London midday: Stocks up ahead of non-farm payrolls

(Sharecast News) - London stocks were off earlier highs but still in the black by midday on Friday, as investors eyed the latest US non-farm payrolls report, with upbeat results from BA owner IAG and US tech giant Apple helping to lift the mood. The FTSE 100 was up 0.5% at 7,739.03, while sterling hit a one-year high against the dollar, trading up 0.3% at 1.2610 as the US currency was hit by worries about the banking sector.

The payrolls report is due at 1330 BST, along with the unemployment rate and average earnings.

Victoria Scholar, head of investment at Interactive Investor, said: "All eyes are on the US non-farm payrolls report on Friday with investors looking for further signs that the labour market is cooling stateside. The consensus is for 180,000 job additions in April, the smallest monthly gain since December 2019."

On home shores, a survey showed that activity in the housebuilding sector fell at its fastest rate in April since May 2020, although broader construction activity rose.

The S&P Global/CIPS construction purchasing managers' index increased to 51.1 from 50.7 in March, coming in marginally above consensus expectations of 51.0. A reading above 50.0 indicates expansion, while a reading below signals contraction.

Commercial building was the fastest-growing area, with improving economic conditions helping to boost clients' willingness to spend. Civil engineering activity also picked up, supported by resilient pipelines of work on infrastructure projects, but housebuilding was by the weakest-performing segment in April, with the index coming in at 43.0 from 44.2 in March.

Survey respondents noted delays to new house building projects, along with constraints on demand from softer market conditions and higher borrowing costs.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said he expects the downturn in housebuilding to gather more momentum in the third quarter, "as some builders likely are currently starting more housing units than required to meet demand, so that they do not have to comply with stricter 'Part L' building rules, which will apply from July".

"The likelihood that new mortgage rates will edge up over the coming months, mainly in response to the increase in risk-free rate expectations, suggests that underlying house purchase demand will remain weak this year," he said.

"Meanwhile, large net repayments of external finance by private non-financial corporations in recent months suggest that the current momentum in new commercial work will not endure. All told, then, we continue to think that construction output will finish the year down about 3% year-over-year."

Investors were also digesting the latest data out of China, which showed that growth in the services sector was a little weaker than expected in April.

In equity markets, BP and Shell gushed higher as oil prices rose. Shell was also in focus after Ithaca Energy said it had struck a deal with the oil giant to market its 30% stake in the giant Cambo North Sea oil and gas prospect.

British Airways and Iberia owner IAG flew higher as it lifted its full-year earnings forecasts on the back of strong summer demand as its first-quarter profits performance beat expectations.

The group, which also owns Aer Lingus, now expects annual profit at the top end of a €1.8 - 2.3bn range given in February. Operating profit for the three months to March was €9m, compared with a €718m loss a year earlier and smashing the €179m loss forecast by analysts.

IAG said the summer outlook was encouraging, adding that capacity in the North Atlantic and Latin American markets was now back at pre-pandemic levels, driven by leisure demand.

On the downside, InterContinental Hotels fell after it announced the departure of chief executive Keith Barr and said it had seen a "good start" to the year. Barr will be replaced by Elie Maalouf, who has led IHG's Americas business as regional chief executive for the last eight years.