News Column

MARKET COMMENT: Calm Returns To Markets Ahead Of US Jobs Report

June 6, 2014

Jon Darby

LONDON (Alliance News) - UK stocks indices are trading broadly higher Friday, although trading across all markets has become subdued once again after the excitement of Thursday's rate cut by the European Central Bank, as investors await the US non-farm payroll report still to come.

By mid-morning Friday the FTSE 100 is up 0.3% at 6,833.69, the FTSE 250 is up 0.6% at 16,097.86, and the AIM All-Share is up 0.4% at 803.62.

Within major European markets, the French CAC 40 is up 0.1%, and the German DAX is up 0.2%, while major foreign exchange pairs also are stable.

"As can often be the case on Non-Farm Payrolls Friday, forex trading is showing little real direction in early trading," said Hantec Markets market analyst Richard Perry. "Traders will certainly now be focusing on the release at 1330 BST"

Economists are expecting the headline US unemployment rate to rise slightly to 6.4% in May, from the 6.3% recorded in April, while an extra 218,000 people are expected to have been added to the payroll, down from the very strong reading of 288,000 in April.

The recent trend of payrolls to rise by more than 200,000 per month has been key to gauging that the US economy is strong enough to handle the tapering of the US asset purchase programme, says Alpari market analyst Joshua Mahony. "As such, I believe that as long as we see a figure over and above that level, we would continue to see (Fed Chair) Yellen and co taper."

After German trade balance data earlier in the the morning showed a healthy trade surplus of EUR17.7 billion for April, the same data from the UK has shown a disappointing expansion of the deficit.

The UK traded deficit widened to GBP8.29 billion in April from GBP8.29 billion in March. Economists had forecasts an expansion to just GBP8.65 billion.

The Bank of England has released is latest inflation forecast survey, that shows the respondents expect prices in the UK economy to rise by 2.6% over the next 12-months, which is down from the 2.8% that was expected at the last survey in February.

Within the few notable UK equity movers, Morrison's is underperforming the FTSE 100, down 0.9% following the criticism of its turnaround strategy by the supermarket's founding family at its AGM Thursday. The board of the company were barraged with criticism from investors at the meeting, The Times reported Friday, as members of the founding family questioned the competence of its managers after its poor performance during the year. A quarter of investors voted against Morrison' remuneration policies, and 14% against the reappointment of Chief Executive Dalton Philips.

In the FTSE 250, Synergy Health is up 3.1% after saying it has signed a multi-year outsourcing contract with Minnesota-based Sterilmed Inc, a company that reprocesses and re-manufactures single-use medical devices. Synergy said that the contract was one of a group of new contracts that it mentioned in its full-year results on Wednesday without giving details. The new contracts are together worth a total of GBP48 million in yearly revenue, it said.

Telecommunications group KCOM is up 2.6% after reporting a rise in its pretax profit for the year to end-March to GBP50.5 million, from GBP47.7 million in the previous year. The group also raised its dividend and pledged a continued investment in the roll-out of high speed fibre-based broadband products. FTSE confirmed earlier this week that KCOM will be deleted from the FTSE 250 and join the FTSE Small-Cap index instead from Monday, June 23, following the regular index review.

Imagination technologies is performing less well, down 1.1% Friday after receiving a cut to Hold from Buy from Liberum Capital. The chip maker's shares have risen nearly 50% over the last 18-months, and Liberum says it's now "time to pause for breath".

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Source: Alliance News

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