London’s blue chip Index continued to trade in negative territory this morning, as apprehensive investors played it safe and took profits ahead of this afternoon’s all-important US non-farm payroll data.
Today’s non-farm payrolls may be the tipping point that sends markets into a longer phase of consolidation, and, in my opinion, it has been long overdue. While I wouldn’t rule out a few up days on the FTSE, the trend may very well be downwards hereon in.
Metal prices, often viewed as a barometer for the prospects of global economic growth, traded lower today and this, naturally, had an impact on heavyweight resource shares.
The worst performing miners were: Lonmin, which declined 3.84% to 1479p and Xstrata, which was down by 2.75% to 848p after the UK Takeover Panel told the miner that it has until 20 October to make a takeover move for Anglo American. Randgold Resources and Vedanta fell 2% to 4149p and 1.85% to 1912p respectively, while Anglo American remained unchanged at 1886p.
In the meantime, the price of December high grade copper futures traded 1.6% lower, December silver contracts fell 0.85%, while December gold was more resilient, down by only 0.15%.
Energy majors were also lower following declines in crude oil; BG Group declined 0.56% to 1064p and Cairn Energy was nearly 2% lower at 2663p. BP was practically unchanged at 540.90p a share.
Meanwhile, November Brent crude oil futures fell 1.2% to $68.35 a barrel and November Light Sweet crude (WTI) traded 1.3% below its previous close at $69.93 a barrel.
Not surprisingly, banks were also under pressure today, with the likes of Lloyds Banking Group and Royal Bank of Scotland down 3.7% to 95.59p and 4.2% to 48.42p respectively. Barclays fell over 0.9% to 359.8p, while HSBC eased 0.2% to 696.9p.
Investors also took the opportunity to sell Insurers as well today; the sector recently experienced a rally, predominantly on the back of takeover speculation. The sector’s worst performer was Legal & General, plunging 3.7% to 84.65p followed by Old Mutual, which declined 1.5% to 96.95p and Aviva, which dropped 1.3% to 445.9p.
Elsewhere, UK retailers retreated following a bearish report from Citigroup, which recommended selling shares of Tesco, J Sainsbury and William Morrison Supermarkets. This sent Tesco’s shares sliding 1.4% to 388.3p, J Sainsbury Plc was down 0.5% to 321.4p and William Morrison Supermarkets declined 1.2% to 274.3p.
Bucking the negative trend was beverage company SABMiller, which advanced 1.4% to 1502p after Cazenove reiterated its ‘outperform’ rating on the company.
There was some mixed news on the economic front today, with Nationwide revealing that UK house prices rose 0.9% in September, bringing the annual rate on par to last year’s level. In the meantime, a separate report revealed that construction activity contracted at a faster pace in September; the Purchasing Managers’ Index (PMI) fell to a reading of 46.7 from 47.7 in August.
By 10:30am (London time), the FTSE 100 index was 33.10 points (-0.66%) lower at 5014.71 while the broader FTSE 250 was 91.60 points (-1.01%) below its previous close at 8972.68. December Dow and S&P 500 futures were also trading in the red, down 0.23% and 0.26% respectively.
US non-farm payrolls, the unemployment rate, and other US labour related statistics are scheduled for release at 1:30pm (London time), followed by factory orders at 3pm.
Bloomberg median forecasts point to a 175,000 drop in non-farm payrolls in September. This compares with a loss of 216,000 the month before. The unemployment rate is expected to rise to 9.8% in September from 9.7% the month before and factory orders are forecast to remain unchanged in August.
