London midday: Stocks drop as pound rallies; non-farm payrolls eyed
London stocks had fallen into the red by midday on Friday as the pound rallied, with investors jittery as they eyed global trade developments and the release of the latest non-farm payrolls report.
The FTSE 100 was down 0.5% at 7,283.34, trading below the 7,300 level for the first time in nearly five months, as the pound rose 0.7% against the dollar and the euro at 1.3017 and 1.1195, respectively. Sterling got a boost as transcripts from earlier in the week published by the UK parliament showed that the EU's chief Brexit negotiator, Michel Barnier, was open to the possibility of simplifying checks on the Irish border.
Trade was very much in focus still as relations between the US and China could sour further later in the day if President Trump goes ahead and slaps tariffs on a further $200bn of Chinese goods.
"Tariffs could be as high as 25%. The consultation-period is over - now we look to see what Trump does. Does he double down - this would be true to form - or does he hold off for now?" said Markets.com analyst Neil Wilson.
A report out on Thursday suggested that the US President could target Japan next. According to CNBC, Trump has hinted that he might next take up trade issues with Japan.
US talks with Canada were also ongoing, as Canada’s foreign affairs minister Chrystia Freeland booked in for another few nights in Washington to try and thrash out a Nafta deal.
"Trump is threatening to exclude Canada from the Mexico-US deal, but needs to show to the electorate before the November mid-term elections that he can strike a positive deal," Wilson said.
The other big focus will be the US non-farm payrolls report, which is due at 1330 BST along with the unemployment rate. Economists expect 191,000 payrolls to have been added in August, versus 157,000 the month before, while the unemployment rate is expected to have ticked down to 3.8% from 3.9%. Average hourly earnings will also be key.
"The US jobs report will naturally attract plenty of attention today, with the economy now strong and the Federal Reserve raising interest rates at a steady and consistent pace," said Oanda analyst Craig Erlam. "The only thing that’s lacked from what would otherwise be a booming economy is better wage growth and that is expected to continue to elude the data for August, with earnings seen growing only 2.7% again, a level it’s struggled to break sustainably above since the start of last year."
Closer to home, a survey by Halifax out earlier showed that house prices in the UK rose 3.7% in the three months to August compared to the same period a year ago, up from a 3.3% increase the month before but below analysts’ expectations for growth of 3.9%.
On the month, house prices were 0.1% higher, topping expectations of a 0.3% decline following a 1.2% drop in July.
The number of first-time buyers was up around 3% in the first six months of 2018 to 175,500. This marks the sixth increase over a comparable period in the last seven years and the third consecutive year that first-time buyer numbers have topped 150,000.
Halifax managing director Russell Galley said: "While the pace of employment growth has recently slowed, a low unemployment rate and a gradual pickup in wage growth are helping to support household finances. This has been accompanied by interest rates still remaining at a historically low rate and a stable, yet constrained, supply of new homes onto the market further supporting house prices."
In corporate news, Greene King frothed up as it said positive momentum in its Pub Company unit continued through the summer with like-for-like sales up 2.8% for the first 18 weeks of the year, ahead of the market, which was up 1.2%. Peer JD Wetherspoon was lifted by the news.
Smith & Nephew was the top gainer on the FTSE 100 as Morgan Stanley said in a note that it sees "significant upside potential" but awaits catalysts before making a more positive call on the equalweight-rated stock.
Ashmore rallied after it reported steady full-year pre-tax profit and record net inflows, as it said it was in the process of establishing an office in Ireland ahead of Brexit.
On the downside, International Consolidated Airlines Group was the worst performer after British Airways announced that the payment card information of at least 380,000 customers had been compromised in a data theft.
Primark owner Associated British Foods was under the cosh after accountancy and business advisory firm BDO's monthly High Street Sales Tracker showed that like-for-like sales declined 2.7% in August compared to a year earlier, marking the worst August drop for three years.
AstraZeneca fell after saying that it and Amgen have been granted a breakthrough therapy label for their drug to treat a type of severe asthma by the US Food and Drug Administration.
Playtech was weaker as it sold around 11.4 million shares in Plus500 - its entire stake - at 1,550p per share, realising gross proceeds of approximately £176m that will be used for general corporate purposes and debt reduction. Plus500 shares slumped.
Healthcare company BTG slipped after saying it was paying up to $130m in cash to buy Ireland-based Novate, which specialises in the prevention of pulmonary embolism (PE) in patients at high risk of venous thromboembolic events.
In broker note action, Shire was cut to ‘hold’ by Berenberg, while DCC was initiated at ‘outperform’ by RBC Capital Markets and Burberry was downgraded to ‘neutral’ at Goldman Sachs.
Market Movers
FTSE 100 (UKX) 7,283.34 -0.49%
FTSE 250 (MCX) 20,144.69 -0.68%
techMARK (TASX) 3,425.95 -0.23%
FTSE 100 - Risers
Smith & Nephew (SN.) 1,374.00p 1.44%
BAE Systems (BA.) 616.20p 1.02%
NMC Health (NMC) 3,672.00p 0.93%
DCC (DCC) 6,790.00p 0.82%
Vodafone Group (VOD) 164.90p 0.55%
BT Group (BT.A) 221.41p 0.46%
Unilever (ULVR) 4,241.00p 0.41%
Morrison (Wm) Supermarkets (MRW) 262.70p 0.38%
Experian (EXPN) 1,889.00p 0.37%
Sky (SKY) 1,547.00p 0.32%
FTSE 100 - Fallers
International Consolidated Airlines Group SA (CDI) (IAG) 661.20p -2.94%
Fresnillo (FRES) 840.20p -2.64%
Antofagasta (ANTO) 757.60p -2.42%
Royal Bank of Scotland Group (RBS) 242.60p -2.22%
Melrose Industries (MRO) 225.80p -1.83%
Lloyds Banking Group (LLOY) 58.84p -1.79%
Taylor Wimpey (TW.) 165.15p -1.70%
Ashtead Group (AHT) 2,282.00p -1.60%
Associated British Foods (ABF) 2,265.00p -1.52%
Schroders (SDR) 2,955.00p -1.47%
FTSE 250 - Risers
Greene King (GNK) 515.20p 8.46%
Ashmore Group (ASHM) 355.60p 3.01%
Wetherspoon (J.D.) (JDW) 1,235.00p 2.66%
Convatec Group (CTEC) 217.80p 2.54%
Mediclinic International (MDC) 492.30p 1.51%
Greencore Group (GNC) 176.85p 1.35%
Sophos Group (SOPH) 499.60p 1.30%
Babcock International Group (BAB) 719.80p 1.07%
Hilton Food Group (HFG) 954.00p 1.06%
Ascential (ASCL) 428.40p 1.04%
FTSE 250 - Fallers
Hochschild Mining (HOC) 159.98p -5.62%
Go-Ahead Group (GOG) 1,729.00p -5.52%
Sirius Minerals (SXX) 25.81p -5.46%
Just Group (JUST) 83.55p -5.00%
Weir Group (WEIR) 1,558.50p -4.50%
Kaz Minerals (KAZ) 437.50p -4.27%
Hunting (HTG) 750.00p -3.78%
Ferrexpo (FXPO) 147.20p -3.16%
Provident Financial (PFG) 653.80p -2.94%
Contour Global (GLO) 211.40p -2.94%