London pre-open: FTSE seen flat ahead of payrolls

5th Apr 2024 07:38

(Sharecast News) - London stocks were set for a muted open on Friday as investors eyed the all-important non-farm payrolls release, and mulled data showing that UK house prices fell for the first time in six months in March.

The FTSE 100 was called to open flat.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: "The combination of cautious Fed remarks and oil rally spoiled the market mood ahead of today's US jobs data. The S&P500 fell more than 1%, as Nasdaq 100 retreated 1.55%. The US yields however remained soft on the back of a flight to safety, and the US dollar rebounded in Asia after hitting a two-week low.

"Today, all eyes are on the US jobs data, that should distinguish between those expecting that the Fed will cut interest rates three times this year and those who bet that the Fed will barely cut the rates with strong growth and rising inflation.

"The US economy is expected to have added 212,000 new non-farm jobs last month, the average earnings may have accelerated on a monthly basis and decelerated on a yearly basis. The unemployment is seen steady at 3.9%. Note that the mention of job cuts in earnings call have been rising since the beginning of the year, yet we haven't yet seen a material impact on official data.

"In fact, the past three NFP numbers exceeded market expectations by around 78,000 and the US economy added around 280,000 new nonfarm jobs on average over the past three months. Another higher-than-expected NFP and hotter-than-expected wages growth could lead to a further pullback in dovish Fed expectations, weigh on stock and bond valuations and boost the US dollar. The sweetest combination would be a reasonably strong NFP number and softer wages growth. The latter would cement the expectation of a soft landing and give support to equities."

On home shores, figures from Halifax showed that house prices fell by 1% on the month in March, following a 0.3% increase in February and five months of growth.

On the year, house prices were 0.3% higher in March, down from a 1.6% increase a month earlier.

The average price of a home now stands at £288,430, down from £291,338 in February.

Kim Kinnaird, director of Halifax Mortgages, said: "That a monthly fall should occur following five consecutive months of growth is not entirely unexpected, particularly in view of the reset the market has been going through since interest rates began to rise sharply in 2022. Despite this house prices have shown surprising resilience in the face of significantly higher borrowing costs.

"Affordability constraints continue to be a challenge for prospective buyers, while existing homeowners on cheaper fixed-term deals are yet to feel the full effect of higher interest rates. This means the housing market is still to fully adjust, with sellers likely to be pricing their properties accordingly.

"Financial markets have also become less optimistic about the degree and timing of Base Rate cuts, as core inflation proves stickier than generally expected. This has stalled the decline in mortgage rates that had helped to drive market activity around the turn of the year."

In corporate news, oil and gas titan Shell raised its short-term production forecasts and said it expects an increase in margins as it updated its guidance for the first quarter.

Integrated gas production is now tipped to come it at 960-1,000 thousand barrels of oil equivalents per day (kboe/d), up from February's guidance of 930-990 kboe/d, while the upstream production guidance range has been narrowed to 1,820-1,920 kboe/d from 1,730-1,930 kboe/d previously.

Increased forecasts for utilisation - the actual usage of refineries and chemical plants as a percentage of the rated capacity - also mean that indicative refining margins are expected to be $12 a barrel in the first quarter, up from $10 in the fourth, while indicative chemicals margins should grow to $151/tonne from $125/tonne.

AstraZeneca said that Imfinzi, or durvalumab, had shown promising results in a phase three trial for patients with limited-stage small cell lung cancer, demonstrating significant improvements in overall survival and progression-free survival compared to placebo after concurrent chemoradiotherapy.

Despite the aggressive nature of the cancer, it said Imfinzi's safety profile remained consistent with previous data, with no new safety concerns identified.

The findings would be presented at an upcoming medical meeting, with discussions with regulatory authorities planned, while the trial's secondary arm testing Imjudo, or tremelimumab, in combination with Imfinzi was ongoing.