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  • FTSE 100 index down 47 points
  • US non-farm payrolls rise by 225,000 in January
  • Unemployment rate rises to 3.6% from 3.5% in December

3.05pm: Sterling’s revival adds further pressure on blue-chips

“Another strong US jobs report supports the view that the US economy has made a promising start to 2020,” suggested ING Economics.

“It may well be that the US-China trade deal has reduced uncertainty and provided a platform for growth. Nonetheless, coronavirus fears in an environment of already subdued global growth underlines the risk of softer figures ahead,” it added.

Meanwhile, Ian Shepherdson at Pantheon Macroeconomics, reckons the surprisingly strong US jobs figures for January were likely a correction after December’s modest increase of 147,000 jobs,

“The gains in recent months have all been outside manufacturing, where payrolls fell by 12K in January, the worst month since August 2016; the trend clearly is deteriorating, with the sector under pressure from the trade war. Manufacturing accounts for only 8.4% of payrolls, but it punches above its weight in the eyes of the markets, media, and politicians,” Shepherdson said.

“The manufacturing losses in January were offset by above-trend increases in business services and healthcare, and a 44K leap in construction, likely thanks to the exceptionally mild winter across much of the country and the clear upturn in the housing market. Looking ahead, surveys continue to point to substantially slower payroll growth, but the hard data have outperformed substantially in recent months and show no signs yet of fading. Even so, January’s jump in payrolls likely will be followed by a significantly smaller increase in February, as favourable weather effects fade and healthcare job growth mean-reverts,” he added.

None of which is having much of a positive impact on this side of the Atlantic; quite the opposite, in fact, with sterling rising a fifth of a cent against the dollar and making many blue-chip stocks less attractive.

The FTSE 100 was down 50 points (0.7%) at 7,455.

2.45pm: FTSE 100 slumbers on as US markets pull back

Hastings Group Holdings PLC (LON:HSTG) got a lift on Friday afternoon as Morgan Stanley upgraded its rating for the FTSE 250-listed firm to ‘overweight; from ‘equal-weight’ in a review of the UK motor insurance sector.

Morgan Stanley also raised its target price for Hastings to180p to 220p, with the shares currently trading at 188.10p, up 2.2% on Thursday’s close.

The US investment bank’s analysts said: “Liquidity constraints could mean Hastings shares move before investors are able to build a position if the UK motor market starts to harden.”

A number of other stocks also found support from broker upgrades on Friday. Vodafone PLC (LON:VOD) added 2.4% at 154.62p as Jefferies upped its rating to ‘buy’ from ‘hold’ after looking at two tracks the mobiles company could take to boost its valuation.

The US investment bank’s analysts hiked their target price for the FTSE 100-listed firm to 176p from 144p, which they say offers 22% upside, including the dividend, on a one-year view.

Meanwhile, Berenberg boosted Mitchells & Butlers PLC (LON:MAB) shares 1.5% higher to 410p after returning their rating for the pubs group to ‘buy’ from ‘hold’, having downgraded in November last year on valuation grounds.

The German bank’s analysts said the re-upgrade follows around a15% pull-back in the shares, with its target price unchanged at 480p.

And an RBC Capital upgrade to ‘Top Pick’ propelled Huntsworth PLC (LON:HNT) shares 4.3% higher to 68p, with the Canadian bank repeating a 130p target price on the small-cap communications group, which they think could be a takeover candidate.

2.05pm: US benchmarks expected to open lower

Some more details on those US jobs numbers …

The US economy added 225,000 jobs in January, following 147,000 additions (revised from 145,000) in December.

The unemployment rate, which had been expected to remain at 3.5%, nudged up to 3.6%.

Average earnings were up 3.1% year-on-year; economists had predicted an increase of 3.0%.

“Today’s nonfarm payrolls report was another reminder of the underlying strength of the US economy and rounds off a good week for Donald Trump following his acquittal by the Senate and the Democratic Party’s shambolic Iowa Caucus,” said Richard Carter, the head of fixed interest research at Quilter Cheviot.

