London midday: Rally stalls ahead of monthly US jobs data

A renewed and wholly unexpected air of optimism around global trade tensions propelled London shares higher on Friday, although come midday the advance had stalled as investors waited for the release of the latest and all-important monthly US jobs report.

By noon, the FTSE 100 index increased 0.82% or 59.90 points to 7,174.36 and was holding near its best levels of the session. The pound added to the previous day's rally, up 0.11% to 1.30186 against the US dollar, but was down 0.25% versus the euro at 1.1373.

Overnight, US stocks enjoyed their third straight winning session after President Trump said that trade discussions with China were "moving along nicely" and there were reports that his negotiators had been told to prepare an offer to China in time for the G20 meeting in Argentina later this month.

Disappointing iPhone sales and Christmas outlook from Apple after the closing bell on Wall Street on the other hand saw its share price dive in after-hours trading and the US index futures take a step lower, although by noon they were pointing to opening gains of approximately 1% for all the major stockmarkets.

The tech behemoth reported quarterly revenue up 20%, slightly ahead of expectations, but iPhone sales were flat and there was a weaker sales forecast for the crucial holiday season, combined with the news that Apple will no longer give a breakdown of product sales.

Asian markets lapped up the positive news of an easing trade war, brushing off Apple's disappointing outlook, said market analyst Japser Lawler at LCG.

"The trade war has been partly to blame for the recent equities rout, so any signs that the two powers are making progress will encourage investors to put risk back on the table and pick up stocks at bargain levels," he said.

"This remains a fragile situation, but it appears to have turned a corner, providing a floor to the recent equity selloff. Whilst talks are on a positive note we don’t expect to see a repeat of those extreme bouts of selling that we saw across October."

Agreement of a US-China trade deal is seen as likely to put pressure on the dollar.

Later on Friday morning there will be manufacturing surveys covering most of the larger European economies, with the UK PMI survey due out at 0930 GMT.

US labour market data at 1230 GMT, includes the big non-farm payroll report, for which the consensus estimate is 190,000. The US unemployment rate is tipped to hold steady at 3.7%, while average earnings are expected to rise to 3.1% year-on-year, up from 2.8%.

"The key as ever will be the wage data – this could be a big breakout month with annual wage growth potentially starting to take on the 3% handle," said Neil Wilson at Markets.com.

"Survey data of small businesses struggling to find workers and looking to increase wages points to the ultra-tight labour market starting to produce the wage inflation long expected. The question mark as ever though is over the labour force participation rate, which betrays a depth of hidden slack in the labour market even as the unemployment rate hits 50-year lows."

In UK corporate news, IAG flew higher as the British Airways owner upped its profit target for the coming five years. The Anglo-Ibeiran airline group is holding an investor event on Friday, where chief executive Willie Walsh will set out plans to generate EBTIDAR averaging €7.2bn per year, up from the previous target of €6.5bn for 2018-2022.

Burberry shares were lifted as the luxury sector rallied around the world on the back of the US-China tensions thawing. Likewise, Asia-focused banks Standard Chartered and HSBC were given a fillip, while exporters such as Melrose were also higher.

Sage shares were lifted as investors cheered the promotion of finance chief Steve Hare to chief executive after serving two months as the software group’s interim leader.

"As we looked externally for the experience, vision and deep knowledge required to accelerate operational execution it very quickly became clear through Steve's early decisions and his clear prioritisation that he is the right person to lead Sage," said chairman Donald Brydon.

Barclays was on the front foot after it confirmed that Rothschild boss Nigel Higgins had been recruited to replace John McFarlane as chairman. Higgins will take over at Barclays’ next annual meeting on 2 May.

Paddy Power Betfair was trotting higher as it reported lower third quarter profits but tightened up its full year earnings guidance. Reported third quarter EBITDA fell 16% to £101m, due to the inclusion of FanDuel fantasy sports losses.

Oil majors BP and Shell picked up a touch after the sector slumped lower the day before as Opec output readings jumped. Brent crude remained softer on Friday at $72.67 a barrel, with West Texas Intermediate at $63.41.

"Oil prices have also continued to slide after the US gave eight countries waivers on Iranian sanctions, sending the oil price back below the 200 day MA to a daily close below it for the first time since August 2017," observed Michael Hewson at CMC Markets.

"Given that we’ve seen five successive weeks of inventory builds we could well see further falls towards the August 2018 lows at $70 a barrel, welcome news for the consumer and also welcome news for the US consumer which has seen WTI prices fall to their lowest levels since April, thus putting downward pressure on US gasoline prices."

On the downside, defensive stocks were in the red as optimism about the US-China trade situation led investors to move to a more risk-on approach.

Market Movers

FTSE 100 (UKX) 7,174.63 0.84%
FTSE 250 (MCX) 19,406.67 1.22%
techMARK (TASX) 3,354.68 0.85%

FTSE 100 - Risers

Burberry Group (BRBY) 1,899.00p 4.51%
Ashtead Group (AHT) 2,036.00p 4.46%
Standard Chartered (STAN) 581.80p 4.45%
Prudential (PRU) 1,633.00p 4.21%
Evraz (EVR) 571.80p 4.04%
Just Eat (JE.) 671.80p 3.99%
Smurfit Kappa Group (SKG) 2,556.00p 3.57%
Antofagasta (ANTO) 848.00p 3.54%
Johnson Matthey (JMAT) 3,107.00p 3.33%
Halma (HLMA) 1,375.00p 3.31%

FTSE 100 - Fallers

Imperial Brands (IMB) 2,620.00p -2.58%
British American Tobacco (BATS) 3,362.50p -1.61%
Severn Trent (SVT) 1,881.00p -1.31%
Diageo (DGE) 2,639.00p -1.31%
United Utilities Group (UU.) 729.80p -1.24%
Centrica (CNA) 144.90p -0.96%
Compass Group (CPG) 1,537.41p -0.94%
Unilever (ULVR) 4,074.00p -0.89%
BT Group (BT.A) 259.28p -0.76%
Reckitt Benckiser Group (RB.) 6,354.00p -0.58%

FTSE 250 - Risers

Sophos Group (SOPH) 487.00p 5.73%
Energean Oil & Gas (ENOG) 670.00p 5.68%
IP Group (IPO) 119.00p 5.50%
Indivior (INDV) 202.50p 5.41%
Kaz Minerals (KAZ) 566.80p 5.39%
Provident Financial (PFG) 560.83p 4.95%
Hastings Group Holdings (HSTG) 197.90p 4.71%
Fidelity China Special Situations (FCSS) 203.99p 4.51%
Quilter (QLT) 122.20p 4.36%
Premier Oil (PMO) 108.40p 4.33%

FTSE 250 - Fallers

Senior (SNR) 263.20p -5.53%
Just Group (JUST) 95.70p -3.28%
Capita (CPI) 125.60p -2.71%
Fisher (James) & Sons (FSJ) 1,806.00p -1.42%
NewRiver REIT (NRR) 250.80p -1.26%
Greene King (GNK) 493.60p -1.06%
Spire Healthcare Group (SPI) 130.60p -1.06%
Tate & Lyle (TATE) 667.40p -0.95%
Pennon Group (PNN) 749.00p -0.87%
Pantheon International (PIN) 2,113.00p -0.80%