FTSE 100 set for solid start ahead of US jobs data

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  • FTSE 100 up 22 points
  • US adds 266,000 jobs instead of 1mln
  • AstraZeneca vaccine to be advised for over 40s only

2.45pm: US stocks start higher


US benchmarks started in the green on Friday as investors mulled over the big miss in the monthly jobs report.


The US economy added just 266,000 jobs in April this year, while consensus estimates had been for one million new positions.


The Dow Jones Industrial Average added around 44 points at 34,593 in early deals; the Nasdaq gained over 104 points at 13,736 and the S&P 500 jumped around 14 at 4,216.


“The debate on whether entitlement spending is hurting hiring will grow, but in the end this big miss should give Biden more ammunition to push through his next stimulus/infrastructure package,” noted analyst Edward Moya at Oanda.


“Hiring has been rapidly increasing across the country after an impressive vaccine rollout that has the country poised to reach 50% of the US population to be vaccinated by this month. This is only one report, but this is changing many traders thinking on how this recovery is unfolding.”


He added that the number was disappointing, but that “the US recovery still remains intact and Wall Street should still expect growth exceptionalism over the coming months, which in the end should lead to much higher Treasury yields”.


Banking and financial gaint ING said that the April report was “likely more a reflection of structural rigidities and supply constraints rather than any meaningful weakening in demand for labour”.


1.55pm: US jobs data comes well below forecast due to labour shortages


FTSE 100 retracted in the early afternoon, rising 22 points to 7,099.


US stock futures went into reverse an hour ahead of the Wall Street open after April’s US jobs growth proved much weaker than expected.


Employers added just 266,000 jobs last month, while unemployment rose to 6.1%. Reuters had predicted that April US non-farm payrolls (NFP) would increase by 978,000 jobs after rising by 916,000 in March.




It was likely due to labour shortages, Reuters reported, as businesses were overwhelmed by booming demand.


The unemployment rate rose slightly to 6.1%, the first increase in a year.




Naeem Aslam, chief market analyst at AvaTrade commented: “Looking at the US NFP data, it seems like that 1 was missing at the beginning of today’s number. Market was expecting nearly a million, and we got 266K. One thing is clear that the loose monetary policy isn’t going anywhere soon.”


“Traders have shown animals spirts when it comes to gold prices as the gold price is ripping all the resistance levels in its way. The dollar index was weaker going into the release of this data and now we know for certain that there is plenty of more weakness ahead. This has made gold traders go wild and the risk-off rally is in big time,” Aslam added.


1pm: UK to avoid AstraZeneca vaccine in under 40s amid blood clots concerns


The UK has decided to provide under 40s with an alternative to the vaccine developed by Oxford University and AstraZeneca PLC (LON:AZN).


The move comes after 242 cases of blood clots were reported among the 28.5mln doses administered in the UK.


One in 60,000 people in their 30s are at risk, compared to one in 100,000 people in their 40s, while risks of developing severe COVID-19 increase with age.


“Our position remains that the benefits of the COVID-19 Vaccine AstraZeneca against COVID-19, with its associated risk of hospitalisation and death, continue to outweigh the risks for the vast majority of people,” said Dr June Raine, chief executive of the Medicines and Healthcare products Regulatory Agency (MHRA)


“The balance of benefits and risks is very favourable for older people but is more finely balanced for younger people and we advise that this evolving evidence should be taken into account when considering the use of the vaccine.”


The MHRA advise people to seek medical advice if they experience a new onset of severe or persistent headache, blurred vision, confusion or seizures, develop shortness of breath, chest pain, leg swelling or persistent abdominal pain and unusual skin bruising or pinpoint round spots beyond the injection site.


Shares in the pharma giant were unmoved at 7,690.14p, while FTSE 100 trimmed its gains and was up 43 points to 7,119.


12.05pm: Wall Street set for green open after jobs data release


FTSE 100 continued its climb at midday, adding 51 points to 7,128.


In the US, futures are pointing at a green open for the Dow, the S&P 500 and the Nasdaq after a volatile week.