“However, the attention of most investors remains focussed on China and the spread of the coronavirus which, aside from being a human tragedy, is starting to pose risks for global growth in 2020. We expect it to be largely a Q1 story but if not, the Federal Reserve may come under pressure to cut interest rates despite continued strong US labour markets,” he added.

The FTSE 100 was down 47 points (0.6%) at 7,7,458, a level it has clung to (more or less) for the last three hours or so.

Despite the strong jobs numbers, US markets are set to open lower with the Dow Jones pegged to commence trading at around 29,271, down 109 points.

The S&P 500 is expected to open some 11 points lower at 3,436.

1.45pm: Non-farm payrolls (NFP) boost proves short-lived

An upward burst by the Footsie after US jobs additions comfortably topped expectations lasted all of 10 minutes.

The FTSE 100 is down 42 points (0.66%) at 7,463.

“The US NFP [non-farm payrolls] number rocked the markets, throughout this week, we have seen investors brushing away all ill thoughts about markets and today’s number has put a final seal on this. The bottom line is that the data has confirmed that the US job market is solid and tight,” said Naeem Aslam at Avatrade.

“Having said this, we do have concerns that the positive impact of this jobs report may not last long because the fact that China has delayed its release of economic number, and major warnings coming from Burberry, indicates that investors are likely to see [a] tumultuous time,” the analyst added.

1.35pm: Big beat for non-farm payrolls

US non-farm payrolls rose by 225,000 in January, well above the consensus forecast of a rise of 160,000.

The unemployment rate came in at 3.6%, versus expectations of 3.5%, while average earnings were up 3.1%, compared to the market’s expectation of a 3.0% year-on-year rise.

12.10pm: Profit-takers emerge

A bit of end of week profit-taking could be going on in European markets ahead of this afternoon’s US non-farm payrolls release.

The FTSE 100 is down 49 points (0.7%) at 7,455, making it one of the worst-performing European indices this morning.

“It would appear the bullish sentiment that was prevalent during the week has faded, but that’s not a huge surprise as traders often square up their books ahead of the US non-farm payrolls report,” said CMC’s David Madden.

“The headline reading is tipped to be 160,000, and keep in mind the December report showed that 145,000 jobs were added. The unemployment rate is expected to stay put at 3.5% – a joint fifty-year low.

“Average earnings on a yearly basis are expected to edge up to 3% from 2.9%. The earnings metric has been given more attention lately as it can be a leading indicator for consumer spending, as workers who earn more usually spend more. Should the wages reading rise it could be a sign the labour market is tightening as employers might have to offer higher wages in order to fill job vacancies. Volatility in the markets is expected to be low on the run up to the announcement,” Madden said.

He can say that again but amid the blue-chip tumbleweed some small caps are flourishing, such as DP Poland PLC (LON:I3E), which is up 20% after it revealed like-for-like (LFL) sales growth returned big time in the second half of 2019.

READ DP Poland sees like-for-like sales growth bounce back

The Domino’s Pizza franchise operator said LFL sales were up 3% year-on-year in 2019 with the second half of 2019 seeing LFL growth of 6%.

Shares in queue-jumping technology company accesso Technology Group PLC (LON:ACSO) moved towards the top of the London stock exchange’s leaderboard after chief executive Steve Brown purchased 198,000 shares in the company at an average price of 390p per share.

Brown was formerly president and chief executive officer of the company between 2016 and 2018 and returned to the helm last month; his purchase follows the acquisition by company chairman Bill Russell late last month of 20,000 shares at 345p each.

Accesso shares currently trade at 445p, up 14%.

10.05am: An Englishman’s home is his pension plan

The Footsie has ebbed further to its lowest point of the day as investors flip-flop back to worrying about the coronavirus.

London’s index of heavyweight shares was down 37 points (0.5%) at 7,468, with even the housebuilders down in the dumps despite further signs that the UK housing market is picking up (or getting worse, depending on whether you are buying or selling).

