London midday: Stocks extend gains after global selloff; payrolls eyed
London stocks had regained further lost ground by midday on Friday, recovering from heavy losses in the previous session that took the top-flight index to its worst level since the Brexit referendum, as investors eyed the release of the latest non-farm payrolls report.
The FTSE 100 was up 1.4% to 6,797.01, having closed down 3.2% at 6,704.05 on Thursday as the arrest of Huawei’s chief financial officer sparked renewed concerns about Sino-US relations and a global selloff.
In currency markets, the pound was down 0.1% against the dollar at 1.2771 and 0.2% lower versus the euro at 1.1221 ahead of next week’s parliamentary vote on Theresa May’s Brexit deal.
While the gains in London are a welcome relief after Thursday’s "horrible" session, "this only claws back some of the losses", said Russ Mould, investment director at AJ Bell.
"The important point to note is the large swings in the market on a daily basis in recent weeks, which may suggest volatility could become one of the key themes in 2019.
"It would be possible to draw the conclusion that investors are overreacting to every little bit of information related to politics, economics and the markets. Ultimately it does tell you that investors are extremely nervous and confidence cannot be very high as we approach the end of the year."
Market participants were eyeing the latest US non-farm payrolls report and unemployment rate at 1330 GMT.
Neil Wilson, chief market analyst at Markets.com, said: "All eyes on the nonfarm payrolls figures today with the focus very much on the US yield curve. Do we get a strong print on wages (in particular as these are more important for inflation), that helps lift yields? Would a strong print also allay concerns about a slowdown in the US economy? Look for the NFP number to come in at 200k, a slowdown from the 250k a month ago."
Meanwhile, wages should come in above 3%, having hit a decade high of 3.1% last time.
"The problem is that firming wages and job creation, whilst it may allay fears the US economy is slowing, only makes it more likely the Fed will stick to its hiking schedule," Wilson said, adding that market expectations are now starting to price in only one hike next year.
On home shores, house prices were shown to have dropped much more than expected last month, with the latest survey from lender Halifax revealing annual growth fell to a six-year low amid intensifying political and economic uncertainty.
Compared to the month before, house prices fell 1.4% in November, versus market expectations for a 0.2% increase. Annual price growth in November limped to 0.3%, the lowest level since the end of 2012, down from the 1.5% growth seen in October and well below the 1.0% consensus forecast.
Alongside historically low mortgage rates, Halifax managing director Russell Galley said the relatively limited supply of new and existing properties for sale continued to sustain house prices nationally.
This was being undermined by a reduced supply of bank credit, pointed out economist Samuel Tombs at Pantheon Macroeconomics, as the Bank of England’s latest credit conditions survey indicated that uncertainty about Brexit has made banks more cautious about even secured lending.
"With political uncertainty only set to escalate when parliament rejects the Prime Minister’s Brexit deal next week, the housing market will remain in the doldrums over the coming months," Tombs said. "But even if, as we expect, a Brexit deal is signed off at the eleventh hour, extending the economic status quo for up to four years, house price growth likely will remain sluggish, as the MPC will start to raise Bank Rate at a faster rate."
Berkeley Group provided some cheer for the sector, however, as it posted a drop in half-year profit on the back of Brexit uncertainty but lifted its profit forecast for the full year.
George Salmon, equity analyst at Hargreaves Lansdown, said the results were "strong" but cautioned that there’s "only so much the group can do to look after its share price".
"Sentiment will remain closely tied to the Brexit barometer, since London could well be in the eye of the storm should a disorderly departure trigger a housing meltdown. While the shares remain something of a binary bet on Brexit in the short-term, looking further afield Berkeley’s niche operating model and enviable track record mean we think it should be a long-term winner."
Tesco was the standout gainer following an upgrade to ‘neutral’ from ‘underperform’ at Exane BNP Paribas.
Premier Oil gushed higher as it said year-to-date group production year to date had averaged 79,400 barrels a day, hitting a record 98,700 this week.
Games Workshop was on the front foot after saying first-half results would be in line with expectations for the year.
On the downside, Associated British Foods was the worst performer on the FTSE 100 as it said that its Primark retail arm endured a "challenging" period of trading last month but expectations for annual profits growth remain unchanged. In a statement ahead of its annual shareholder meeting, the food and clothing conglomerate repeated its guidance for adjusted earnings per share for the group to be flat for the full year.
AstraZeneca was in the red after saying that its immunotherapy Imfinzi did not meet the main goals of a late-stage study for the treatment of advanced head and neck cancer.
Animal genetics company Genus was also trading lower after saying it raised £68m in a share placing at 2,200p, which represents a 7.8% discount to the closing price of 2,386p on Thursday.
In broker note action, IP Group was battered by a downgrade to ‘underperform’ at Jefferies, while Centamin was cut to ‘hold’ at Berenberg and Rotork was boosted by an upgrade to ‘neutral’ at Credit Suisse.
FTSE 100 - Risers
Tesco (TSCO) 203.00p 4.77%
Just Eat (JE.) 557.20p 4.15%
Evraz (EVR) 482.60p 4.05%
Scottish Mortgage Inv Trust (SMT) 481.55p 4.01%
NMC Health (NMC) 3,217.12p 3.18%
Ocado Group (OCDO) 815.80p 3.16%
Taylor Wimpey (TW.) 137.20p 3.16%
Barratt Developments (BDEV) 477.40p 3.11%
CRH (CRH) 2,052.00p 3.04%
InterContinental Hotels Group (IHG) 4,190.00p 2.95%
FTSE 100 - Fallers
Associated British Foods (ABF) 2,286.00p -2.72%
Shire Plc (SHP) 4,519.50p -1.96%
Severn Trent (SVT) 1,848.00p -0.30%
Smith (DS) (SMDS) 306.50p -0.26%
AstraZeneca (AZN) 5,946.00p -0.15%
Ashtead Group (AHT) 1,619.50p -0.09%
Lloyds Banking Group (LLOY) 54.75p 0.10%
Bunzl (BNZL) 2,311.00p 0.17%
RSA Insurance Group (RSA) 509.00p 0.24%
Direct Line Insurance Group (DLG) 311.40p 0.26%
FTSE 250 - Risers
Games Workshop Group (GAW) 3,155.00p 5.34%
Just Group (JUST) 83.75p 4.69%
Premier Oil (PMO) 68.90p 4.24%
TBC Bank Group (TBCG) 1,484.00p 3.92%
Quilter (QLT) 114.88p 3.89%
Auto Trader Group (AUTO) 432.05p 3.34%
Avast (AVST) 271.75p 3.27%
Balfour Beatty (BBY) 238.10p 3.25%
IWG (IWG) 212.80p 3.20%
Bovis Homes Group (BVS) 888.00p 3.02%
FTSE 250 - Fallers
IP Group (IPO) 105.60p -7.21%
Genus (GNS) 2,254.00p -5.53%
Thomas Cook Group (TCG) 31.28p -4.23%
Amigo Holdings (AMGO) 245.30p -3.71%
Elementis (ELM) 173.30p -3.45%
BTG (BTG) 826.50p -3.11%
Sirius Minerals (SXX) 21.36p -2.22%
IMI (IMI) 895.00p -1.92%
Indivior (INDV) 81.49p -1.77%
Riverstone Energy Limited (RSE) 1,160.00p -1.69%