“In recent days, investors have been piling into risk-sensitive assets, including commodities and value stocks and anything that relies on economic growth,” said Fawad Razaqzada, analyst at ThinkMarkets.


“Indeed, the Dow surged to a fresh record high as more signs of an improving economy emerged, with applications for unemployment benefits falling last week to a fresh pandemic low. But on Thursday, the tech sector also found renewed strength as yields dipped on the back of dovish remarks from several Fed officials who have moved to alleviate speculation over monetary tightening amid rising inflationary pressures.”


It’s the first Friday of the month so that means it is US non-farm payrolls day with economists expecting the previous month’s forecast-busting 916,000 new jobs to be topped with a reading of around 925,000.


“Heading into the non-farm payrolls, the key question for stock market participants would be this: will the Nasdaq be able to extend its gains even if today’s jobs data triggers a bond market sell-off and cause yields to rebound?” Razaqzada added.


11.15am: Single-use plastic bags to cost 10p at all retailers in England


The Footsie was looking up in the late morning, jumping 40 points to 7,116.


Meanwhile, sterling rose 0.2% to US$1.3922 as it rebound following Thursday’s Bank of England announcements.


The UK government has increased the price of single-use plastic bags for all businesses in England from 5p to 10p, with the aim of reducing plastic pollution.


The new measure will be enforced from 21 May, with the Department for Environment, Food & Rural Affairs saying the charge helped drive down 95% plastic bag sales since it was first introduced in 2015.


A new survey by charity WRAP shows that 69% of respondents were either ‘strongly’ or ‘slightly’ in favour of the charge when it was first introduced, and that has increased now to 73%.


Two-thirds said they used a ‘bag-for-life’ – either fabric or more durable plastic – to take their shopping home for a large food shop in-store, with only 14% using a single-use carrier bag.


10.15am: Conservatives win Hartlepool from Labour in by-election


FTSE 100 was on the rise in mid-morning, jumping 33 points to 7,109.


Hartlepool has elected a Conservative MP for the first time ever in this week’s by-election.


Jill Mortimer beat Labour’s Paul Williams by 6,940 votes.


Meanwhile, the Scottish Parliamentary election will reveal whether the Scottish National Party (SNP) manages to gain an outright majority.


“The party fell slightly short in the 2016 election, and recent polls suggest it’s a close call again,” economists at ING Economics said.


“But even if the SNP fails to gain a majority this time, there is talk of some form of coalition or agreement with the Greens, which are also pro-independence. In other words, the result is likely to lead to renewed calls for a second referendum.”


8.55am: FTSE 100 gains altitude, but BA owner IAG left grounded after another set of dire results


The FTSE 100 made a positive start to what is expected to be a reasonably busy end to the week.


The Tory win in Hartlepool, a rock-solid Labour seat for more than half a century, may ease some pressure on Boris Johnson in the wake of ‘wallpapergate’ as should the results from the local elections.


Counting after the Scottish polls is underway. The predicted resounding win for the nationalists will bring more pressure for a second independence referendum.


So, for the PM one political headache may be replaced by another.


Imminent are the latest construction PMIs, which are likely to copper-bottom the Bank of England‘s bullish recovery scenario, while over in the US we have the monthly official jobs numbers.


On the market, the aerospace groups Rolls Royce (LON:RR.) and Melrose (LON:MRO), owner of GKN, were flying high(ish) with gains of 2% and 1.7% respectively.


Presumably, the early mark-up reflected a potential return to international travel, albeit limited to certain countries, which would then have a knock-on impact for the companies that maintain the world’s fleets of jet airliners.


For British Airways and Iberia owner IAG (LON:IAG) the picture was still a dour one – which might explain why the shares stood pat on a day of optimism for the wider sector.


The quarterlies revealed the company posted a near GBP1bn loss, while traffic has returned to just a quarter of its pre-Covid level.


“IAG may be poised for a return to the skies, but for the moment its prospects are grounded on factors beyond its control,” said Richard Hunter, head of markets at Interactive Investor.


Proactive news headlines


MGC Pharmaceuticals Ltd (LON:MXC, ASX:MXC) has announced the results of a Phase II clinical and preclinical studies on ArtemiC and its use in relation to COVID-19.