According to the Halifax, house prices rose 0.4% in January after rising 1.8% in December and 1.2% in November.

“The underlying recent sharp strengthening of house prices was highlighted in the three-month/three-month rise in prices climbing to 2.3% in January from 1.0% in December and 0.2% in November,” noted Howard Archer, the chief economic advisor to the EY ITEM Club.

“The annual rise in house prices rose to 4.1% in January, taking it to the highest level since February 2018. It had previously jumped to 4.0% in December from 2.1% in November and just 0.9% in October (the lowest since April 2013).

“The Halifax has tended to be at the top end of house prices measures and to show stronger monthly movements (even after it recently revamped its index). Latest data from the Nationwide put annual house price inflation at a 14-month high of 1.9% in January (after a rise of 0.5% month-on-month) while the Land Registry/ONS put it at a 12-month high of 2.2% in November following an unadjusted 0.4% month-on-month increase,” he added.

According to Archer, house price movements may be shifting up a gear after a lacklustre 2019.

“While we suspect that the housing market may get a further near-term boost from reduced uncertainties, we remain relatively cautious over housing market prospects over 2020 and suspect that the upside will likely be limited.

“Nevertheless, we have modestly raised our forecast for house price gains over 2020 to 2.8% from 2.0% and there is clearly a possibility that they could rise more than this. This partly reflects the fact that we have also modestly raised our UK GDP growth forecast for 2020 to 1.2% from 1.0%.

“Housing market activity – and possibly to a lesser extent prices – could be given a modest lift in 2020 if the Government introduces specific measures aimed at boosting the sector in the Budget on 11 March (although the possibility of cutting Stamp Duty appears to have been shelved).

“Furthermore, mortgage interest rates are at historically low levels. Indeed, there is a very real possibility that the Bank of England’s could cut interest rates in 2020,” Archer said.

9.30am: China cancels publication of January trade data 

As is often the case on the day when the US jobs numbers are set to be released, traders are sitting on their hands.

The FTSE 100 is down 21 points (0.3%) at 7,483, with the retreat led by funds supermarket Hargreaves Lansdown PLC (LON:HL.), which is down 2.8% at 1,660.5p after co-founder Peter Hargreaves, announced plans to cash in £500mln worth of shares.

The market had been hoping to get a read on how the coronavirus is affecting the Chinese economy but China opted to delay the publication of its trade data.

“The authorities don’t release January data for some series, as they fear that Lunar New Year distortions will be misinterpreted. That is not normal practice for the trade data, which generally are published in January, and until this morning, that is what we were expecting,” reported Freya Beamish, the chief Asia economist at Pantheon Macroeconomics.

“The authorities had not notified data service providers that the numbers would not be published. It’s possible that the double whammy of the calendar distortions, alongside then disruption from the virus led officials to refrain from publishing. Calendar distortions were already unfavourable. Alternatively, the disruptions from virus containment efforts could have interfered with data collection or processing,” she speculated.

Mid-cap housebuilder Bellway PLC (LON:BWY) found the market hard to please as its shares dipped 2% to 3,983p following its trading update.

It was a mixed half-year update as the housebuilder saw good indications for the return of the traditionally strong spring selling season but flagged “challenges” in relation to higher-priced homes and continued “upward pressure on construction costs” across the wider sector.

Earlier in the day, the release of the Halifax House Price Index indicated UK house prices rose 0.4% in January, after rising 1.8% in December.

“As a result, annual growth remained relatively stable at 4.1%, up just a fraction from the end of 2019,” reported Russell Galley, the managing director of Haliax, Britain’s biggest mortgage lender.

“A number of important market indicators continue to show signs of improvement. We have seen a pick-up in transactions with more buyer and seller activity consistent with a reduction in uncertainty in the UK economy; however, it’s too early to say if a corner has been turned. The recent positive figures may actually represent activity that would ordinarily have been expected to take place last year, but was delayed by economic uncertainty. So while housing market activity has undoubtedly increased over recent months, the extent to which this persists will be driven by housing policy, the wider political environment and trends in the economy,” he asserted.

