LONDON MARKET MIDDAY: Oil prices offer inflation hope ahead of US jobs

Stock markets were on hold midday Friday ahead of the latest US jobs report, leaving oil prices the most interesting mover.

Brent oil, the North Sea benchmark, was quoted near $94 a barrel, having still been above $100 as recently as Tuesday.

The FTSE 100 was down 10.26 points, 0.1%, at 7,437.80 midday Friday. The FTSE 250 index was up 10.07 points, 0.1%, at 20,165.83. The AIM All-Share index was down just 0.03 of a point at 922.69.

The Cboe UK 100 index was down 0.2% at 742.03. The Cboe 250 was marginally lower at 17,528.69. The Cboe Small Companies was up 0.2% at 13,907.60.

In Paris, the CAC 40 stock index was down 0.5%, while in Frankfurt, the DAX 40 was 0.1% lower.

‘After yesterday's shocking assessment of the UK economy from the Bank of England, the FTSE 100 was down modestly this morning,’ AJ Bell analyst Russ Mould commented.

While announcing on Thursday a half-percentage-point rate hike, its biggest since 1995, the BoE dropped the bombshell that it expects the UK to enter recession ‘from the fourth quarter of this year’.

The US Federal Reserve has not yet predicted the same for the US, but Friday's jobs figures will be scrutinised for any new signs of economic weakness.

The July US nonfarm payrolls report is at 1330 BST, with figures expected to show the world's largest economy added 250,000 jobs in July, according to consensus cited by FXStreet, slowing from 372,000 in June.

Federal Reserve Chair Jerome Powell last week said the strong labour market is not congruent with the US being in a recession, despite figures showing two successive quarterly falls in gross domestic product, a technical indication of recession.

Numbers on Thursday showed initial claims for unemployment support were higher week-on-week.

According to the Department of Labor, initial jobless claims increased to 260,000 in the week that ended July 30, from 254,000 the week earlier. The prior week's figure was downwardly revised from 256,000.

New jobless claims have now risen in four out of the last five weeks, suggesting the US economy's momentum is waning.

The dollar was weaker ahead of the nonfarm payrolls release.

The pound was quoted at $1.2126 early Friday in London, up from $1.2115 at the London equities close on Thursday. The euro stood at $1.0228, up slightly from $1.0220. Against the yen, the dollar was trading at JP¥133.09, unchanged from JP¥133.30.

Analysts at ING commented: ‘The dollar goes into today's US jobs report around 2% off its highs of the year. We doubt a softish headline jobs number will do too much damage to the dollar, given that average earnings should stay firm and next week should see another near 9% year-on-year US consumer price index print.’

US equity market futures indicated no single direction. The Dow Jones Industrial Average was called 0.1% higher, the S&P 500 mixed and the Nasdaq Composite 0.2% lower.

Gold stood at $1,785.62 an ounce midday Friday in London, flat from $1,785.66 late Thursday. The precious metal is up roughly 1.5% from this time last week, boosted by a weaker dollar.

Brent is about 15% lower than a week earlier, quoted at $94.09 a barrel midday Friday in London, down from $94.65 at the European equities close on Thursday. US benchmark West Texas Intermediate was trading at $87.72 a barrel, down from $91.14.

BDSwiss analyst Marshall Gittler commented: ‘While the fall in oil prices may be negative for commodity currencies, it's also likely to add to the market's view that inflation is likely to peak soon and central banks can slow their hiking cycles. That's good news for risky assets.’

Weaker Brent prices hit shares in BP and Shell, however. The duo were down 1.4% and 0.9% midday in London.

Fellow FTSE 100-constituent Hargreaves Lansdown added 6.1%. It reported a fall in managed assets over the course of its financial year, with market volatility denting investor sentiment, but it said it was pleased with its ability to add 92,000 new clients.

The fund supermarket also promised to grow its ordinary dividend.

In the year that ended June 30, pretax profit slumped 26% to £269.2 million from £366.0 million. Revenue declined 7.6% to £583.0 million from £631.0 million. Hargreaves ended the financial year with £123.8 billion in total assets under administration, sliding 8.6% from £135.5 billion at the same point the year prior.

HL raised its annual ordinary dividend by 3.1% to 39.7 pence from 38.5p. However, including a special payout of 12.0p for financial 2021, the total annual dividend is down 24% from 50.5p.

Looking ahead, HL expects 3% ordinary dividend growth for financial 2023.

London Stock Exchange Group rose 2.7% as it said results in the first half of 2022 improved, with this year's interim period benefiting from an extra month of contribution from recent acquisition Refinitiv.

LSEG completed the $27 billion acquisition of financial market data and trading infrastructure provider Refinitiv in January 2021, ending a long process after first making its interest clear back in July 2019.

LESG's total income excluding recoveries jumped by 24% year-on-year to £3.57 billion from £2.87 billion. Including recoveries, the measure was up at the same rate to £3.74 billion from £3.02 billion.

Pretax profit jumped 73% to £803 million from £463 million.

The stock exchange operator said its offering benefits from market price volatility. Revenue from the Capital Markets unit alone jumped 34% year-on-year. Its largest revenue contributor, Data & Analytics, saw a top-line improvement of 26%.

LSEG lifted its interim dividend by 27% to 31.7p per share from 25.0p. It also on Friday launched a £750 million shares buyback, ‘phased over multiple tranches over 12 months’.

Advertising agency WPP lost 7.5%. Fear that an economic downturn will crimp the marketing budgets of WPP clients was too much for investors to bear, despite the firm lifting guidance.

WPP now expects organic revenue to rise by between 6.0% and 7.0% for 2022. It had previously guided for a 5.5% to 6.5% rise.

Reported pretax profit in the first half of 2022 climbed 6.1% year-on-year to £419 million from £394 million. Revenue increased 10% to £6.76 billion from £6.13 billion. WPP upped its payout by 20% to 15.0p from 12.5p.

Pendragon shares rose 7.4% to 23.10p, giving it a market capitalisation of £322.7 million.

Pendragon said a ‘large international corporate’ bidder for the car dealership chain has decided against pursuing takeover talks. The mystery suitor had made a bid of 29p per share. This would value Pendragon's share capital at around £405.1 million.

Pendragon was unable to engage with one of its five largest shareholders, the London-listing explained, and as a result, the suitor walked away ‘given this lack of certainty’.

In March, Sky News reported that Pendragon had rejected a £400 million takeover approach from 27% shareholder Hedin Mobility Group. According to Sky, Hedin, a Swedish firm that operates more than 200 vehicle showrooms in Belgium, Norway, Sweden and Switzerland through its subsidiary Hedin Bil, had tabled a secret 28p offer.

Capita shares fell 6.9%. The outsourcer's pretax profit plunged to £100,000 in the six months to June 30, from £261.1 million a year earlier. The bottom-line was hit by £92.5 million worth of goodwill impairments.

Revenue declined 6.3% to £1.52 billion from £1.62 billion a year earlier.

Elsewhere in London, Next shares fell 2.7% as Goldman Sachs cut the retailer to 'neutral' from 'buy'.

Amte Power surged 14% after it signed a deal with Cosworth to support the development of the automotive engineering firm's new electric vehicles.

Under the agreement, Amte will supply its ‘ultra high power cells’ to be used in Cosworth's propulsion technology.

Based in Northampton in England's East Midlands region, Cosworth is one of the more renowned names in the British automotive industry. It collected over 150 wins as an engine supplier in Formula One, third only to Ferrari and Mercedes.

Though it no longer participates in the sport, Cosworth provides automotive components for the IndyCar series in the US.

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