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  • London open: Stocks edge up ahead of payrolls; TalkTalk tumbles

    Stock market news

    London stocks rose in early trade on Friday but gains were fairly modest as investors digested a downbeat reading on the Chinese manufacturing sector and eyed the release of the latest non-farm payrolls report.

    At 0830 GMT, the FTSE 100 was up 0.3% at 6,987.29, while the pound was flat against the dollar at 1.3107 and down 0.1% versus the euro at 1.1444.

    The Caixin/Markit manufacturing purchasing managers’ index for January fell to 48.3 from 49.7 in December, marking its worst reading since February 2016 and missing expectations for a reading of 49.5.

    Meanwhile, US President Donald Trump said on Thursday that he will meet with Chinese President Xi Jinping soon to seal a deal on trade.

    Speaking at the White House during a meeting with Chinese vice premier Liu He following two days of trade talks between US and Chinese delegates, Trump said he was optimistic that the two nations could reach “the biggest deal ever made”.

    Spreadex analyst Connor Campbell said: “Some positive US-Sino trade talk noise overnight failed to provoke any substantial growth on Friday morning, the signs of progress undermined by data from China that underscored the need for a deal.

    “Though the details what of happens next are still unclear, with Donald Trump claiming he will meet President Xi Jinping soon and reports of a potential mid-February meeting in Beijing for yet more negotiations, the overall tone from the January-ending trade talks was one of cautious optimism. This includes China agreeing to ‘vigorously expand’ its US imports, alongside further discussions about intellectual property theft and technology transfer.”

    “The lack of concrete deal, however, meant the markets were reticent to celebrate anything just yet.”

    The big focus on Friday will be the US non -farm payrolls report, unemployment rate and average earnings, all due at 1330 GMT. The jobs report is expected to show an increase of 165,000 in January compared to the 312,000 jobs that were added in December.

    Meanwhile, the unemployment rate is expected to hold steady at 3.9%, while yearly average earnings are forecast to be unchanged at 3.2%.

    In the UK, Markit’s manufacturing PMI is at 0930 GMT.

    In corporate news, exhibitions, events and business intelligence group Informa edged up as it announced the sale of its Life Sciences Media Brands portfolio to US-based healthcare, education and market research company MJH Associates for just over $100m.

    Euromoney Institutional Investor was higher as it said on that trading between 1 October and 31 December 2018 was in line with the board’s expectations and its outlook is unchanged.

    UK energy supplier SSE was in the green after saying it was selling 49.9% of its Scottish Stronelairg and Dunmaglass wind farms to Greencoat UK Wind and an unnamed UK pension fund for £635m. Greencoat was a just a touch weaker.

    Paddy Power Betfair slipped after saying it had bought an initial 51% controlling stake in Georgian betting outfit Adjarabet for £101m, adding that it expected to snap up the rest of the company within three years.

    Glencore was on the back foot as it said it unearthed more copper, cobalt and nickel in the fourth quarter of 2018 compared to the quarter before, while zinc, lead, gold and silver all dipped.

    TalkTalk tumbled as it reported further good growth of customer numbers in the third quarter but trimmed its full-year profit guidance due to IFRS 15 timing adjustments and investment growth.

    Plastic packaging company RPC Group, which now has both Apollo Global Management and US packaging group Berry Global vying for its attention, ticked a touch lower as it said third-quarter operating profit was broadly flat on the previous year.

    In broker note action, Close Brothers was knocked lower by a downgrade to ‘sell’ at Citi, while Rentokil was boosted by an upgrade to ‘buy’ by the same outfit.

    Plus500 rallied on the back of an upgrade to ‘add’ at Peel Hunt, while Rio Tinto was lifted to ‘add’ at AlphaValue, but Intertek was downgraded to ‘hold’ at Jefferies.

    US close: S&P 500 wraps up best January in 32 years, Dow closes lower

    US stocks turned in a mixed performance on Thursday as investors digested dovish comments from Fed chairman Jerome Powell and a slew of earnings from the likes of Facebook and Microsoft.

    At the close, the Dow Jones Industrial was down 0.06% at 24,999.67, while the S&P 500 closed out its best January in 32 years 0.86% higher at 2,704.10 and the Nasdaq traded 1.37% firmer at 7,281.74.

    The Dow closed 15 points lower after the Federal Reserve left interest rates on hold at between 2.25% and 2.5% on Wednesday, as expected. Market participants took comfort from the fact that the Fed dropped the phrase “further gradual increases” in relation to rate hikes from its statement.

    They also welcomed Powell’s patient ‘wait-and-see’ policy and acknowledgement that the case for higher rates has weakened.

    “Only last month the Fed had raised rates and hinted that two more moves could follow this year,” said strategists at Rabobank.

    “While last night’s change of direction had been heralded by more accommodative comments from various Fed officials in the past few weeks, the abruptness of the change of direction still took the market by the surprise.”

    Elsewhere, trade talks between the US and China are progressing “well with good intent” but a final deal will have to wait until the American and Chinese presidents meet personally “in the near future”, Donald Trump said.

