- FTSE 100 closes down
- AstraZeneca and EU reach settlement
- US job creation number misses expectations
5.10pm: FTSE closes lower
FTSE 100 index closed lower on Friday as the US jobs number weighed on sentiment.
The UK’s premier share index finished down around 25 points, or 0.36%, at 7,138, not far from the session low of 7,123 and well off the high of 7,182.
The US non-farm payroll print for August came in at 235,000 against expectations for a 720,000 increase.
“The poor number certainly helps to vindicate the cautious stance taken by Jay Powell at his Jackson Hole speech last week, and while the hawks on the FOMC will still be keen to set out a timeline for a taper, it may well not happen until early next year,” noted Michael Hewson, chief market analyst at trading firm CMC Markets UK.
“The disappointment over the jobs number has weighed on stock markets in the afternoon session, with European markets sliding back, having spent most of the day in positive territory,” he added.
On Wall Street, stocks were mixed on Friday ahead of Monday’s Labor day. The Dow Jones Industrial Average shed 91 points at 35,352. The S&P 500 lost around five at 4,531. The Nasdaq added nearly 17 points though, at 15,348.
3.30pm: US jobs disappointment still burns
FTSE 100 pared its losses before close but was still down 18 points to 7,145 as the US jobs disappointment still burnt.
“The well-below consensus 235,000 gain in non-farm payrolls in August suggests that the Delta variant is beginning to weigh on the economy, with leisure & hospitality employment unchanged on the month,” economists at Capital Economics said.
“Even allowing for the fact that first estimates for August often disappoint on the downside, the extent of the slowdown in jobs growth all-but rules out any tapering announcement at this month’s FOMC meeting and, if this weakness persists, then it could be pushed into early next year.”
In domestic news, AstraZeneca PLC (LSE:AZN) and the European Union have reached an agreement on the delivery of outstanding COVID-19 vaccine doses by the pharmaceutical company, which will end the legal dispute between the two parties.
A contract between AstraZeneca and the EU, entered into in 2020, estimated the delivery of 300 million vaccine doses by the end of June 2021, but so far, only 100 million doses have been supplied.
Under the settlement announced today by the European Commission, AstraZeneca will deliver the remaining 200 million doses by the end of March 2022.
2.40pm: FTSE 100 drops in the red after Wall Street opens lower on big jobs miss
The Footsie dropped in the red when the opening bell rang at Wall Street, with indices on both sides of the Atlantic pushed down by US jobs data widely missing expectations.
London’s leading index was down 22 points to 7,141, the Dow Jones Industrial Average lost 92 points to 35,351, the S&P 500 shed 10 points to 4,526 and the Nasdaq tumbled 32 points to 15,298.
US non-farm payrolls grew by just 235,000 in August, way below forecasts for 720,000 jobs to be added, while the jobless rate fell to 5.2% as expected.
The weak jobs report offered more evidence on the extent to which the coronavirus (COVID-19) Delta variant is affecting the US labor market recovery.
Naeem Aslam, chief market analyst at AvaTrade commented: “Today’s US NFP number was wild, and it missed the expectations by a huge margin. Looking at the data it is pretty much clear now that September isn’t going to be a live meeting. The US labour market still has a long way to go to recover the lost ground.
“In terms of the price action, the dollar index has plunged, and this has boosted the gold price. It is clear that the dominant trend for the gold price is going to the upside. Equity traders are still trying to digest the news and it will take some time for them to fully understand the data. But given the fact that the market is addicted to loose monetary policy, the Fed is unlikely to tighten their monetary policy belt.”
12.55pm: Oxford University to trial COVID-19 vaccine as cancer treatment
FTSE 100 stayed put at lunchtime and was up 16 points to 7,180.
Studies at the Ludwig Institute of Cancer Research in collaboration with Oxford scientists took one of the viral vectors used in the Covid-19 vaccine to treat mice.
Results showed an increase in the mice’s T-cells, the defence the body uses to attack and kill invading cancers.
The anti-cancer vaccine was designed to target two MAGE-type proteins found on many cancer cells and shrank tumours and prolonged survival rates.
