- FTSE 100 down 47 points
- Sainsbury’s leads fall after update
- US job figures trounce expectations
3.34pm: BP, Shell top risers as oil rallies
BP PLC (LSE:BP.) and Shell PLC (LSE:SHEL, NYSE:SHEL) sat among the FTSE 100’s biggest risers on Friday in line with a surge in oil prices.
Shares in the heavyweights climbed by 1.9% and 1.3% respectively as oil prices gained over the day.
Benchmark Brent crude had climbed as high as US$80.70 a barrel on Friday, to match levels last seen in October, before scaling back to US$79.76.
Oil was up 4.1% for the week as a result, having sat at the US$76.63 on Monday morning.
Upward pressure has been fuelled by fears around the US imposing some of its harshest sanctions against the Russian oil industry to date, according to Reuters.
Sanctions were set to target 180 vessels, dozens of traders, two major oil companies and top Russian oil executives, a document, cited by Reuters, said.
The move would also come as stockpiles remain low and Europe grapples with a cold snap.
BP and Shell’s gains failed to buoy the FTSE 100 on Friday though, which traded 47 points lower at 8,272.
3.13pm: Nasdaq sinks as strong job figures hamper rate cut hopes
Wall Street got off to a poor start on Friday after expectation-beating non-farm payroll figures hampered hopes around interest rate cuts ahead.
The Nasdaq sank 2.3% as trading got underway as a result, while the S&P 500 fell 1.7% and the Dow Jones dropped 1.4%.
US Bureau of Labor Statistics showed non-farm payrolls climbed by 256,000 in December, against the 153,000 anticipated, as unemployment unexpectedly fell from 4.2% to 4.1%.
Money markets scaled back Federal Reserve interest rate cut expectations as a result and forecast just one just for 2025.
“This solid payroll data highlights the current US economic strength,” Evelyn Partners investment strategist Nathaniel Casey commented.
“However, this strength is likely to put the brakes on the Fed’s cutting cycle, with markets now expecting the bank to hold tight on any more cuts for at least the first half of the year.”
2.41pm: US markets fall after hot jobs read
FTSE 100 has recovered from the surprisingly strong US jobs number, with the index now down by around 19 points.
Traders said the stronger-than-expected number probably means the next rate cut will be postponed until June with the chances of a second this year now markedly reduced.
US markets reflected that viewpoint, with the Dow down 320 points in early trades, Nasdaq off 1.5% or 279 points and the S&P 500 down 1%.
2.17pm: NFP numbers unlikely to change Fed plans, suggests economist
Pantheon Macroeconomics doesn’t think the larger-than-expected payrolls number will have much impact on the Fed’s intentions.
“The FOMC likely will continue to conclude that monetary policy still is restrictive, despite the upside surprise from December nonfarm payrolls.
“Labor market data are so volatile and confidence intervals so wide that trends are best determined from at least six months of data.
“Payroll growth averaged 165,000 in the second half of 2024, down from 207,000 in the first half.
“Catch-up growth in healthcare payrolls of 70,000 in December once again made a disproportionately large contribution to overall payroll growth.
“Growth in private payrolls in cyclical sectors affected by monetary policy averaged 51,000 in the second half of 2024, down from 86,000 in H1 and slowing more sharply than overall payrolls.”
FTSE 100 down 36 at 8,282
1.48pm: Pound sinks, bond yields jump on strong US job figures
Strong US job figures for December sent the pound tumbling and reignited a sell-off of UK debt on Friday.
US Bureau of Labor Statistics figures showed non-farm payrolls over the month climbed by 256,000, against the 153,000 expected, as unemployment fell from 4.2% to 4.1%.
Markets had been watching the figures for any clarity on Federal Reserve rate cuts ahead, with the data signalling job market strength and likely hampering scope for future reductions.
Sterling tumbled 0.72% to a new 14-month low of US$1.2218 on the back of the figures.
Yields on 30-year UK gilts hit a new 26-year high of 5.437% in the meantime, having climbed by 0.07% on Friday.
1.36pm: Non-farm payrolls surge past expectations
The US economy added over 100,000 more jobs than expected in December, while unemployment receded, figures showed on Friday.
According to the US Bureau of Labor Statistics, non-farm payrolls climbed by 256,000 over the month, while the unemployment rate fell from 4.2% to 4.1%.
Markets had been expecting the addition of 153,000 jobs in December and for unemployment to remain flat at 4.2%.
“Employment trended up in health care, government, and social assistance. Retail trade added jobs in December, following a job loss in November,” the report said.
Focus had been on the figures given jitters around the Federal Reserve’s stance on cutting interest rates ahead.