    That meeting was needed for him and Xi Jinping to discuss and agree on some of the long-standing and more difficult points, the US President said in remarks posted to his personal account on social media platform Twitter.

    In corporate news, Facebook shares surged 10.82% in the session as it posted a record $6.9bn profit for the last three months of 2018, up 61% on the previous year.

    Hargreaves Lansdown equity analyst George Salmon said: “Only time will tell if Mark Zuckerberg’s ambitious plans to revolutionise Facebook (will) pay off, but these results will go a long way towards regaining the trust of Wall Street.”

    General Electric shares closed 11.65% higher as its fourth-quarter revenue topped analysts’ expectations.

    Microsoft lost 1.83% in the session as its second-quarter revenue missed expectations of $32.51bn, at $32.47bn and electric car maker Tesla dipped 0.57% after its fourth-quarter earnings.

    Neil Wilson, chief market analyst at Markets.com, said the results were OK, but the outlook is a little bit dubious.

    “Back-to-back quarterly profits will get headlines but one must fear that Musk is rather robbing Peter to pay Paul in order to achieve it and the guidance for 2019 looks very weak.

    “Earnings missed expectations despite much better revenues. Operating income steady at $414m, with profits hit by (a) decline in regulatory credits, lower prices in China, higher import duties on parts from China and the introduction of a lower-priced mid-range Model 3.”

    Elsewhere, Northrop Grumman was down 1.96% and Dow DuPont 9.30% weaker after the release of their quarterly earnings.

    On the macro front, more Americans filed for unemployment benefits in the week ended 26 January than they had since September 2017 amid the tail end of the longest government shutdown in US history.

    Jobless claims jumped from a 50-year low to 253,000, according to the Labor Department, exceeding all button forecast.

    In other news, economic activity in the Chicago area deteriorated by more than expected in January, according to figures released on Thursday.

    The MNI Chicago business barometer index fell to a two-year low of 56.7 from a downwardly-adjusted 63.8 in December, missing expectations for a reading of 61.5.

    Four out of five of the barometer’s sub-components started the year lower, with notable falls in production and new orders contributing to most of the 7.1-point drop in the headline index.

    Jai Lakhani, economist at MNI Indicators, said: “The MNI Chicago business barometer had a sluggish start to 2019, pressured by significant drops in both new Orders and production, resulting in the lowest headline reading in two years.

    Lastly, new home sales shot up 17% to 657,000 in November, according to the Commerce Department in a report that had been delayed as a result of the 34-day long shutdown.

    However, this pace was 7.7% slower than a year ago, with an average price of $302,400 – 12% lower year-on-year.

    Friday newspaper round-up: Brexit, Npower, RBS, Patisserie Valerie

    Nearly one in three British businesses are planning to relocate some of their operations abroad or have already shifted them to cope with a hard Brexit, according to a leading lobby group. The Institute of Directors (IoD) warned that 29% of firms in a survey of 1,200 members believed Brexit posed a significant risk to their operations in the UK and had either moved part of their businesses abroad already or were planning to do so. – Guardian

    Npower, one of big six energy firms, is to cut 900 jobs, as the company warned it would make significant financial losses this year. The German-owned supplier blamed the cuts, about 15% of its UK workforce, on the government’s price cap on default tariffs and “intense competition” in sector over fixed deals. Npower said about 900 roles would go over the coming year and that it would consult staff over the next month. – Guardian

    MPs are to launch a new inquiry into the heavily criticised business rates system amid warnings that a further 100,000 shops will close this year. Nicky Morgan MP, chair of the Treasury Select Committee, said the inquiry would scrutinise the changes in reliefs and allowances that had already been announced by the Government, the burden on companies and the “behaviours it drives in businesses”. – Telegraph

    A Tory MP has said he is “hugely concerned” a government agency could have played a role in the Royal Bank of Scotland’s (RBS) scandal-hit turnaround unit after it emerged the bank’s top executives had their pay linked to the agency. Documents referenced in court on Thursday showed that senior bankers, including RBS’s former chief executive Stephen Hester, had their bonuses pegged to the success of government agency the Asset Protection Agency (APA) in 2010. – Telegraph

    The executive chairman and chief executive of Patisserie Holdings did not disclose a possible conflict of interest to investors arising from their ownership of a shop of its collapsed café chain. Luke Johnson, 56, and Paul May, 59, are landlords of the Patisserie Valerie’s Tunbridge Wells store, which is leased to the business for £45,000 a year. They bought the building in 2014, three months before the café opened, through a vehicle called Tunbridge Freehold Ltd, which they jointly own. – The Times

    Metro Bank came under new selling pressure yesterday after changing its account of the discovery of a £900 million accounting misstatement that led its share price to crash last week. Shares in the fast-growing challenger bank fell 11 per cent to £10.87 amid speculation that it was scrambling to raise fresh capital and coming under pressure to strengthen its board. Before last week’s bombshell, they were trading at £22 and touched a high of more than £40 less than a year ago. – The Times

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