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London open: Stocks rise on US debt deal; all eyes on payrolls
London stocks rose in early trade on Friday after the US Senate passed a bi-partisan agreement to raise the debt ceiling, and as investors eyed the latest non-farm payrolls report.
At 0820 BST, the FTSE 100 was up 0.5% at 7,523.85 amid relief that the US has averted a debt default.
Richard Hunter, head of markets at Interactive Investor, said: “Investor optimism ahead of the Senate vote proved to be well-founded as the debt ceiling issue was resolved, with just days to go, after the closing bell.
“While the issue was expected ultimately to reach a satisfactory conclusion, there was nonetheless relief as the legislation avoids what would have been a disastrous US default. Attention will now revert to the other pressing issues of the day, most notably the next move on interest rates from the Federal Reserve.
“Comments from Fed members also lifted sentiment, suggesting that the time for a pause in the rate hiking cycle might now be appropriate. The consensus has swung again to a reported 75% chance that there will be no hike at the upcoming June meeting.
“However, a strong non-farm payrolls report later today could upset that particular applecart. The current forecast is for 190,000 jobs to have been added in May, as compared to a figure of 253,000 the previous month.”
The payrolls report for May is due at 1330 BST, along with the unemployment rate and average earnings.
In equity markets, heavily-weighted miners were the top performers as copper prices rose, with Antofagasta, Anglo American, Glencore and Rio all up.
Dechra Pharmaceuticals surged after it agreed to be taken private in a £4.5bn deal.
The veterinary medicine firm said it had accepted an all-cash offer of 3,875p per share from Swedish private equity firm EQT and Luxinva, a subsidiary of the Abu Dhabi Investment Authority.
Elsewhere, JD Sports gained as US sportswear retailer Lululemon surged in after-market trade after lifting its full-year outlook.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Antofagasta Plc | +5.54% | +76.50 | 1,456.50 |
| 2 |  |
Anglo American Plc | +5.41% | +124.50 | 2,424.00 |
| 3 |  |
Prudential Plc | +4.77% | +52.00 | 1,143.00 |
| 4 |  |
Rio Tinto Plc | +4.63% | +226.00 | 5,112.00 |
| 5 |  |
Bhp Group Limited | +4.32% | +97.00 | 2,340.00 |
| 6 |  |
Carnival Plc | +3.79% | +30.80 | 844.40 |
| 7 |  |
Glencore Plc | +3.63% | +15.15 | 432.05 |
| 8 |  |
Ocado Group Plc | +3.12% | +11.00 | 363.40 |
| 9 |  |
Land Securities Group Plc | +3.00% | +18.20 | 625.40 |
| 10 |  |
British Land Company Plc | +2.75% | +9.50 | 355.20 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Centrica Plc | -1.04% | -1.25 | 118.65 |
| 2 |  |
Severn Trent Plc | -1.03% | -28.00 | 2,679.00 |
| 3 |  |
Sse Plc | -0.96% | -18.00 | 1,862.00 |
| 4 |  |
Bae Systems Plc | -0.95% | -9.00 | 935.80 |
| 5 |  |
Astrazeneca Plc | -0.74% | -86.00 | 11,584.00 |
| 6 |  |
Melrose Industries Plc | -0.55% | -2.70 | 485.70 |
| 7 |  |
Bunzl Plc | -0.51% | -16.00 | 3,134.00 |
| 8 |  |
United Utilities Group Plc | -0.48% | -5.00 | 1,027.00 |
| 9 |  |
Compass Group Plc | -0.27% | -6.00 | 2,208.00 |
| 10 |  |
British American Tobacco Plc | -0.25% | -6.50 | 2,551.00 |
US close: S&P, Nasdaq reach nine-month highs as sentiment surges
Wall Street’s equity markets ended on a high note on Thursday, with both the Nasdaq Composite and the S&P 500 closing at their highest points in more than nine months.
At the close, the Dow Jones Industrial Average was up 0.47% at 33,061.57, while the S&P 500 climbed 0.99% to end the day at 4,221.02.
The tech-focussed Nasdaq Composite was ahead 1.28% by the closing bell, finishing at 13,100.98.
Upbeat sentiment was put down to a combination of encouraging economic data, as well as progress on Capitol Hill over raising the federal debt ceiling.
In currency markets, the dollar was slightly weaker against its European counterparts, slipping 0.03% on sterling to trade at 79.81p, and losing 0.01% against the common currency to 92.91 euro cents.
The greenback did, however, gain a marginal 0.02% against the yen to change hands at JPY 138.83.
“Now that Democrats and Republicans have basically agreed to raise the US debt ceiling and a new bill is expected to become law before the 5 June cut-off date at which the US would default, the dollar advance stalls,” said IG senior market analyst Axel Rudolph earlier.
“Comments by permanent voters, Fed governors Philip Jefferson and Patrick Harker, in which they expressed a preference to skip a potential interest rate hike this month, led to a repricing of risk ahead of Friday’s all-important nonfarm payrolls and average hourly earnings.”
Labour market data paints better-than-expected picture
On the economic front, fresh figures from the Labor Department suggested a slightly better than expected situation in the jobs market.
