MARKET COMMENT: UK Equities Mostly Down Ahead Of US Jobs Data

LONDON (Alliance News) - The major UK stock indices are trading a little lower Friday, as investors weigh-up the impact of the stimulus measures announced by the ECB on Thursday and wait for the monthly US jobs report due later.

By mid-morning Friday, the FTSE 100 is down 0.3% at 6,860.17, the FTSE 250 down 0.3% at 15,955.77, while the AIM All-Share is up 0.1% at 778.08.

It's a mixed picture in Europe following Thursday's strong gains. The French CAC 40 is down 0.1%, while the German DAX is up 0.2%.

BP is currently one of the top gaining blue-chip stocks, up 0.9%. It's been a volatile morning for the oil major, however, which has been oscillating between between gains and losses as investors weigh up the potential damage of Thursday's court ruling in the US. The gains come on the back of a near 6% fall in the stock on Thursday.

A number of brokers, including Goldman Sachs and Jefferies, have lowered their price targets on the stock to take account of a potential fine, which at current estimates could see BP having to add an extra USD8 billion to its provisions, which equates to about 5.5% of its market capitalisation.

It's an uncertain situation that could see BP ultimately fined more or less than current predictions. BP is contesting the ruling and analysts say there are plenty of mitigating factors that will lead to a lengthy court process. In the not-too-distant past, Exxon took almost 20 years to settle its own dispute over the 1989 Valdez spill.

The mining and natural resource stocks are underperforming Friday amid ongoing concerns about base metals prices. The FTSE 350 sector index is down 1.2%, with Fresnillo down 3.3%, and Rio Tinto down 1.6%. Randgold Resources is the second-biggest faller on the FTSE 100, down 2.7%.

Foxtons Group is the worst performer in the FTSE 250, down 2.3%. The Financial Times has reported Friday that the private equity company that listed Foxtons last year, BC Partners, has sold a further 7% stake in the company, as it continues with its exit strategy.

The euro is making a back a little of the losses it made on Thursday in the wake of the surprise ECB announcements, although at USD1.2955 it remains extremely subdued after the heavy sell off.

The single currency received a small boost from some better-than-expected German industrial production data released earlier in the session. Production in Europe's largest economy expanded by 1.9% month-on-month in July, exceeding the estimate for 0.3% growth.

While the German data provided an upside surprise, eurozone GDP data has highlighted why the ECB opted for more unconventional easing on Thursday. The data backed up initial estimates to show growth across the eurozone remained stagnant in the second-quarter, showing no growth at all, down from just 0.2% growth in the first quarter. The final reading will come at the start of next month.

Overall, markets remain fairly subdued in the run-up to the US non-farm payroll report, due at 1330 BST.

Analysts are looking for a figure of 225,000 in August, up from 209,000 in July, which would represent the sixth consecutive month above 200,000. The unemployment rate is expected to drop to 6.1%, from 6.2%.

Investors will also have a keen eye on both average earnings data and the participation rate, given that slow wage growth is holding the Federal Reserve back from an interest rate rise, and that the Fed now also prefers to look at the underemployment rate than the headline unemployment rate.

In July, average hourly earnings grew at 2.0% year-on-year and were flat month-on-month, while the participation rate was 62.9%. Analysts are expecting to see monthly earnings growth of 0.2% in August.

Ahead of the data, the futures markets indicate a slightly softer open can be expected on Wall Street, with the S&P 500 and the DJIA both pointing down about 0.1%.

By Jon Darby; jondarby@alliancenews.com; @jondarby100

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