Plans are now underway for a human clinical trial, which will comprise 80 patients and target non-small cell lung cancer (NSLC).
NSLC is one of the most deadly forms of the disease with almost 50,000 people in Britain diagnosed each year.
12.10pm: Wall Street in for green open
US stocks are expected to open modestly higher on Friday ahead of the August nonfarm payrolls report, which will indicate the strength of the recovery in the US labour market.
Futures for the Dow Jones Industrial Average were up 0.1%, while those for the broader S&P 500 rose 0.2%, with the index having hit another record close on Thursday. Futures for the tech-laden Nasdaq-100 added 0.1%.
The latest monthly jobs data, due at 9.30am ET, is expected to show that the US economy added 720,000 jobs in August and that the unemployment rate fell to 5.2%. The numbers could influence the Federal Reserve’s timetable for scaling back stimulus policies that have supported markets during the coronavirus (COVID-19) pandemic.
Fawad Razaqzada, market analyst at Think Markets commented: “With Jerome Powell and several other Fed officials more or less confirming that tapering QE could start before the end of the year, investors are speculating that the US central bank may announce the timeline of the process at the FOMC’s November meeting.
“Until then, the Fed will have three more jobs reports to consider before publishing its plans. As such, today’s jobs report will be scrutinised very closely by the markets, and we may very well see some big moves in reaction to the data.
“Now the market has had enough time to digest the Fed’s slow build up to the eventual reduction of QE. This means that tapering QE is no longer going to surprise the market, at least not in a meaningful way anyway. The Fed has also been very clear that interest rates will not necessarily rise immediately after tapering is completed.
The IHS/Markit US services sector PMI activity survey for August is also due out today, at 9.45am, as well as the Institute for Supply Management services index at 10.00am.
Back on this side of the Atlantic, the Footsie was up 15 points to 7,179.
10.50am: Citizens Advice warns against debt piling from buy now, pay later schemes
The FTSE 100 trimmed its gains in late morning, advancing 10 points to 7,174.
A report from the Citizens Advice Bureaux (CAB) indicates that 10% of shoppers who use “buy now, pay later” schemes are being pursued by debt collectors.
The “buy now, pay later” (BNPL) method of shopping, a reinterpretation of the old “hire purchase” system, can be “a slippery slope into debt” the CAB said, after publishing the results of a survey of 2,000 adult shoppers.
Over a tenth of customers aged between 18 and 34 who use BNPL had been referred to debt collectors.
Citizens Advice is urging anyone who has been contacted by debt collectors to get free, independent debt advice.
Klarna, a fintech unicorn used by several online retailers to spread payments over up to two months, has become hugely popular during the pandemic.
The group has over 90mln active users worldwide and 2mln transactions a day. It launched in France and New Zealand in the first half of 2020 and in Poland in August and now operates in 17 countries.
9.50am: Berkeley flat as better London market offset by higher materials prices
The FTSE 100 swung back to the green in mid-morning, up 15 points to 7,179.
London has lagged the housing boom enjoyed by other parts of the country during the past twelve months, but the housebuilder said with the easing of lockdown restrictions the capital’s market had started to firm again.
However, there is building materials cost inflation arising principally from supply chain issues and staffing problems resulting from Brexit and COVID-19.
“October is likely to be a testing time for the property market as the lack of the money-saving incentive could see housing activity calm down, thereby bringing down prices with it,” analysts at AJ Bell noted.
“If housebuilders can’t cover the extra costs of building materials through higher prices, then they must stomach lower profit margins. In the old days, they might have tried to cut corners to save money but the outrage over build quality in the industry a few years ago means only the foolish would attempt to save a few quid here and there by not doing a proper job.”
“Berkeley can afford to stomach lower profit margins as it is swimming in cash, and it may take the view that this is only a temporary risk. After all, it is continuing to invest in land as a way of laying the foundations for future value generation.”
8.30am: DiscoverIE pushes through the GBP1bn threshold
While Wall Street finished in record territory once more, it was a subdued start to trading in the Square Mile with London’s price setters keeping their powder dry ahead of US nonfarm payrolls later.
