FTSE 100 still in the red despite positive start on Wall Street

  • FTSE 100 down 9 points
  • US adds 559,000 jobs in May
  • Bitcoin hit by latest Elon Musk tweet

2.42pm: Wall Street opens in the green

Wall Street has made a positive start to Friday’s session despite the latest batch of non-farm payrolls data falling short of expectations.

Shortly after the opening bell, the Dow Jones Industrial Average was up 0.43% at 34,724 while the S&P 500 climbed 0.55% to 4,216 and the Nasdaq rose 0.75% to 13,716.

The higher start came after the latest jobs data reported that the US economy added 559,000 jobs in May, up from 278,000 in April but below the 675,000 predicted by analysts. The unemployment rate, meanwhile, fell to 5.8% from 6.1% the month before.

Back in London, the FTSE 100 was still slightly in the red in late afternoon, down 9 points at 7,054 at around 2.40pm.

2pm: Wall Street futures turn green as US adds 559,000 jobs in May

The Footsie clawed back some losses in the afternoon, dipping only 4 points to 7,059.

Wall Street futures turned green after the latest US jobs data showed a 559,000 gain in non-farm payrolls in May.

Economists at Capital Economics said it was at least an improvement on the 278,000 gain in April but, with the level of employment still 7.6mln below its pre-pandemic peak, it would take more than 12 months at that pace to fully eradicate the shortfall.

“Only a few months ago we had expected to see several months’ worth of gains north of one million as the economy reopened, but labour supply is bouncing back much more slowly than demand,” said chief US economist Paul Ashworth.

“Not surprisingly, the biggest gains last month came in the sectors worst affected during the pandemic. the reopening of high-contact services and schools generated a 292,000 gain in leisure & hospitality and a 144,000 gain in public and private education,” he added.

“But employment in those sectors is still roughly 2.5mln and 1.0mln respectively below pre-pandemic levels. Otherwise, manufacturing employment increased by 23,000, led by a 25,000 rebound in motor vehicle manufacturing, which suggests the impact of semiconductor supply shortages eased a little in May.”

1.30pm: Bitcoin price slides following more Musk Twitter antics

The FTSE 100 dived again in the early afternoon, sliding 24 points to 7,039.

The price of Bitcoin turned downwards early on Friday and was still struggling by the afternoon following yet more crypto-related antics from Tesla boss Elon Musk.

In early afternoon deals in London, Bitcoin was down 6.1% in the last 24 hours at US$36,110, giving it a market cap of around US$676.2bn.

The latest slide appeared to have been triggered by a cryptic tweet from Musk overnight which appeared to imploy the billionaire had ‘fallen out of love’ with Bitcoin.

 This isn’t the first time Musk’s Twitter activity has caused price swings in the crypto markets, with the Tesla CEO’s backing of Dogecoin on multiple occasions being credited with some of the meme-based crypto’s biggest rises and drops in price this year.

12.40pm: UK approves Pfizer/BioNTech COVID-19 jab for kids aged 12-15

The FTSE 100 trimmed its losses at lunchtime and was down only 6 points to 7,057.

The Medicines and Healthcare products Regulatory Agency (MHRA) has authorised the Pfizer/BioNTech COVID-19 vaccine for kids aged 12-15.

Researchers said the jab is safe and effective in this age group and that the benefits of this vaccine outweigh any risk.

Trials involves over 2,000 people aged between 12 and 15, with no cases of COVID-19 from 7 days after the second dose in the vaccinated group, compared with 16 cases in the placebo group.

Data on neutralising antibodies showed the vaccine working at the same level as seen in adults aged 16-25 years.

Professor Sir Munir Pirmohamed, Chair of the Commission on Human Medicines, said these were “extremely positive” results.

11.50am: Wall Street called lower ahead of hotly anticipated US jobs data

The FTSE 100 stayed put and was down 14 points to 7,049.

US indices are called slightly lower ahead of the hotly anticipated US jobs data.

The Dow Jones is expected to shed 70 points to 34,497 at open, with the S&P 500 down 4 points to 4,187 and the Nasdaq down 12 points to 13,516.

Consensus sets 650,000 new jobs in May, with unemployment down to 5.9% from 6.1%.

Last month’s figures missed expectations, with only 266,000 jobs added, so May’s reading will help determine whether the weak April print was a one-off or the start of a new trend, analysts say.

“The ADP private payroll report, initial jobless claims and the employment subcomponent in the ISM services PMI all point to a stellar report,” noted Sophie Griffiths at OANDA.

“A strong labour market, combined with elevated inflation, could prompt the Fed to start tapering support to the economy, a concern that dragged stocks lower in the previous session. With this in mind, a better-than-expected jobs report could drive equities lower, particularly high-growth tech stocks, which are more sensitive to interest rate expectations.”