Sensyne Health PLC (LON:SENS) confirmed its MagnifEye software that uses artificial intelligence to automate the accurate reading and analysis of lateral flow diagnostics has been given the green light by the UK regulator.


Love Hemp Group PLC (LON:LIFE), the cannabidiol (CBD) product supplier, is to give subscribers to its newsletter who are aged 16 or over free access to the Togetherall platform. Togetherall is an online mental health and well-being support service.


Power Metal Resources PLC (LON:POW) said a new company is to be created to advance the Molopopo Farms Complex in Botswana. The plan is for the new company, in which Power Metal will have a 21.7% stake, to be listed on a recognised exchange in London this year.


Power Metal also informed shareholders it has published a new corporate presentation on its website.


Diversified Gas and Oil PLC (LON:DGOC) has enacted its name change and will now be called Diversified Energy Company PLC. The London listed shares will now trade under the ticker ‘DEC’.


Tiziana Life Sciences PLC (NASDAQ:TLSA, LON:TILS) announced that an interview with CEO and CSO Dr Kunwar Shailubhai will air on The RedChip Money Report on the Bloomberg Network in the US on Saturday, May 8 at 7pm local time. The RedChip Money Report airs on Bloomberg Television U.S. on Saturdays at 7 p.m. local time in approximately 73mln homes. The interview segment can be viewed on Youtube.


Chamberlin PLC (LON:CMH) said it has promoted the company’s financial controller, Alan Tomlinson, to the post of finance director, replacing Neil Davies, who will step down at the end of May.


San Leon Energy PLC (LON:SLE) has appointed John Brown as its new non-executive director.


Adams PLC (LON:ADA) on 6 May purchased 8mln ordinary shares in Seeing Machines Ltd (LON:SEE) on the open market at an average price of 11.35p per share for a total consideration of GBP908,000. This represents a stake of 0.21% of the currently issued ordinary share capital.


6:50 am: Firm start predicted


London’s leading equities are set for a firm start ahead of the release this afternoon of US jobs figures for April.


Spread betting quotes indicate the FTSE 100 will open 40 points higher at 7,107, more or less doubling yesterday’s rise in an instant.


US markets put their best foot forward yesterday with the Dow Jones industrial average jumping 318 points to 34,549 and the S&P 500 advancing 34 points to 4,202.


“With global recovery price action and the Non-Farms dominating investors’ minds, Asia’s data has been somewhat subsumed today. Nevertheless, it contained nothing to dull the recovery narrative. South Korea’s Trade Balance modestly outperformed, coming in at $7.82 billion. Japan’s Jibun Bank Services PMI improved to 49.5, with the street ignoring signals of extended and tightening Covid-19 restrictions in Japan,” reported OANDA’s Jeffrey Halley.


“Front and centre was China’s Caixin Services PMI, which rose strongly in April to 56.30. It indicated that the directional of travel for China’s domestic recovery continues in the right direction. It has also dampened any negative feedback on the tense geopolitical front between China, and seemingly, the rest of the entire planet this week.


“China has just released its Balance of Trade which has printed at $42.86 billion in dollar terms, well above the $28.1 billion expected. The YoY [year-on-year] export and import numbers have leapt massively but are slightly disingenuous, reflecting a shallow Covid-19 base in April last year. Nevertheless, the data is excellent and should be supportive, along with the Caixin PMI for regional equities today,” he added.


The Hang Seng has responded to the Chinese data by climbing 107 points to 28,745. Elsewhere in Asia, Japan’s Nikkei 225 is 45 points to the good at 39,376.


Forecasts for the increase in US non-farm payrolls are around the 1mln mark, though this forecast figure has been edging higher.


“Average estimates are for a number in the region of 1mln especially since weekly jobless claims are also trending lower dropping below 500k a week yesterday, and a post lockdown low, while the unemployment rate is expected to fall further, from 6% to 5.8%,2 said CMC’s Michael Hewson.


“This is very welcome especially since the participation rate has remained steady and actually edged up to 61.5% in March, and which is expected to move higher today, suggesting early signs that more disincentivised workers are returning to the workforce.