Marc von Grundherr, director of lettings and sale agent Benham and Reeves, attributed the pick-up to the so-called “Boris Bounce”.

“Given the months of market decline and the seasonalities involved, this turn around is really quite remarkable and demonstrates the absolute resilience of our bricks and mortar market.

“We can now expect more of the same and we can look forward to a Brexit inspired bump in house prices now that we have finally departed and these green shoots will almost certainly be cultivated by the government with a further budget boost come spring,” he said.
 

8.25am: Dull start to Friday

The FTSE 100 index opened with a whimper rather than a bang on Friday with the traders keeping their powder dry ahead of US jobs numbers later.

The UK blue-chip index was trading 13 points lower at 7,492.18

WATCH: Morning Report: Novacyt reports ‘unprecedented interest’ in its coronavirus diagnostic

The London market took its cue from Asia’s main bourses, which continued to be haunted by coronavirus impact fears, rather than Wall Street, which closed at another record high.

Turning to the US non-farm payroll data, the market is pricing in that the world’s largest economy will have generated an additional 160,000 jobs last month, an improvement on the 145,000 seen in December.

The US unemployment rate, meanwhile, is tipped to hold steady at 3.5% – a fifty-year low.

Returning to the UK stock market, the top faller was Hargreaves Lansdown (LON:HL.), the investment group. Its shares tumbled 5% after its co-founder, Peter Hargreaves, announced plans to offload a £500mln chunk of his 31% holding.

Not far behind, with a 3% tumble, was Burberry (LON:BRBY), which lost ground after warning on the impact of the coronavirus outbreak in China, which has closed many of its stores there.

But benefiting from the disease emergency was NovaCyt (LON:NCYT), which has generated unprecedented demand for its coronavirus diagnostic. The shares shot up 16%.

Proactive news headlines:

accesso Technology Group PLC (LON:ASCO) said it was notified on 6 February 2020 that its recently returned chief executive officer, Steve Brown purchased 198,000 ordinary shares in the company on 6 February 2020, at an average price of 390p each. The group noted that, following this purchase, Brown now holds an interest of 514,774 accesso ordinary shares, representing approximately 1.86% of the company’s issued share capital and has 582,567 options over ordinary shares.

Jersey Oil & Gas PLC (LON:JOG), an independent upstream oil and gas company ‎focused on the UK Continental Shelf region of the North Sea, said it has been notified that its chief operating officer, Ronald Landsell on 6 February 2020 acquired 13,590 ordinary shares in the company, at a price of 1.03p each, taking his holding in the company to 1,013,590 ordinary shares, representing 4.64% of the company’s issued share capital.

DP Poland PLC (LON:DPP), which operates the Domino’s Pizza brand in Poland, saw like-for-like sales growth accelerate sharply in the second half of 2019. System sales over the whole year rose 13% to 82mln zloty (PLN) from 72mln PLN in 2018. Like-for-like (LFL) sales were up 3% year-on-year with the second half of 2019 seeing LFL growth of 6%.

G3 Exploration Ltd (LON:G3E) chairman Randeep Grewal has told investors that the China-headquartered company’s operations are continuing without any interruption related to the coronavirus. “I am happy to report, no employee has been infected by the coronavirus till date and we expect to maintain prudence to avoid exposure until the virus is contained,” Grewal said in a statement. “The group activities are ongoing without interruption,” he added.

NQ Minerals PLC (NEX:NQMI) (OTCMKTS:NQMLF) said the authorities in Tasmania have approved the company’s acquisition of the Mt Block permit around the firm’s flagship Hellyer base and precious metals project. The 46 square-kilometre area effectively triples NQ’s footprint. “This tenement is underexplored and has the potential to host new mineralisation close to NQ’s Hellyer processing plant,” said NQ chairman David Lenigas.

i3 Energy PLC’s (LON:I3E) chair David Knox is leaving the North Sea oil and gas firm to oversee Australia’s largest renewable energy provider. The company, in a statement, noted that Knox took on the role of chairperson at Snowy Hydro Limited and he is now stepping down from the I3 board and departing to focus on this new role during a critical and trying time in Australia. Linda Beal will be i3’s interim chair whilst a formal search for Knox’s replacement is undertaken.

