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London open: FTSE falls as investors eye payrolls report
London stocks fell in early trade on Friday as weak data raised fears about the US economy, and ahead of the release of the all-important non-farm payrolls report.
At 0840 BST, the FTSE 100 was down 0.5% at 8,240.91.
Richard Hunter, head of markets at Interactive Investor, said: “Investor sentiment turned on its head as recessionary fears surfaced, following a slew of corporate and economic data which brought into question whether the Federal Reserve is now behind the curve.
“Initial jobless claims in the US rose by the most in a year, while those claiming benefits jumped to a level not seen since November 2021. In addition, the ISM manufacturing index fell to 46.8%, signalling a contraction while also being worse than the expected figure. Even though Fed Chair Powell signalled earlier in the week that a rate cut was likely in September, the concern is now that the Fed may have missed the boat and that the idyllic economic soft landing will not be achieved.
“In turn, traders began to speculate whether such a cut in September would rise to 0.5% from the previously expected 0.25% in an effort to stem the tide. The changing backdrop puts additional emphasis on the non-farm payrolls report later today, where it is expected that 185,000 jobs will have been added in July, compared to 206,000 the previous month, with unemployment remaining steady at 4.1%. Any notable deviation from these numbers will be market-moving, especially a weak reading which would exacerbate fears of an impending recession.”
The payrolls report for July is due at 1330 BST, along with the unemployment rate and average earnings.
In equity markets, IAG flew higher after the BA and Iberia owner said it would start paying dividends again, posted a rise in first-half profits and abandoned its pursuit of Air Europa.
GSK rose as it said the US Food and Drug Administration has approved its Jemperli treatment in combination with chemotherapy and then use on its own for adult patients with primary advanced or recurrent endometrial cancer.
Capita tumbled despite saying it swung to a profit of £60m in the first half from a loss of £67.9m in the same period a year earlier, and backing its full-year expectations.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
International Consolidated Airlines Group S.a. | +6.31% | +10.10 | 170.10 |
| 2 |  |
Gsk Plc | +2.39% | +36.50 | 1,562.50 |
| 3 |  |
Fresnillo Plc | +1.61% | +9.50 | 601.00 |
| 4 |  |
National Grid Plc | +1.43% | +14.00 | 994.00 |
| 5 |  |
Johnson Matthey Plc | +1.25% | +20.00 | 1,623.00 |
| 6 |  |
Smith & Nephew Plc | +0.83% | +10.00 | 1,209.00 |
| 7 |  |
Easyjet Plc | +0.63% | +2.70 | 434.30 |
| 8 |  |
Astrazeneca Plc | +0.61% | +76.00 | 12,588.00 |
| 9 |  |
Unilever Plc | +0.48% | +23.00 | 4,805.00 |
| 10 |  |
Severn Trent Plc | +0.46% | +12.00 | 2,601.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Mondi Plc | -4.41% | -68.00 | 1,473.50 |
| 2 |  |
Scottish Mortgage Investment Trust Plc | -3.24% | -27.60 | 824.00 |
| 3 |  |
Ocado Group Plc | -3.18% | -12.80 | 389.10 |
| 4 |  |
3i Group Plc | -2.98% | -92.00 | 3,000.00 |
| 5 |  |
Schroders Plc | -2.88% | -10.20 | 344.40 |
| 6 |  |
Barclays Plc | -2.80% | -6.25 | 216.65 |
| 7 |  |
Carnival Plc | -2.76% | -32.00 | 1,127.50 |
| 8 |  |
Ashtead Group Plc | -2.75% | -150.00 | 5,308.00 |
| 9 |  |
Melrose Industries Plc | -2.41% | -12.40 | 502.60 |
| 10 |  |
Marks And Spencer Group Plc | -2.32% | -7.70 | 323.50 |
US close: Stocks sharply lower as recession fears resurface
Wall Street stocks closed sharply lower on Thursday as recessionary fears resurfaced.
At the close, the Dow Jones Industrial Average was down 1.21% at 40,347.97, while the S&P 500 lost 1.37% to 5,446.68 and the Nasdaq Composite saw out the session 2.30% weaker at 17,194.15.
The Dow closed 494.82 points lower on Thursday, more than reversing gains recorded in the previous session as hawkish comments from the head of the Federal Reserve ignited stocks with hopes rising for an interest-rate cut at the central bank’s next meeting in September.
The Fed’s two-day policy meeting concluded on Wednesday with no change in policy, as was widely anticipated but Jerome Powell indicated that the central bank would be prepared to loosen monetary policy at its next meeting if price pressures continue to ease.