Futures showed Wall Street falling into the red after the figures, with the Nasdaq, S&P 500 and Dow Jones seen 0.4%, 0.3% and 0.1% lower respectively.
In London, the FTSE 100 fell further by 48 points to 8,270.
1.26pm: FTSE 100 stuck on back foot before US job figures
London’s blue chips remained downtrodden into the afternoon, having fallen by 37 points to 8,281 on Friday.
Beazley PLC (LSE:BEZ) led the decline, down 4.1%, followed by Entain PLC (LSE:ENT) and J Sainsbury PLC (LSE:SBRY), which were off by 3.9% and 3.2% respectively.
Attention on Friday afternoon turned to US job market figures, including both non-farm payrolls and the unemployment rate for December.
According to analysts, the US economy is expected to have added 153,000 jobs over the course of December, against 227,000 in November.
Unemployment is expected to have remained flat at 4.2% in the meantime.
12.47pm: Mortgage rates begin to accelerate once more
Despite HSBC Holdings PLC (LSE:HSBA)’s First Direct being among the latest to cut mortgage rates this week, recent days have seen a a renewed uptick in costs.
First Direct on Tuesday signalled cuts of up to 0.3% across fixed-rate deals, bringing interest on its five-year 90% loan-to-value down to 4.74%, for instance.
The move followed a string of cuts by Banco Santander (LSE:BNC), Virgin Money and Barclays PLC (LSE:BARC) late last year as mortgage rates receded after sweeping hikes seen from early October.
However, a sell off in government bonds and corresponding surge in gilt yields this week has prompted a renewed uptick in mortgage rates in recent days.
According to comparison site Moneyfacts, interest on the average two-year fixed mortgage sat at 5.4739% come Friday.
Though this was lower than the 5.4767% seen last Friday, figures showed average rates rebounding from a low of 5.4664% on Wednesday.
Swap rates, which determine mortgages, have risen sharply to 4.5% in line with this week’s bond market sell-off, from below the 4.0% mark in mid-September.
Concern has built that the sell-off, which has been sparked by fears around the government’s plans for high borrowing, stubborn inflation, incoming US president Donald Trump and Bank of England caution, could see interest rates stay higher for longer.
11.56am: Caution sweeps across Wall Street ahead of job figures
Wall Street appeared in a cautious mood ahead of Friday’s opening bell and key job market figures later in the day.
Futures had the Nasdaq and S&P 500 each down 0.1% before the open, while the Dow Jones was seen just above the mark.
Non-farm payroll figures for December were set to be the focus on Friday, especially given jitters over Federal Reserve policy and market direction ahead.
According to analysts, the US economy is expected to have added 153,000 jobs over the course of December, against 227,000 in November.
Unemployment, for which data is also due on Friday, is expected to have remained flat at 4.2% in the meantime.
“The Fed is now less worried about negative risks to the labour market,” Tickmill Group partner Patrick Munnelly said, “other employment data supports this perspective”.
“This situation raises the threshold for the Fed to revert to a more dovish stance. Currently, there is little urgency to prolong the rate cut cycle.”
11.42am: Higher borrowing costs could spell cuts and tax rises – JPMorgan
JPMorgan analysts have also weighed in on the news around surging UK borrowing costs, warning chancellor Rachel Reeves may be forced to ditch her Budget promises.
According to the bank, the 50 basis point rise in short and short and longer term yields since the October Budget will add £6 billion to government borrowing over its five-year period.
“While significant, the greater fiscal issue since the Budget has been weak growth,” JPMorgan added.
The Office for Budget Responsibility had forecast economic growth of 2% for this year, analysts pointed out, “whereas the latest data suggest the economy is stagnating”.
Were there a sustained 1% miss on gross domestic product, JPMorgan said borrowing would rise by close to £20 billion, on top of Reeves’ £70 billion spending plan.
“Unless the macro picture […] changes, the chancellor will ultimately be faced with the familiar choice of changing or suspending the fiscal rules to allow more borrowing, cutting spending or raising taxes,” JPMorgan warned.
10.54am: Goldman Sach cuts UK growth forecast due to rising gilt yields
Economists at Goldman Sachs have added their sixpenny worth to the gloomy headlines around the health of the UK’s finances.
Following Chancellor Rachel Reeves’ tax raid, the Wall Street titan now sees the UK economy growing by 0.9% this year, compared to the official forecast of 2%.
This week’s surge in gilt yields will add to the problem, Goldman adds.
“We expect higher yields to act as an additional headwind to growth via household remortgaging and weaker investment, with the increase of the last few days worth around 0.1 percentage point of additional growth drag this year,” it said.
