially valued at $13.4 billion when first announced over a year ago.
On the upside, Moderna rose 3.22% after the pharmaceutical company’s first-quarter earnings and revenue exceeded analysts’ expectations.
Shopify meanwhile surged 23.84%, after the e-commerce technology and platform provider reported a surprise adjusted profit, and announced a deal to sell its logistics unit.
Friday newspaper round-up: Train strikes, Apple, Boohoo
The UK and US have intervened in the race to develop ever more powerful artificial intelligence technology, as the British competition watchdog launched a review of the sector and the White House advised tech firms of their fundamental responsibility to develop safe products. Regulators are under mounting pressure to intervene, as the emergence of AI-powered language generators such as ChatGPT raises concerns about the potential spread of misinformation, a rise in fraud and the impact on the jobs market, with Elon Musk among nearly 30,000 signatories to a letter published last month urging a pause in significant projects. – Guardian
Train passengers face further disruption this summer after members of the RMT rail union voted overwhelmingly for further strike action. A ballot of members working across 14 train operating companies “massively reaffirmed a mandate for further strike action”, the union said on Thursday, with 90% of votes cast in favour of holding more strikes over the next six months. – Guardian
Apple has reported its second straight drop in revenues as the rising cost of living hits sales of its high-end devices. The US tech giant, the world’s biggest company by market value, said last night that revenues had fallen by 3pc to $94.8bn (£75.4bn) in the first three months of the year. Profits dropped by 3.4pc to $24.2bn. – Telegraph
The Bank of England is to give City rulebreakers half-price fines if they settle cases early in an attempt to speed up investigations. As part of an overhaul of its enforcement powers for non-criminal cases, the Bank’s Prudential Regulation Authority (PRA) has outlined plans for an “early account scheme”. – Telegraph
Vodafone and Three are closing in on a £15 billion merger agreement to create the UK’s biggest mobile network operator with 28 million customers. The deal, which would be likely to face intense regulatory scrutiny, is expected to be announced this month and follows the appointment of Margherita Della Valle, formerly Vodafone’s chief financial officer, as chief executive. – The Times
Boohoo Group has asked its suppliers for a 10 per cent discount on delivered and undelivered clothing orders as the online fashion retailer takes a tighter control of costs. One supplier, who spoke to The Times on condition of anonymity, said they had received a call yesterday “demanding” a discount on all outstanding orders. “It turns all orders produced into losses,” the supplier said. “This is major self-harm. They are struggling to find suppliers and now they are screwing the ones they have.” – The Times
