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London open: Stocks steady ahead of payrolls; Direct Line jumps
London stocks were steady in early trade on Friday as investors mulled the latest UK house price data and looked ahead to the release of the US non-farm payrolls report, with deal news in focus as Direct Line agreed to be taken over by Aviva.
At 0835 GMT, the FTSE 100 was flat at 8,346.20.
The payrolls report for November is due at 1330 GMT, along with the unemployment rate and average earnings.
Patrick Munnelly at Tickmill Group said: “Forecasts suggest a 200,000 job increase in November, following a dip in October due to hurricanes and strikes. The unemployment rate is anticipated to rise slightly to 4.2% from 4.1%. Markets are hoping for a balanced outcome: not too strong to undermine the likelihood of a rate cut, nor too weak to spark concerns about economic health.
“Futures currently imply a 70% chance of a rate cut by the Fed on December 18, suggesting that a strong jobs report could provoke a significant market reaction, especially as recent softer data has led futures to incorporate another quarter-point cut for 2025.”
On home shores, figures released earlier by Halifax showed that house prices rose in November for the fifth month in a row to hit a record high of £298,083.
Prices ticked up 1.3% on the month following a 0.4% jump in October.
Meanwhile, annual house price growth was 4.8% in November – the strongest level since November 2022 – following 4% growth the month before.
Amanda Bryden, head of mortgages at Halifax, said: “Latest figures continue to show improving levels of demand for mortgages, as an easing in mortgage rates boost buyer confidence. However, despite these positive trends, many potential buyers and movers still face significant affordability challenges and buyer confidence may be tested against a changeable economic backdrop.
“As we move towards the end of the year and into 2025, positive employment figures and anticipated decreases in interest rates are expected to continue supporting demand. This should underpin further house price growth, albeit at a modest pace as borrowing costs remain above the average of a few years ago.”
Paul Dales, chief UK economist at Capital Economics, said: “The 1.3% m/m leap in Halifax house prices in November mirrors the 1.2% m/m rise in the Nationwide measure and suggests that some relief rally or release of pent-up demand after the Budget has more than offset the latest rise in mortgage rates.
“Prices are very unlikely to continue rising at this rate – the latest rise in mortgage rates will bite eventually. That said, the falls in market swap rates in recent days suggest that mortgages rates will start to drift a little lower in the coming weeks.
“And our forecast that the economy will strengthen next year and a fall in Bank Rate from 4.75% now to 3.50% by early 2026 (rather than to 3.75-4.00% as investors expect) will reduce mortgage rates to just below 4.00%, suggests that house prices will have a decent 2025. We’re forecasting a 3.5% rise compared to the consensus forecast of 2.50-3.00%.”
In equity markets, Direct Line surged as it accepted a takeover offer from rival Aviva after the latter increased its bid to 275 a share.
The company reiterated that it was confident of its prospects as a standalone operation, but after considering the new offer with advisers and consulting with shareholders it decided the latest bid was at a value that it could recommend acceptance.
Aviva has until 1700 GMT on Christmas Day to make a firm offer under UK takeover rules.
Derren Nathan, head of equity research at Hargreaves Lansdown, said: “The deal, a mix of cash, shares, and a small dividend, delivers a 73% premium to Direct Line’s pre-offer price. Direct Line’s board had been holding out, insisting they could make it on their own.
“But even they had to admit that Aviva’s proposal is a golden ticket they’d struggle to match independently. Confidence in their solo strategy aside, this offer was just too good to pass up.
“Let’s not sugarcoat it: Direct Line has hit some serious potholes lately. Market share has been sliding, underwriting hasn’t exactly been flawless, and regulators have been knocking on the door. But with a fresh leadership team at the wheel, the company has been working on a bold turnaround plan.
“For Aviva, the price is pushing the limit of good value but snapping up Direct Line could be a strategic jackpot. It cements their place as a heavyweight in the UK home and motor insurance markets and brings fresh opportunities to steer Direct Line’s transformation, while squeezing out efficiency gains from their combined scale.”
In broker note action, AO World was boosted by an initiation at ‘buy’ by Deutsche Bank.
However, Spirax was hit by a downgrade to ‘neutral’ at JPMorgan, while AJ Bell was knocked lower by a downgrade to ‘hold’ at Deutsche Bank.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Coca-cola Europacific Partners Plc | +1.63% | +100.00 | 6,240.00 |
| 2 |  |
Investec Plc | +1.31% | +7.50 | 579.50 |
| 3 |  |
Aib Group Plc | +1.14% | +5.00 | 444.50 |
| 4 |  |
Vodafone Group Plc | +1.12% | +0.80 | 72.38 |
| 5 |  |
Standard Chartered Plc | +1.09% | +10.60 | 981.00 |
| 6 |  |
Sainsbury (j) Plc | +1.05% | +2.80 | 270.40 |
| 7 |  |
Prudential Plc | +0.98% | +6.40 | 662.80 |
| 8 |  |
Smurfit Westrock Plc | +0.94% | +40.00 | 4,302.00 |
| 9 |  |
Bp Plc | +0.94% | +3.55 | 382.75 |
| 10 |  |
Diageo Plc | +0.89% | +21.50 | 2,450.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Next Plc | -2.31% | -236.00 | 9,994.00 |
| 2 |  |
Severn Trent Plc | -2.04% | -56.00 | 2,686.00 |
| 3 |  |
Spirax Group Plc | -1.73% | -130.00 | 7,365.00 |
| 4 |  |
United Utilities Group Plc | -1.64% | -18.50 | 1,110.50 |
| 5 |  |
Pershing Square Holdings Ltd | -1.64% | -64.00 | 3,846.00 |
| 6 |  |
Carnival Plc | -1.54% | -29.50 | 1,882.00 |
| 7 |  |
Dcc Plc | -1.24% | -70.00 | 5,565.00 |
| 8 |  |
Tesco Plc | -1.12% | -4.20 | 370.30 |
| 9 |  |
Anglo American Plc | -1.06% | -26.50 | 2,465.50 |
| 10 |  |
Rolls-royce | -0.95% | -5.60 | 583.00 |
US close: Stocks retreat from record highs ahead of payrolls data
US stocks were in the red on Thursday with all three Wall Street benchmarks pulling back from record highs.
