London midday: Stocks muted ahead of payrolls; construction data disappoints
London stocks were still little changed by midday on Friday, with investors erring on the side of caution ahead of the non-farm payrolls report, as data revealed that the UK construction sector suffered its biggest monthly drop in six years in January.
The FTSE 100 was flat at 7,202.61, while the pound was up 0.1% against the dollar and the euro at 1.3823 and 1.1232, respectively.
Data released earlier by the Office for National Statistics showed construction output declined 3.4% in January from December, coming in far worse than expectations of a 0.3% drop and marking the biggest month-on-month slide since June 2012.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "Rising interest rates and Brexit uncertainty are proving to be a toxic combination for the construction sector. The sharp decline in output in January primarily reflected an 8.3% month-to-month collapse in new work in the private housing sector.
"We doubt that housebuilding will recover fully soon; the housing activity index of the construction PMI rose only to 51.2 in February, having fallen to 48.1 in January from 55.3 in December. The prospect of further increases in interest rates is subduing buyer demand both for new and existing homes."
Meanwhile, industrial production rose 1.3% on the month in January after falling by the same amount in December, missing expectations for a 1.5% jump. Manufacturing output increased by just 0.1% on the month, down from the 0.3% growth recorded in December and short of the 0.2% forecast. This meant the three-month on three-month growth rate slowed to 0.9% from 1.3%.
Aside from UK data, investors were mulling news that US President Trump has agreed to meet with Kim Jong Un by May for talks about its nuclear weapons, something North Korea has been seeking with an American president for more than 20 years.
They were also keeping their powder dry ahead of the release of the key non-farm payrolls report, which is due out in the US at 1330 GMT, along with the unemployment rate and average hourly earnings.
The report is expected to show that 205,000 jobs were added in February, up a touch from January's 200,000, while the unemployment rate is forecast to have fallen to 4% from 4.1%. Average hourly earnings will garner the most attention, however, given the emphasis that new Federal Reserve governor Jerome Powell has put on strengthening wage growth.
"Interestingly the figure is estimated to fall from 0.3% to 0.2% month-on-month, something that may leave the dollar facing a soft end to the week," said Spreadex analyst Connor Campbell.
In corporate news, satellite operator Inmarsat fell after saying it would be cutting its annual dividend to 20 cents a share as it cited “the lack of visibility” over future cash payments from US partner Ligado beyond the end of 2018 and the need to take advantage of the growing in-flight wi-fi market.
Renewi slumped after the waste-to-products business said a review of contracts in its waste management division would lead to additional write-downs worth a £73m.
Building products supplier SIG dropped as it reported a 10% decline in underlying profits and cash flow shrinking by a third as the UK market becomes "increasingly challenging".
On the upside, sports betting and gaming company GVC Holdings, which received shareholder approval for its merger with Ladbrokes Coral this week, rallied as posted a rise in full-year adjusted profit and net gaming revenue, thanks in part to the acquisition of Bwin.
In broker note action, Smurfit Kappa was upgraded to ‘hold’ at Kepler Cheuvreux, Esure was lifted to ‘outperform’ by RBC Capital Markets and G4S was upgraded to ‘hold’ at SEB Equities.
Meanwhile, Pennon and Severn Trent were boosted to ‘overweight’ at JPMorgan and Acacia Mining and Centamin were initiated at ‘sell’ and ‘hold’, respectively, by Berenberg.
Market Movers
FTSE 100 (UKX) 7,202.61 -0.01%
FTSE 250 (MCX) 20,009.92 0.21%
techMARK (TASX) 3,386.28 -0.12%
FTSE 100 - Risers
NMC Health (NMC) 3,518.00p 4.64%
Aviva (AV.) 516.20p 1.49%
Severn Trent (SVT) 1,814.00p 1.26%
Persimmon (PSN) 2,579.00p 1.22%
Direct Line Insurance Group (DLG) 388.20p 1.17%
Anglo American (AAL) 1,726.60p 1.14%
Mediclinic International (MDC) 613.40p 1.05%
Smiths Group (SMIN) 1,603.17p 1.05%
SSE (SSE) 1,260.55p 1.05%
Centrica (CNA) 143.05p 0.99%
FTSE 100 - Fallers
WPP (WPP) 1,205.00p -2.07%
Rolls-Royce Holdings (RR.) 908.00p -1.50%
Evraz (EVR) 434.00p -1.25%
Royal Bank of Scotland Group (RBS) 260.06p -1.12%
Intertek Group (ITRK) 4,998.00p -1.03%
Legal & General Group (LGEN) 261.70p -0.95%
International Consolidated Airlines Group SA (CDI) (IAG) 623.20p -0.92%
Mondi (MNDI) 1,969.00p -0.91%
Standard Life Aberdeen (SLA) 368.50p -0.78%
Just Eat (JE.) 763.40p -0.78%
FTSE 250 - Risers
GVC Holdings (GVC) 938.00p 4.16%
AA (AA.) 82.88p 3.65%
John Laing Group (JLG) 249.80p 3.24%
Sirius Minerals (SXX) 29.34p 3.24%
Sanne Group (SNN) 695.00p 2.96%
FDM Group (Holdings) (FDM) 965.00p 2.66%
IG Group Holdings (IGG) 809.50p 2.60%
Rotork (ROR) 281.10p 2.48%
TBC Bank Group (TBCG) 1,834.00p 2.46%
Hunting (HTG) 711.75p 2.41%
FTSE 250 - Fallers
Inmarsat (ISAT) 436.20p -5.97%
Renewi (RWI) 84.40p -5.59%
SIG (SHI) 142.50p -4.87%
Acacia Mining (ACA) 130.70p -3.97%
Ferrexpo (FXPO) 290.70p -3.74%
Daejan Holdings (DJAN) 5,670.00p -2.91%
Brown (N.) Group (BWNG) 196.30p -1.85%
Alfa Financial Software Holdings (ALFA) 382.39p -1.70%
Fenner (FENR) 469.40p -1.55%
Tullow Oil (TLW) 185.45p -1.41%