SDX Energy PLC (LON:SDX), the MENA-focused oil and gas company, has announced the appointment of Catherine Stalker as an independent non-executive director with effect from 6 February 2020. The group noted that Stalker is an experienced non-executive director and consultant to the boards of FTSE companies, public sector bodies, regulators, pension funds and not-for-profits. It said she is currently a partner at Independent Audit Limited, a leading board evaluation firm with offices in London, Brussels and Dublin, and sits on the boards of two subsidiaries of DTEK, a Dutch energy company with vertically integrated assets in Ukraine. Michael Doyle, SDX’s non-executive chairman commented: “Her experience on Boards and in the fields of governance and energy will be invaluable to us as we drive the business forward in what is due to be a particularly busy year with the drill bit.”

Salt Lake Potash Limited (LON:SO4) (ASX:SO4) said it has now completed the placement of 33.6 million new ordinary shares in the company, to raise gross proceeds of A$23.5mln, first announced on 6 December 2020. The group said the second tranche has been completed following shareholder approval at a General Meeting held on 29 January 2020. The issue comprised 678,571 ordinary shares placed at a price of A$0.70 per share, including 428,571 shares subscribed for by the CEO, Tony Swiericzuk, and 250,000 shares by the company’s chairman, Ian Middlemas.

Integumen PLC (LON:SKIN) announced that it will be participating in Britain’s largest one-day investor event, the Global Group UK Investor Show on Saturday 25 April at the QEII Centre in Westminster, London. The group said its CEO Gerard Brandon, will be speaking at 11:40am in room Slater and C-Level management, members of Rinocloud and Labskin, will be manning Stall 15 all day, so there will be an opportunity to meet the team and ask your questions face to face.

Open Orphan PLC (LON:ORPH), the rapidly growing specialist CRO pharmaceutical services company which has a focus on orphan drugs and is a world leader in the provision of virology and vaccine challenge study services, announced that the company will be attending and presenting at the Shares Growth and Invention Forum on February 11, 2020 at the Business Design Centre, London N1, London, N1 0QH. It said its executive chairman Cathal Friel will be presenting at 3:30pm in the Babbage Room at the centre to update existing and potential investors on the company’s business plans for 2020.

6.10am: Hesitant start predicted 

London’s blue-chip stocks look set to take their lead from Asian markets, where traders’ screens are a sea of red this morning.

As ever, there may be a reluctance for traders to commit to big positions ahead of the release of the US jobs data for January, so a modest 7 point fall to 7,498 at the outset – which is what the spread-betting firms are predicting – should not be a surprise.

US benchmarks hit new highs again yesterday, with the Dow rising 89 points to 29,380 and the S&P 500 up 11 points at 3,346 but Asian markets have been weak this morning ahead of the release of Chinese trade data.The Hang Seng index in Hong Kong was off 234 points at 27,260 while the Nikkei 225 in Japan was down 53 points at 23,820.

As has been the case in recent weeks, traders have been keeping a watchful eye on the spread of the coronavirus. The number of confirmed deaths caused by the virus is now almost up to 640 including, poignantly, Dr Li Wenliang, who was one of the first physicians in Wuhan to raise the alarm about the virus.

“The risk-off flows returned to Asia this Friday, as mounting China coronavirus death toll and new confirmed cases globally spooked investors and boosted the demand for the … havens at the expense of the risk assets. Meanwhile, a typical pre-US payrolls caution trading also dented the appeal of the higher-yielding assets, as markets ignored the recent US-China trade optimism,” wrote Dhwani Maheta at FXStreet.