This is a function of Reeves’ borrowing plans, says the bank.
“The rise in UK long-term yields in recent days is not driven by shifts in UK growth expectations or monetary policy, but primarily by concerns around the UK fiscal outlook.”
Reeves currently is on a trade visit to China with Bank of England Governor and former boss Andrew Bailey.
FTSE 100 down 15 at 8,304.
10.27am: Footsie slips deeper into red as US jobs data looms
Footsie has turned down now as attention switches to the US and the latest monthly jobs number.
Investors are more on edge than normal ahead of today’s release given the jitters over the Federal Reserve policy and market direction.
Most analysts are predicting moderate job growth in December 2024, with consensus estimates pointing to 153,000 jobs added, aligning with the six-month average.
The unemployment rate is widely expected to remain unchanged at 4.2%.
Larry Tentarelli, chief technical strategist for Blue Chip Daily Trend Report, highlighted the potential for an upside surprise in the jobs data, which could jolt bond and equity markets.
“We believe that investors should be prepared for a higher-than-forecast number, which could send bond yields higher,” Tentarelli said, emphasizing the potential for sharp trading ranges across asset classes.
FTSE 100 down 16 at 8,303.
10.04am: Persimmon gets upgrade ahead of trading update
Persimmon was one of the best of the risers as UBS upgraded to ‘Buy’ ahead of a trading update next week.
Housebuilder shares have been under pressure recently due to worries about the impact of the rise in gilt yields on mortgage costs with Persimmon shedding 35% of its value since November.
UBS suggests this is too extreme, though it adds that how quickly affordability improves will be key to any recovery in the share price.
In next week’s results, investors should especially watch for comments about 2025 it says, with the Swiss bank looking for volumes to rise by 6% to 11,100 houses and margins to pick about by 20 basis points.
Shares were up 1.8% today at 1,111p.
9.34am: Pound dips again
Sterling lost further ground on Friday morning as a selloff seen over the past week continued.
Come mid-morning, the pound was down 0.13% against the dollar at US$1.2292.
Though this was off Thursday’s 14-month low of US$1.2239, it signalled ongoing pressure as concerns around chancellor Rachel Reeve’s spending plans also sent borrowing costs higher.
“The selloff in gilts and the pound may have cooled down yesterday,” Swissquote Bank analyst Ipek Ozkardeskaya acknowledged.
“But, cost of boosting growth has become significantly more expensive for the UK government, meaning that we may not see the UK perform as well as it did last year.
“That sets the pound outlook negative at the early weeks of the new year.”
9.12am: UK borrowing costs continue to edge higher
Gilt yields nudged higher on Friday after a week that has seen UK borrowing costs come into focus amidst a sell-off that sent interest on long-term debt to its highest since 1998.
The yield on UK 30-year gilts edged up to 5.40% come Friday morning to near the week’s peak of 5.42% and the highest rate in over a quarter of a century.
UK 10-year gilt yields were little changed at 4.81% in the meantime.
Deutsche Bank’s Jim Reid noted the ongoing climb reflected a “global selloff” which “showed few signs of letting up” just yet.
The sell-off had been sparked by fears around the Labour government’s plans for high borrowing, stubborn inflation, incoming US president Donald Trump and the Bank of England’s caution towards cutting interest rates ahead.
“The key issue is whether the BoE will intervene,” Tickmill Group partner Patrick Munnelly said.
“It is not the BoE’s responsibility to ensure gilt yields remain low enough for the government to borrow as much as it desires […] however, this does not imply that the BoE would never intervene, as past experiences suggest otherwise.”
8.54am: Sainsbury’s investors bat off Christmas cheer
J Sainsbury PLC (LSE:SBRY) continued to lead the drop on the FTSE 100 on Friday morning, despite signalling a strong Christmas period earlier on in the day.
According to interactive investor analyst Richard Hunter, the drop echoes a wider theme seen after a string of retailer updates this week as traders “ignore the success of the Christmas period and focus heavily on the undoubtedly challenging times to come”.
He flagged efforts by Sainsbury’s to cut prices in recent times to remain competitive against the likes of Aldi and Lidl.
Indeed, Sainsbury’s had highlighted the introduction of its ‘Aldi price match’ and record participation in the Nectar loyalty scheme over the third quarter.
“For Sainsbury, the investment in lowering prices over recent times will come under additional pressure, especially following the outcome of the measures announced in the Budget,” Hunter said.
Shares fell 2.4% to 256.8p on Friday.
