FTSE 100 set for solid start ahead of US jobs data

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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 €1.1bn for IAG, in line with the consensus and way down on the €4.6bn raked in during the same period of 2020.

The Swiss bank is predicting a loss before interest and tax of €1.2bn, also in line with consensus, compared to a loss the year before of €535mln.

“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® 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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