10.55am: UK construction benefits from housing activity boom

The FTSE 100 dipped further in late morning, sliding 19 points to 7,044.

The Markit/CIPS construction PMI jumped to 64.2 in May, from 61.6 in April, but missed consensus of 62.0.

Orders have been growing at the fastest rate since the survey began 24 years ago and emerging supply bottlenecks contributing to sharp increases in prices.

According to economists at Pantheon Macroeconomics, the upturn was driven by a jump in the housing activity index to 66.3, from 61.2 in April.

“Both the commercial and civil engineering sectors are benefiting from the rebound in business confidence, which has resulted in many firms giving the go-ahead to mothballed projects,” said chief UK economist Samuel Tombs.

“Looking ahead, however, growth likely will start to slow as supply-side constraints bite. Output in March was only 0.3% below its 2019 average, and the further recovery in output since then has led to raw material and labour supply problems.”

“When construction businesses pass on these higher costs to end customers, demand likely will start to cool off.”

9.50am: Indian COVID-19 variant (Delta) may increase risk of hospitalisation, officials say

The FTSE 100 turned red in mid-morning, dropping 13 points to 7,051.

Public Health England (PHE) has warned that the Indian COVID-19 variant (Delta) may cause an increased risk of hospitalisation compared to the Kent strain (Alpha).

The cases of Delta in the UK have risen by 5,472 since last week to 12,431, with Bolton remaining the most affected area, though transmission rate is falling.

The news comes as a study published on The Lancet revealed that the Pfizer vaccine causes a lower antibody response against the Delta variant compared to the original COVID-19 strain.

People getting the first two doses have five times lower neutralising antibodies, according to the Francis Crick Institute and the National Institute for Health Research.

However, researchers noted that the levels of antibodies isn’t enough to predict how effective jabs will be, but need to be analysed alongside population studies.

“With this variant now dominant across the UK, it remains vital that we all continue to exercise as much caution as possible. The way to tackle variants is to tackle the transmission of COVID-19 as a whole. Work from home where you can, and practice ‘hands, face, space, fresh air’ at all times,” said Dr Jenny Harries, chief executive of the UK Health Security Agency.

“If you are eligible and have not already done so, please come forward to be vaccinated and make sure you get your second jab. It will save lives.”

8.45am: Traders braced for bout of inflation collywobbles 

As predicted, the FTSE 100 opened more or less where it left off on Thursday with traders prepared to sit on their hands ahead of American jobs data later.

The non-farm payroll (NFPs) update is likely to reveal a strong month-on-month rebound; however, it’s the strength of said rebound that has split economists.

The spread is a wide one with the experts predicting that 650,000-750,000 new openings were created in May compared with 266,000 in April (which was a major undershoot).

If the figure is at the top of the range, or above the upper number, then the debate will turn from jobs to inflation.

The worry is the world’s largest economy may be recovering from the pandemic too quickly, putting pressure on prices. We have already seen signs of this in the US construction sector where raw material costs have started increase rapidly.

For the markets, inflation outside the current range spells an end to the ultra-easy monetary policy that continues to support stock buying activity, particularly in the red hot tech sector.

The recent, albeit fleeting, rotation into value stocks is indicative of the concerns being grappled with.

“The UK is also at something of an inflexion point,” points out Richard Hunter, head of markets at Interactive Investor.

“On the one hand, recent economic data is pointing to a burgeoning recovery, as evidenced by strong manufacturing and services sectors readings, with the UK’s leading position in its vaccination rollout enabling the release of some pent-up demand.

“At the same time, however, this very growth is also putting pressure on supply, where imbalances are beginning to emerge in the face of labour and raw material shortages.

“In addition, the government’s additions to the amber and red travel lists has dealt another blow to the beleaguered airline and tourism sectors, while doubts over the June 21 release date is another potential headwind.”

On the market, British Airways and Iberia owner IAG (LON:IAG) was laid low with a case of the holiday blues after Portugal was added to the UK’s travel red list. The suspicion is more European holiday destinations will be added.

IAG stock opened 2.3% lower. easyJet (LON:EZJ), off 2.6%, and Wizz Air (LON:WIZZ), down 1.7%, were similarly affected.

6.50 am: Flat start predicted 

As is often the case, traders seem prepared to sit on their hands until the release of the monthly US jobs figures this afternoon.

Spread betting quotes indicate the FTSE 100 will open where it left off yesterday, unchanged at 7,063.

US indices were not especially decisive yesterday, either, with the Dow Jones sliding 23 points to 34,577 and the S&P diving 15 points to 4,193.