8.34am: Lloyds to share branches with subsidiaries Halifax, Bank of Scotland
Lloyds Banking Group PLC (LSE:LLOY) has flagged plans to start offering services from Halifax, Bank of Scotland and its flagship brand through any of the three companies’ branches.
Lloyds owns each of the brands, with the latest shake-up coming as the industry grapples with a move away from in-person to online banking.
Customers would have more choice and flexibility following the move, Lloyds said, with a date for the change yet to be confirmed.
Speculation has emerged that the move could pave the way for further closures, after Lloyds has shut dozens of sites since February 2022.
The BTU, which markets itself as an independent union for Lloyds Bank staff, warned the shake-up could pave the way for a new round of closures in the future.
“The co-serving of customers is not about engagement or choice,” BTU said in response.
“It’s about making it easier for Lloyds to close more branches and save more money”… Read more
8.12am: Stocks drop at open
London’s blue chips kicked off Friday’s session on the back foot, dropping 14 points to 8,305.
J Sainsbury PLC (LSE:SBRY) led the early fallers, despite alluding to its “best ever Christmas” in an update earlier on, dropping 2.5%.
Hiscox Ltd (LSE:HSX), Beazley PLC (LSE:BEZ) and Entain PLC (LSE:ENT) were also among those to lead the drop as trading got underway.
Reckitt Benckiser Group PLC (LSE:RKT, ETR:3RB) topped the risers in the meantime, ahead of the likes of InterContinental Hotels Group PLC and Persimmon PLC (LSE:PSN).
7.55am: Vodafone sells Indus Towers stake for $330mln
Vodafone Group PLC (LSE:VOD) has exited its stake in Indus Towers, raising US$330 million (£269 million).
Some 79.2 million shares, equating to 3% of the Indian mobile tower installation company, were sold through an accelerated bookbuild, Vodafone said on Friday.
Of the proceeds, US$105 million had gone to repaying debt secured against Vodafone’s Indian assets in full, the FTSE 100-listed company said.
The remaining US$225 million had been used to increase a stake in local telecommunications firm, Vodafone Idea, from 22.56% to 24.39%, it added.
Vodafone Idea had in turn used the cash to repay outstanding master service agreement fees to Indus, according to Friday’s statement.
“Following this, Vodafone’s obligations to Indus under the security arrangements have now been satisfied in full,” the company added.
7.38am: Sainsbury’s flags ‘biggest ever Christmas’
J Sainsbury PLC (LSE:SBRY) has flagged its “biggest ever Christmas” as the supermarket also lifted financial services profit guidance on Friday.
Sales climbed by 3.8% over the six weeks to January 4, fuelled by 3.8% and 3.4% respective increases for grocery and clothing goods, while Argos saw a 1.1% uptick.
Chief executive Simon Roberts noted the festive trading period had been Sainsbury’s “biggest ever Christmas”.
He said: “Customers shopped later than ever and we achieved our highest ever sales in the final days before Christmas.”
Over the third quarter, sales climbed by 3.7% on a 4.1% increase in grocery but 0.1% drop for clothing goods.
Sales at Argos fell by 1.4% in the meantime, which Sainsbury’s said reflected “subdued customer spending” outside of the Christmas and Black Friday periods.
Guidance for an underlying retail operating profit of between £1.01 billion and £1.06 billion was reiterated, alongside for free cash flow from the division of £500 million.
Financial services underlying operating profit guidance was hiked to £30 million, from between £15 million and £25 million previously… Read more
7.11am: Stocks seen edging lower
London’s blue chips were seen heading lower ahead of Friday’s open, with futures showing the FTSE 100 down eight points at 8,311.
The index had racked up a 59-point gain in Thursday’s session thanks to its large contingent of miners on the back of a rebound in commodity prices.
Overnight, Asian markets faced a largely negative showing, with Singapore’s STI index down 1.9% and leading the drop ahead of falls for Chinese stocks.
Back in London, attention early on was on results from Sainsbury’s, before US job market figures later in the day.
5.00am: What to watch on Friday
Sainsbury’s will offer investors the latest insight into the key Christmas trading period for retailers, before the big US jobs market figures will grab the attention of global markets later.
Sainsbury’s shareholders will want to see further improvement in food sales… read more
In the closely watched US non-farm payrolls report, expectations are for 150,000 jobs to have been added to the economy over the last month of 2024… read more
Announcements due:
Trading updates: Glenveagh Properties PLC, J Sainsbury PLC (LSE:SBRY)
US earnings: Delta Air Lines Inc (NYSE:DAL)
AGMs: Alt Resources, Sealand Capital Galaxy Ltd
Economic announcements: Non-Farm Payrolls (US), Unemployment Rate (US), Consumer Sentiment (US)