“A reduction in the policy rate could be on the table as soon as the next meeting in September,” Powell said. “We’re getting closer to the point at which it’ll be appropriate to reduce our policy rate, but we’re not quite at that point.”
However, several data points and fears that it may be too late for the Fed to start cutting rates if it wants to avoid a recession sent shares sharply lower throughout the session.
On the macro front, Challenger Gray & Christmas revealed that US employers shed 25,855 jobs in July, a 46.9% month-on-month drop to the lowest level in a year as the tech sector cut the most jobs, slashing 6,009 roles, while the services sector cut another 2,932.
Elsewhere, tightness in the US jobs market eased a bit further during the preceding week. According to the Department of Labor, in seasonally adjusted terms, initial unemployment claims for the week ending on 27 July increased by 14,000 to reach 249,000. Economists had pencilled in a smaller increase to 236,000 from an unrevised 235,000 for the week before.
On another note, US labour productivity outpaced economists’ forecasts during the second quarter, reducing unit costs. According to the Department of Labor, in seasonally adjusted terms labour productivity grew at a quarterly annualised pace of 2.3% over the three months to June – keeping the rate of increase in unit labour costs at 0.9%.
Still on data, S&P Global‘s manufacturing PMI was revised slightly higher in July, up to 49.6 from a preliminary reading of 49.5, but remained the lowest reading so far in 2024, while the ISM’s manufacturing PMI fell to 46.6, down from 48.5 in the previous month and short of expectations for a print of 48.8.
Finally, US construction spending fell by 0.3% month-on-month in June to a seasonally adjusted annualised rate of $2.14bn, according to the Census Bureau, following a revised 0.4% decrease in May and missing forecasts for a 0.2% rise.
Following the data releases, the yield on the benchmark 10-year Treasury note dropped below 4% for the first time since February.
In the corporate space, Facebook parent company Meta Platforms delivered stronger-than-expected quarterly earnings after the close, with both revenue and profits coming in ahead of estimates at $39.07bn and $5.16 per share, respectively.
Going the other way, Arm Holdings shares were firmly in the red after offering up underwhelming current-quarter guidance, while confectionary group Hershey also traded lower on the back of Q2 earnings that fell short of expectations on the Street.
Beer giant Anheuser-Busch InBev said on Thursday that revenues came to $15.33bn for the three months ended 30 June, lower than the $15.49bn expected on the Street. However, margin recovery drove a 10.2% growth in EBITDA, more than the 9.24% growth expected. Adjusted earnings per share of $0.90 also beat estimates of $0.86 per share.
Friday newspaper round-up: Morrisons, JLR, Intel
Morrisons is testing out raising the temperature of its freezers by 3C in the first move by a UK supermarket to depart from a long-held industry standard, in order to save energy and money. The Bradford-based chain said it would increase the temperature on appliances in 10 of its stores to -15C from -18C, the industry standard set almost 100 years ago and left unchanged. – Guardian
The UK’s Serious Fraud Office has charged Glencore’s billionaire former head of oil trading with conspiring to make corrupt payments to benefit the commodities company’s oil operations in West Africa. Alex Beard, who ran Glencore’s oil division from 2007 until his retirement in 2019, will face charges alongside former Glencore executives Andrew Gibson, Paul Hopkirk, Ramon Labiaga and Martin Wakefield after a long-running investigation into allegations of bribery at the company. – Guardian
Jaguar Land Rover (JLR) is among a string of luxury carmakers to be hit by major disruption after flooding in Switzerland paralysed a top aluminium producer. The company is scrambling to find alternative suppliers after Novelis, an Indian-owned manufacturer that runs a mill in the alpine city of Sierre, was forced to shut down operations at the end of June. Porsche, BMW and Mercedes have also been affected. – Telegraph
The future of Harland & Wolff is hanging in the balance after the historic Belfast shipyard was handed a $25 million emergency bailout. The company, best known for building the Titanic, also announced that it would scrap plans for a long-awaited restart of ferry services between Cornwall and the Scilly Isles, without a single sailing. – The Times
Intel, the US chipmaker, is planning to cut 15,000 jobs as it attempts to turn around its manufacturing operations, which have fallen behind in artificial intelligence developments. The company’s shares fell 20 per cent to $29.05 in after-hours trading in New York on Thursday after it announced a drastic cost reduction plan and forecast lower than expected revenue for the current quarter. Intel also said it would suspend its dividend. – The Times