In Asia this morning, Japan’s Nikkei 225 I off 107 points at 28,951 but Hong Kong’s Hang Seng is going the other way, up by a single point at 28,967.

“645,000 is the expected figure for the headline non-farm jobs growth for the month of May – if correct, this would represent a sharp improvement from last month’s disappointing 266,000 print (when 1mln was expected),” said Fawad Razaqzada, in a preview of the US non-farm payrolls (NFP) release.

The unemployment rate is expected to ease to 5.9% from April’s 6.1%, which would be the lowest level since April of last year, while wages are expected to have grown 0.2% month-on-month after a 0.7% hike in April.

“Overall, the pre-NFP leading indicators have been mixed. Most notably, the ISM employment component for the dominant services sector suggests employment was not too strong in May. This may mean we will see another disappointing NPP headline on Friday, which could send the dollar back lower and potentially keep the stock markets supported,” Razaqzada opined.

Payrolls processing firm ADP has, as usual, issued its data on private-sector job additions ahead of the release of the official NFP release, and this came in at 978,000, which was well ahead of the 650,000 economists had been expecting, so there may have been some last-minute tweaking of NFP forecasts.

In the UK, at 9.00am, the private car registrations numbers for May will be released.

April was the month in which car showrooms were finally able to reopen and that month saw a massive release of pent-up demand with registrations more than double what they were in April 2019 (i.e. pre-pandemic).

Pantheon Macroeconomics thinks May will see the market come off the boil, with numbers down 10% on two years ago.

At 9.30am, the Markit/CIPS construction survey is released, with the consensus forecast being that the reading will edge up to 62.0 from April’s 61.8, although some dissenting voices say a shortage of raw materials and the proverbial (and actual) April showers will have choked back growth.

There is little of interest officially scheduled in the UK corporate diary but something will doubtless turn up, thus preventing us from starting the weekend early.

Around the markets

  • Sterling: US$1.4091, down 0.15 cents
  • Gilt: 0.842%, +4.04 basis points
  • Gold: US$1,869.70 an ounce, down US$3.60
  • Brent crude: US$71.16 a barrel, down 15 cents
  • Bitcoin: US$36,901, down US$1,791

6.50am: Early Markets – Asia / Australia

Stocks in the Asia-Pacific region were mixed on Friday as the Reserve Bank of India cut its projection for FY22 GDP growth to 9.5% from the earlier forecast of 10.5%.

The Shanghai Composite in China lifted 0.68% but Hong Kong’s Hang Seng index fell 0.13%

In Japan, the Nikkei 225 dipped 0.38% while South Korea’s Kospi fell 0.16%.

Shares in Australia lifted, with the S&P/ASX 200 trading 0.49% higher.

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Proactive Australia news:

Noxopharm Ltd (ASX:NOX) welcomes the news that Novartis’ experimental drug, 177Lutetium-PSMA-617, looks set to become an important new treatment for late-stage prostate cancer based on new Phase 3 clinical trial data.

Cipherpoint Ltd (ASX:CPT) has enjoyed a productive June quarter, with good revenue momentum and pipeline growth through the provision of technical services and the delivery of security software solutions.

Andromeda Metals Ltd (ASX:ADN) and partner Minotaur Exploration Ltd (ASX:MEP) are set to embark on a three-year, $2.4 million research project that evaluates how halloysite nanotubes could be used in fertiliser that better delivers nutrients to agricultural crops.

Volt Resources Ltd (ASX:VRC) (FRA:R8L) has executed a full form loan agreement and associated security documents with European investment company JES Green Investments Limited for provision of a US$8.5 million loan facility to assist with funding Volt’s acquisition of a 70% interest in the Zavalievsky group (ZG) of companies.

Great Boulder Resources Ltd (ASX:GBR) has moved to full ownership of the Yamarna battery metals project near Laverton in WA.

Moho Resources Ltd (ASX:MOH) continues to make progress at the East Sampson Dam prospect within the Silver Swan North Gold Project in Western Australia with the maiden resource estimate upcoming.

9Spokes International Ltd (ASX:9SP) has signed a three-year contract with Virgin Money UK PLC (VMUK) to deliver a VMUK instance of the 9Spokes platform comprising Track, Connect and Explore for the bank’s SMB customers, and bank serving products Engage and Monitor.

Lake Resources N.L. (ASX:LKE) (OTCMKTS:LLKKF) (FRA:LK1) is moving closer to securing debt financing to develop its flagship Kachi Lithium Project from which it aims to produce cleaner and greener lithium to service growing global demand.

Kin Mining NL (ASX:KIN) has tabled further robust gold assays from exploration work at the Cardinia Gold Project (CGP) regional prospect of Mount Flora.

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