Stocks Up Ahead Of US Jobs But Housebuilders Dip

LONDON (Alliance News) - Stocks in London were creeping into positive territory at midday, as housebuilders and fund supermarket Hargreaves Lansdown weighed on the FTSE 100, while well-received interim earnings reports from Merlin Entertainments and Royal Bank of Scotland were providing support.

Attention is set to turn to US employment data at 1330 BST and its potential influence on the US Federal Reserve's monetary policy, with particular attention on wage growth.

In London, the FTSE 100 index of large caps was up 0.1%, or 7.94 points at 7,482.71. The mid-cap FTSE 250 index was down 0.1% at 19,897.18, while the AIM All-Share index was up 0.2% at 989.78.

The BATS UK 100 index was up 0.1% at 12,712.90, and the BATS 250 was broadly flat at 18,113.04. The BATS Small Companies was marginally up at 12,198.55.

Housebuilders were seeing widespread falls, with the FTSE 350 Household Goods & Home Construction sector index sinking 1.0%.

Stocks were falling on a report by Property Week that the UK government is reviewing its Help-to-Buy policy, with options including introducing stricter requirements for applicants or even scrapping the scheme entirely.

Help-to-Buy, which is designed to help first-time buyers purchase houses with a smaller deposit, has stimulated demand in the UK property sector, but also been blamed for keeping house prices artificially high.

In the FTSE 100, Persimmon was down 4.1%, Barratt Developments down 3.9% and Taylor Wimpey down 3.2%. In the FTSE 250, Crest Nicholson was down 3.6% and Galliford Try down 3.4%.

Hargreaves Lansdown also was in the red at midday, down 3.7%. The wealth management firm said it will scrap its special dividend due to a regulatory review of its capital requirements.

Hargreaves Lansdown also said that it expects to reported a 21% increase in pretax profit for the full financial year, in a range of GBP265.0 million to GBP266.0 million. Assets under administration are expected to have grown by 28% to GBP79.20 billion.

Pearson was down 1.1% with the publisher's stock giving back its early gains and more. The publisher cut its interim dividend to 5.00 pence per share, from 18.00p last year and is planning a share buyback of GBP300.0 million following its disposal of its 22% stake in Penguin Random House in order to focus on its education business.

Pearson also said it will cut 3,000 jobs to reduce its headcount by 2020 as part of a GBP300.0 million cost efficiency programme.

However, its pretax loss for the six months to June 30 narrowed to GBP10.0 million from GBP306.0 million, and adjusted operating profit jumped to GBP107.0 million from GBP15.0 million, which the firm said reflected savings from the 2016 restructuring programme.

At the other end of the FTSE 100, Merlin Entertainments was among the risers, up 3.0%.

The theme park and attractions operator reported pretax profit for the 26 weeks ended July 1 of GBP50.0 million, flat from the prior year, but revenue rose by 19% to GBP685.0 million from GBP573.0 million. On a constant currency basis, the revenue rise represented a 9.6% increase.

Merlin said profit stayed flat as a result of adverse timing effects which are expected to normalise in the second half of the year.

RBS was up 1.8%. The majority state-owned lender reported attributable profit of GBP939.0 million for the six months to June 30, swinging from a GBP2.05 billion loss for the same period in 2016.

The lender's operating profit for the half-year amounted to GBP1.95 billion, swinging from a GBP274.0 million loss a year before. The return to profit was aided by a significant fall in litigation and conduct costs, to GBP396.0 million for the recent six months from a GBP1.32 billion charge for the same period in 2016.

Mediclinic International was 3.4% higher at 751.5 pence, after Credit Suisse raised its price target on the stock to 906.0p.

Sterling was quoted at USD1.3142 at midday, largely unchanged from USD1.3143 at the London equities close on Thursday.

The pound tumbled from above USD1.32 on Thursday after the Bank of England's Monetary Policy Committee opted to maintain interest rates at 0.25% in a 6-2 vote, and also cut its expectations for UK economic growth.

In mainland Europe, the CAC 40 index in Paris and the DAX 30 in Frankfurt were both up 0.2%. The euro was standing at USD1.1875, hardly budged from USD1.1881 at the European equities close on Thursday.

In New York, the Dow Jones Industrial Average was pointed up 0.2%, as the index looks to maintain a seven-day rally that has taken it above 22,000 for the first time. The S&P 500 index and the Nasdaq Composite were both seen up 0.1%.

The highlight of Friday's economic calendar is the US non-farm payrolls report for July, due at 1330 BST. Consensus estimates are for the economy to add 183,000 jobs, falling from 222,000 in June.

The unemployment rate is expected to tick down to 4.3% from 4.4%, while average hourly earnings are expected to have grown by 0.3%, up from 0.2% in June.

"Traders are yet to buy into the Fed’s plans for another interest rate hike this year – December being the most likely date – which is hardly surprising given the data seen in the first half, particularly on the inflation front. With that in mind, while the unemployment number is likely to write the headlines and the jobs number will be the initial focus, earnings growth is key to today’s report, as well as those for the rest of the year," said Craig Erlam, senior markets analyst at OANDA.

"Should we continue to see soft wage growth and inflation running well below target as a result, the Fed may be forced to delay plans on future rate hikes and instead focus on reducing its balance sheet. Given the clear desire to get interest rates closer to 3%, this is obviously a very undesirable situation, although it should be noted that the US is well ahead of others on this," added Erlam.

Alongside July's non-farm payrolls, the US unemployment rate and trade balance are at 1330 BST. Then the Baker Hughes oil rig count is at 1800 BST.