Labour market data and a flurry of retailer earnings – along with a continued surge in the price of bitcoin – were dominating headlines during the session, with investors choosing to take profits ahead of the all-important non-farm payrolls release on Friday.
The Dow slipped 0.55% to 44,7651.71, the S&P 500 fell 0.19% to 6,071.11, while the Nasdaq fell 0.18% to 19,700.26 – with the latter two indices snapping a four-day winning streak.
“Investor sentiment remains positive, and everyone expects a rally into Christmas,” said David Morrison chief market analyst at Trade Nation. “There’s been a sharp increase in leveraged positions and option plays favouring a continuation of the rally, and it rather feels as if everyone has rushed to the same side of the boat. History tells us that in these situations, it’s wise to wear a lifejacket.”
Data takes centre stage
On the macro front, the Labor Department reported that jobless claims hit 224,000 last week, up from 213,000 in the previous week and ahead of expectations of 215,000.
Challenger, Gray & Christmas revealed that US employers announced 57,727 job cuts in November, up from October’s 55,597 print and 45,510 at the same time a year earlier for the fourth-highest November reading since 2008. For the year as a whole, companies announced 722,566 job cuts, up 5.2% from 686,860 announced through November of last year.
Finally, the US trade deficit narrowed to $73.8bn in October, according to the Bureau of Economic Analysis, down from an upwardly revised print of $83.8bn gap in September and better than expectations for a reading of $75.0bn. Exports declined 1.6% to $265.7bn, while imports contracted 4% to $339.6bn.
Looking ahead to Friday’s session, non-farm payrolls are expected to have climbed by 200,000 in November, according to the consensus forecast, following a gain of just 12,000 in October – when data was distorted by hurricanes and strikes.
“We look for nonfarm payrolls to have risen 205,000 […] with about 38,000 returning strikers and 60,000 workers impacted by Hurricanes Helene and Milton contributing to the rebound in job growth,” said Nancy Vanden Houten, lead US economist at Oxford Economics.
Market movers
Clothing retailer American Eagle slumped 14% on the back of disappointing revenues for the third quarter and weak forward guidance for the holiday season, pointing to comparable sales growth of just 1% over the current quarter.
Shares in discount retailer Five Below jumped 10% as a result of better-than-expected earnings and profits in the third quarter.
Sector peer Dollar General finished more or less flat after reducing the top end of its profit guidance for the full year.
Meanwhile, supermarket group Kroger pushed higher after topping quarterly sales estimates on the back of increased demand for fresh, cheaper groceries.
Friday newspaper round-up: Boeing, Boohoo, nuclear power stations
Ten years ago, marketing executives at Britain’s biggest supermarket had a brainwave: might slashing the price of basic vegetables tempt shoppers to do their Christmas shop with them? Tesco, under chief executive Dave Lewis, was trying to revive a business reeling after falling sales, five profit warnings and an accounting scandal. That promotion in December 2014, dubbed its Festive Five, offered bags of carrots, potatoes, brussels sprouts, parsnips and a cauliflower for 49p each. – Guardian
A US federal judge on Thursday rejected plane giant Boeing’s agreement to plead guilty to fraud after two fatal crashes of its 737 Max passenger jets, faulting a diversity and inclusion provision in the deal regarding the selection of an independent monitor to audit the company’s compliance practices. Boeing and the US justice department now have 30 days to update the court on how they plan to proceed in the case, Judge Reed C O’Connor of the northern district of Texas ordered. – Guardian
The former boss of Boohoo resigned after alleged stalking and “corporate espionage” targeted at several of the retailer’s executives. John Lyttle, who stepped down on October 18 after five years as chief executive, is understood to have cited stalking and surveillance concerns as reasons for his exit. Lyttle, Dan Finley, Boohoo’s chief executive, and co-founder Mahmud Kamani, claim to have over the past few months been routinely followed by men on public transport and in other public spaces, at locations in London, Kent and Manchester. – The Times
Building new nuclear power stations will be “essential” to decarbonising Britain’s energy system, Ed Miliband has said, insisting that investing taxpayer money could deliver “big returns” for the country. In his first speech on nuclear power since being reappointed energy secretary, Miliband said that despite “this being a time of immense challenge” for the public finances, the government was “determined to drive forward nuclear through both public and private investment”. – The Times
An additional 100,000 workers have been dragged into a ‘60pc tax trap’ in the past year, figures from HM Revenue & Customs have revealed. The number of taxpayers earning between £100,000 and £125,000 in 2023-2024 stood at 634,000, up 18pc from the previous year, when 537,000 were caught. The tax trap applies when the personal allowance, which is £12,570 for the 2024/25 tax year, begins to fall because the worker earns £100,000. – Telegraph
