LONDON MARKET OPEN: Tepid trade before afternoon's US jobs report

(Alliance News) - Stock prices in London struggled for direction early Friday ahead of US jobs data in the afternoon, while the pound sat below the USD1.23 mark in the aftermath of bond market turmoil earlier this week.

The FTSE 100 index opened down just 0.55 of a point at 8,319.14. The FTSE 250 was up just 9.28 points at 20,014.42, and the AIM All-Share lost only 0.23 of a point to sit at 719.76.

The Cboe UK 100 was up 0.1% at 833.21, the Cboe UK 250 was flat at 17,428.98, and the Cboe Small Companies was down 0.1% at 15,390.96.

The CAC 40 in Paris was 0.1% higher, while the DAX 40 in Frankfurt was down slightly.

The pound fell slightly to USD1.2294 early Friday, from USD1.2304 around the time of the London equities close on Thursday. The euro rose to USD1.0299 from USD1.0295. Versus the yen, the dollar was higher at JPY158.39 from JPY157.96.

A barrel of Brent fetched USD77.44, up from USD77.11. Gold climbed to USD2,679.23 an ounce from USD2,667.81.

Rachel Reeves faces further pressure to balance the books as the UK's borrowing costs hit their highest level since the 2008 financial crisis.

The chancellor is said to be prepared to impose more severe spending cuts on departments if necessary, having already ruled out increasing either borrowing or taxes.

Yields on government bonds continued to rise on Thursday, up eight basis points to 4.89% for 10-year gilts, which is the highest since 2008.

These yields settled later on Thursday afternoon, sitting one basis point higher for the day at 4.82% when London's market closed.

"The global bond selloff showed few signs of letting up over the last 24 hours, with long-term borrowing costs continuing to move higher across the board. The UK was particularly in the spotlight, as its 10yr gilt yield hit another post-2008 high of 4.81%, whilst the 30yr yield hit a post-1998 high of 5.37%. But even though the UK might appear the most striking in terms of when yields last traded at these levels, other countries have experienced a similar pattern too," analysts at Deutsche Bank commented.

"For instance, the French 10yr yield hit its highest since October 2023, whilst the German 10yr bund yield hit its highest since July. In the meantime, US Treasuries showed some signs of stabilising, but even there the 10yr yield is still at 4.69% this morning, on track to close at its highest level since April, and Japan's 10yr yield is at its highest since 2011."

Deutsche analysts continued: "That focus on the UK was clear from several angles, as the pound sterling fell to its weakest level against the US dollar since November 2023. That made it the worst-performing G10 currency for a second day running. What makes the current situation particularly noteworthy is that higher interest rates normally help strengthen the currency, so the fact we're seeing the pound weaken even as gilt yields rise goes to demonstrate how nervous investors are right now."

The highlight of the day will be the latest set of US nonfarm payrolls at 1330 GMT. According to FXStreet cited consensus, the pace of US hiring is expected to have eased to 160,000 jobs in December, from 227,000 in November.

Swissquote analyst Ipek Ozkardeskaya commented: "Before the announcement of the US official jobs data, activity on Fed funds futures suggests that the Fed's next rate cut should arrive in May – with around a 53% chance. A set of stronger-than-expected data could flip this expectation to the 'no cut until June' side very rapidly and enhance the selloff in the US treasuries and support a further appreciation of the US dollar, while a set of softer-than-expected jobs data could strengthen the hope of a May cut."

The US Federal Reserve should proceed cautiously before supporting any future rate cuts, a senior bank official said Thursday, adding that she saw December's rate cut as a final step for now.

The US central bank voted 11-to-1 in favour of cutting rates by a quarter of a percentage point at the meeting on December 17 and 18, reducing the bank's key lending rate to between 4.25 and 4.50% despite an uptick in inflation.

Speaking in California on Thursday, Fed Governor Michelle Bowman said she had backed another rate cut but could have been persuaded against it.

"I supported the December policy action because, in my view, it represented the Committee's final step in the policy recalibration phase," she said.

Speaking in Missouri at around the same time as Bowman, Kansas City Fed President Jeff Schmid sounded a similar note of caution about future rate cuts.

"My read is that interest rates might be very close to their longer-run level now," he said. "Regardless, I am in favour of adjusting policy gradually going forward and only in response to a sustained change in the tone of the data."

"The strength of the economy allows us to be patient," added Schmid, who has a vote on the Fed's rate-setting committee this year.

Equity markets in New York were closed Thursday for a day of mourning following the death of Jimmy Carter.

In London, Sainsbury's shares fell 2.1%, despite the grocer hailing a bumper Christmas.

In the 16 weeks to January 4, its third-quarter, total retail sales advanced 2.7% year-on-year. The measure excludes fuel. Including fuel, sales were flat. Excluding fuel again, like-for-like sales rose 2.8% on a year prior.

For the Sainsbury's brand alone, sales rose 3.7%, including a 4.1% rise in the grocery offering. Sainsbury's general merchandise & clothing sales fell 0.1%. Argos sales, meanwhile, declined 1.4% on the prior year.

For the final six weeks of that period alone, so a gauge of its trading over the key festive stretch, Sainsbury's brand sales rose 3.8% year-on-year, with grocery sales climbing at the same pace. Sainsbury's general merchandise & clothing advanced 3.4% on-year, while Argos sales rose 1.1%.

On the up, Reckitt climbed 1.4% after Morgan Stanley lifted the consumer goods company to 'overweight' from 'equal-weight'.

Clarkson added 4.9%. The shipping services firm expects results for 2024 to be "slightly ahead of current market expectations". The firm expects underlying pretax profit of no less than GBP115 million. It would represent a 5.3% rise from GBP109.2 million in 2023. Clarkson reports annual results on March 10.

On AIM, Alliance Pharma and Team Internet moved in opposite directions amid contrasting M&A updates.

Alliance Pharma jumped 38% to 61.30 pence after it backed a GBP349.7 million cash buyout from DBAY Advisors, its largest shareholder. The consumer healthcare company currently has a market capitalisation of GBP330.3 million.

Team Internet shed 12%. Suitor TowerBrook Capital Partners has said it does not plan to make a takeover offer for the London-based internet services company.

Team Internet on Tuesday said it received two takeover approaches, which it was considering with advisers. One was from TowerBrook and another from Verdane Fund Manager and both were at 125 pence per share, valuing Team Internet at around GBP315.1 million.

"TowerBrook today confirms that it does not intend to make an offer for Team Internet," TowerBrook said.

By Eric Cunha, Alliance News news editor

Comments and questions to newsroom@alliancenews.com

Copyright 2025 Alliance News Ltd. All Rights Reserved.