“Some Fed officials have indicated that they want to see clear evidence of the participation rate moving much higher before considering any change in monetary policy. It was notable from Fed chair Jay Powell’s most recent press conference that the FOMC wanted to see consistently good jobs numbers over a matter of months, with constant references to ‘substantial further progress’,” Hewson added.


On the domestic front, it’s “inter Friday” with travel-related stocks International Consolidated Airlines Group SA (LON:IAG), the owner of British Airways, and InterContinental Hotels Group PLC (LON:IHG) scheduled to report.


Both companies are likely to be in “putting a brave face on things” mode, with both waiting on the vaccinated cavalry to arrive and save their skins, although IAG more so than IHG.


UBS is forecasting first-quarter revenue of EUR1.1bn for IAG, in line with the consensus and way down on the EUR4.6bn raked in during the same period of 2020.


The Swiss bank is predicting a loss before interest and tax of EUR1.2bn, also in line with consensus, compared to a loss the year before of EUR535mln.


“The focus will be restructuring, balance sheet strength, cash burn, outlook for summer capacity and for rest of the year,” UBS said.


Due to the franchise structure of Holiday Inn owner IHG, the firm has been one of the few in the industry to continue delivering underlying profit during the pandemic, although not much is expected to have changed since the last update given most nations still have travel restrictions in place.


One potential bright spot may be internal demand from domestic travel, especially in the US, as well as growth from the Chinese market a year on from the country’s first pandemic shutdown.


Around the markets


  • Sterling: US$1.3907, up 0.15 cents
  • 10-year gilt: 0.795%, down 2.58 basis points
  • Gold: US$1,819.70 an ounce, up US$4.00
  • Brent crude: US$68.53 a barrel, up 44 cents
  • Bitcoin: US$55,963, down US$25

6.50am: Early Markets – Asia / Australia


Stocks in the Asia-Pacific region were higher on Friday following overnight moves on Wall Street where major US indices advanced on better-than-expected job numbers.


The Hang Seng index in Hong Kong advanced 0.24% while the Shanghai Composite in China gained 0.13%.


In Japan, the Nikkei 225 rose 0.19% and South Korea’s Kospi gained 0.77%.


Shares in Australia advanced, with the S&P/ASX 200 trading 0.22% higher.


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Proactive Australia news:


Noxopharm Ltd (ASX:NOX) is trading higher after revealing that a CEP-2 study will begin shortly for the US Food and Drug Administration (FDA) approved Investigational New Drug (IND) application for Veyonda(R) in first-line sarcoma treatment.


Calima Energy Ltd (ASX:CE1) (FRA:R1Y) is “extremely pleased” with flow rates from three horizontal Sunburst Formation operations performed by subsidiary Blackspur Oil Corp at the core Brooks area in Canada which have exceeded type curve estimates by 28%.


Kinetiko Energy Ltd (ASX:KKO) is trading higher on strengthening its position in gas-hungry South Africa by securing 100% of the Amersfoot Project, a near-term commercial production asset.


Arafura Resources Ltd (ASX:ARU) (OTCMKTS:ARAFF) (FRA:REB) has taken a further step towards financing the Nolans Rare Earth Project in the Northern Territory after receiving a non-binding letter of support from the Australian Government’s export credit agency, Export Finance Australia (EFA).


Emperor Energy Ltd (ASX:EMP) is incrementally piecing together, step by step, the Judith Gas Field Project in Victoria, according to director Phil McNamara.


Bellevue Gold Ltd (ASX:BGL) (OTCMKTS:BELGF) has received an updated target price of A$1.25 from Canaccord Genuity following an upgrade in global resources to 8.5 million tonnes at 9.9 g/t gold for 2.7 million ounces.


WA Kaolin Ltd (ASX:WAK) is on target and within budget with the ongoing stage-1 work program at the wholly-owned Wickepin Kaolin Project in Western Australia.


Strategic Elements Ltd‘s (ASX:SOR) Autonomous Security Vehicle (ASV) has achieved an important milestone by passing Site Acceptance Testing (SAT) at the Eastern Goldfields Regional Prison.

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