In the UK, the morning will likely be dominated by reaction to the trading update from housing giant Bellway PLC (LON:BWY) and the afternoon to the release of the US non-farm payrolls at 1.30pm, where the market is expecting 150,000 jobs to have been added.

A key focus in Bellway’s trading update will be on recent sales rates, reservations and net prices movements.

The stock rocketed 50% higher last year putting it on the verge of promotion to the FTSE 100 index, but the firm expressed caution in an October update, saying it anticipated facing “more pronounced” pressure on profit margins in the current year due to flatter house prices and rising costs.

However, of course, this was well before the December general election, when a big Conservative majority bought some badly needed certainty to the UK but the FTSE 250-listed firm said its completions were likely to moderate slightly from the previous year’s 5.7% growth.

Analysts at Citigroup have pencilled in Bellway reporting pre-tax profits of £290mln as operating margins shrink due to the product mix and flattish house prices, with no big capital returns expected from the group as net cash is only estimated at around £71mln.

Significant announcements expected on Friday:

Trading announcements: Bellway PLC (LON:BWY), CVS Group (LON:CVSG)

Economic data: US non-farm payrolls

Around the markets

  • Sterling: US$1.2940, up 12 cents
  • 10-year gilt: yielding 0.611%
  • Gold: US$1,569.40 an ounce, down 60 cents
  • Brent crude: US$55.09 a barrel, up 16 cents
  • Bitcoin: US$9,774, up US$42

Business headlines

Financial Times

Donald Trump laid into Boris Johnson in a tense phone conversation concerning Britain’s decision to allow Huawei a role in its 5G mobile phone networks.

Activist investor Elliott Management has accumulated a stake worth US$2.5bn in SoftBank and is agitating for a US$20bn share buyback plus governance changes at the technology conglomerate.

Three Thai family-owned businesses have submitted formal first-round bids for the Thai and Malaysian operations of UK supermarkets giant Tesco.

The Daily Telegraph

Billionaire entrepreneur Peter Hargreaves is to sell £500 million-worth of shares in Hargreaves Lansdown – the business he co-founded.

Ministers say they will reclaim Britain’s mantle as the world’s foremost free trade champion by scrapping ‘nuisance tariffs’ on imports that could save households £8.3 billion a year.

Germany’s mighty manufacturing sector suffered 8.7% decline in orders in December than they had been a year earlier – their worst fall since the financial crisis last year.

Some of the Middle East’s richest states risk running out of money in less than a decade as oil production is hit by the rise of clean energy, the International Monetary Fund has warned.

Jaguar Land Rover stopped production at two of its UK plants on some days amid poor sales.

The Times

Factories across Europe face global supply chain disruption due to coronavirus outbreak and could be shut within weeks if it continues to spread.

The owner of The New York Times reported a 3.6% rise in turnover in the fourth quarter after adding more than 300,000 new digital subscribers, even as its advertising sales declined.

A rally in bond and equity markets has boosted investment returns at Beazley and offset the absence of any profit from the Lloyd’s of London insurer’s underwriting business last year.

Compass Group’s North American business has delivered underlying first-quarter revenue growth of 7.5%, underlining its position as the engine of the catering giant’s success.

Shares in Hurricane Energy fell by 17% after it warned it may have to plug and abandon a well to the west of the Shetland Islands.

Michael Fallon, the former defence secretary, has joined Genel Energy as one of several new directors on the oil producer’s board.

Zurich Insurance faces legal action from owners of flats in a development found to have serious fire safety failings after a judge rejected an attempt by the insurance giant to block litigation.

Daily Mail

Royal Mail shares plunged 8% in early trading to an all-time low as another row with unions threatened to derail its turnaround plan.

The Guardian

Twitter shares have climbed after the social network beat expectations by posting fourth quarter revenues of $1.01 billion on Thursday.

Uber’s shares soared yesterday in late trading after chief executive Dara Khosrowshahi said the heavily loss-making ride share company expects to be profitable by the end of 2020.