The FTSE 100 opened less than two points lower at 7,162.18, as the blue-chip index also failed to follow the positive lead set by Asia’s main bourses earlier.
Richard Hunter, head of markets at Interactive Investors, said: “In the UK, traders are non-committal ahead of the numbers, with the main indices little changed in early trade,”
The FTSE250 has retreated slightly from the record high it achieved earlier this week, but “remains firmly ahead” by 18.2% in the year to date, Hunter observed.
The pace of growth for the premier benchmark “has been rather more sedate”, with the index having added 10.9% this year, he went on.
“The variance between these performances has largely been driven by a UK economic recovery which, for the moment, is proving more robust than many had anticipated,” Hunter explained in his end-of-week round-up.
“The FTSE100 has rather more exposure to cyclical forces, such as the volatility of oil and general commodity prices as well as the banking sector.
“Both indices are still seen as being attractive on valuation grounds, particularly as compared to many international peers, and the more recent spike in both IPO and M&A activity has underpinned hopes for further gains.”
On the market, the price action on the Footsie was muted.
Among the mid-caps, DiscoverIE (LON:DSCV), the electronic components group made a strong start to the session with a 10% opening gain. This was generally seen as a sign of approval for the company’s latest acquisition.
Its one-year price chart is impressive with the stock up 85% in that period. The latest movement takes DiscoverIE over a GBP1bn market capitalisation threshold for the first time.
6.50 am: Wait-and-see mode activated
It’s US jobs report day and that means traders are in wait and see mode.
The FTSE 100 is expected to open just three points higher at 7,167.
“The NFP [non-farm payrolls] is always good for some juicy volatility intra-session, but this one will assume potentially greater importance than usual, as the headline result will go a long way towards solidifying financial markets’ timing of the Federal Reserve taper. Well, that’s the theory anyway,” said Jeffrey Halley at OANDA.
“As ever, the range of forecasts is far and wide, but the median consensus seems to be around 750,000 jobs added this evening. My thruppence worth, as a mere pilot fish cleaning the global market’s shark’s teeth, is thus; a number lower than 600,000 jobs will push back tapering expectations from the Fed. That will see markets “buy everything” and sell the US Dollar. A number nearer to 1 million jobs will have the opposite effect, sell everything and buy the US Dollar, perhaps ships some bonds out the door as well. This scenario is likely to be more violent as the street has hitched its wagon to the first scenario this week. A number around expectations will be a bit of a meh for me, giving us no clarity one way or the other. The result will still be “buy everything”, just less vigorously,” he added,
Pantheon Macroeconomics is way below the consensus with its forecast of 400,000 new jobs added to the US economy.
“Payrolls aside, we hope to see another dip in the unemployment rate, but the household survey, which generates the unemployment and participation data, is much more volatile than the payroll numbers, so hefty short term deviations from the underlying trend are common. Over time, sustained payroll gains of 400K per month would pull down the unemployment rate, but we can’t be sure that the household survey’s employment measure will match the payroll numbers in any given month and the payroll data have nothing at all to say about the participation rate,” it added.
US markets yesterday had no reticence in marching higher ahead of today’s jobs data. The Dow Jones rose 131 points to 35,444 and the S&P 500 put on 13 points at 4,537.
Around the markets
- Sterling: US$1.3833, n/c
- Gilt: 0.590%, down 1.16 basis points
- Gold: US$1,813 an ounce, up US$1.50
- Brent crude: US$72.97 a barrel, down 6 cents
- Bitcoin: US$49,595, up 40 cents
6.50am: Early Markets – Asia / Australia
Stocks in the Asia-Pacific region were mixed on Friday as Japanese Prime Minister Yoshihide Suga said he will not be running in the upcoming leadership election.
Shares in Japan surged after Suga bowed out of the leadership race with the Nikkei 225 jumping 1.97%
China’s Shanghai Composite fell 0.30% and Hong Kong’s Hang Seng index slumped 0.75%
Meanwhile, South Korea’s Kospi rose 0.69%.
Australia’s ASX 200 was trading 0.44% higher, with resource stocks leading the way.