Unemployment claims for last week totaled 232,000 – a minor increase of 2,000 from the prior week’s revised figures.
Experts had projected a higher climb to 235,000, with the milder uptick following a 1,000 upward revision for the week before’s data.
The four-week moving average, often regarded as a more reliable metric due to its capacity to mitigate the weekly data’s volatility, stood at 229,500.
That represented a drop of 2,500 from the preceding week’s revised average of 232,000.
Private sector job growth meanwhile surpassed predictions in May, with ADP reporting an employment boost of 278,000, significantly outpacing the forecast 170,000.
The growth was primarily driven by small businesses, which added 235,000 jobs.
Midsize firms also experienced an increase, creating 140,000 new roles, while large businesses reported a decline, shedding 106,000 jobs.
The service sector added 168,000 positions, and the goods-producing sector saw a 110,000 job increase.
However, the wage picture was less rosy, with job changers experiencing a 12.1% increase in pay, down by a full percentage point from April.
Wage growth for those who kept their jobs was 6.5% in May, slightly down from the 6.7% recorded in April.
“This is the second month we’ve seen a full percentage point decline in pay growth for job changers,” said Nela Richardson, chief economist at ADP.
“Pay growth is slowing substantially, and wage-driven inflation may be less of a concern for the economy despite robust hiring.”
In contrast to the relatively encouraging employment figures, the US manufacturing sector continued to struggle, with the ISM manufacturing index falling to 46.9% in May, marking the seventh straight month of contraction.
The figure came in slightly short of the anticipated 47.0%.
Moreover, the new orders index slipped to 42.6% from April’s 45.7%, and the production index dropped to 51.1% from 48.9%.
The prices index also fell sharply to 44.2%, down by nine percentage points from the previous month, while the backlog of orders index followed suit, registering 37.5%, a decline from April’s 43.1%.
Andrew Hunter, deputy chief US economist at Capital Economics, said the slight decline in the manufacturing index reinforced the view that the jump in manufacturing output in April would not be sustained.
“But the bigger news was the renewed plunge in the new orders index, suggesting that the economy is still at high risk of falling into recession,” he said.
“Overall, the report suggests the resilience of the hard activity data in April was not the start of an improving trend and that a recession over the coming months is still a significant risk.
“In that environment, there is still plenty of justification for the Fed to pause interest rate hikes at the FOMC meeting later this month.”
Victoria’s Secret tumbles, department stores maintain their poise
In equites, Salesforce dropped 4.69% after the release of the software company’s first-quarter results.
Victoria’s Secret & Co closed 8.72% lower, as the lingerie retailer reduced its full-year sales forecast, citing weaker consumer demand.
On the upside, Macy’s shares ended the day 1.18% higher, reversing earlier losses despite the department store chain reducing its annual sales and profit forecasts.
The company said earlier that it now expected net sales to fall between $22.8bn and $23.2bn for 2023, a decrease from the prior forecast of $23.7bn to $24.2bn.
It also expected comparable owned-plus-licensed sales to decline by 6% to 7.5%, worse than the previous prediction of a 2% to 4% fall.
Meanwhile, upscale department store Nordstrom saw its shares rise 4.71% on the back of better-than-expected first-quarter results, along with a maintained full-year guidance.
Friday newspaper round-up: RMT strike, Elon Musk, Apple, Boeing
More than 20,000 rail workers in England have begun a 24-hour strike that will cancel half of services on affected lines as part of a long-running dispute with train operators over jobs, pay and conditions. The stoppage by the National Union of Rail, Maritime and Transport Workers (RMT) – the second of three by rail unions to hit the network this week – will affect most operators in England and some cross-border services into Scotland and Wales. – Guardian
Elon Musk is being accused of insider trading in a proposed class action lawsuit by investors. They say the Tesla CEO manipulated the cryptocurrency Dogecoin, costing them billions of dollars. In a Wednesday night filing in Manhattan federal court, investors said Musk used Twitter posts, paid online influencers, his 2021 appearance on NBC’s Saturday Night Live and other “publicity stunts” to trade profitably at their expense through several Dogecoin wallets that he or Tesla controls. – Guardian
Apple has denied allegations that it helped US authorities spy on Russian iPhone users. Russia’s Federal Security Service (FSB) on Thursday claimed it uncovered a US National Security Agency (NSA) operation which hacked several thousand iPhones using sophisticated surveillance software. The US intelligence agency was allegedly able to use specifically-designed “software vulnerabilities” to infect Apple’s phones with previously unknown malware, according to Russia’s foreign ministry. – Telegraph
Activity in mergers and acquisitions in Britain is at its lowest level in seven years as dealmakers remain cautious about the economic outlook. The total value of mergers and acquisitions involving UK companies has more than halved to $89 billion in the first five months of the year and the number of deals announced has dropped by 29 per cent, according to the deals intelligence team at the London Stock Exchange Group (LSEG). – The Times
Boeing is bracing itself for another 18 months of instability in its supply chain as it moves to increase production. Dave Calhoun, the group’s chief executive, acknowledged that it had suffered because of failures and shortfalls across its “very large, very fragmented” base of suppliers. – The Times
