London pre-open: Stocks seen muted ahead of payrolls

(Sharecast News) - London stocks were set for a flat open on Friday following heavy losses in the previous session, as investors mulled the latest UK house price data and looked ahead to the release of the US non-farm payrolls report. The FTSE 100 was called to open unchanged at 7,280.

CMC Markets analyst Michael Hewson said: "Today's US non-farm payrolls report for June could well reinforce this optimism over the US economy, however there is also a fear that a decent jobs report could encourage the Federal Reserve to think the economy is more resilient than it actually is and raise rates more than they need to. That's certainly what markets are pricing with the recent rise in yields.

"The resilience of the jobs market has also been a little embarrassing for the economics profession, with the headline jobs report number, comfortably beating forecasts for the 14th month in succession, coming in at 339k in May. Will today follow a similar pattern?

"Whatever happens today, a 25bps rate hike this month appears locked in, so it's really a question of how many more we get after that.

"That remains to be seen, so while we saw the Fed pause in June, this week's minutes showed us that the decision, while unanimous, was only arrived at reluctantly, and with a commitment to raise rates by another 50bps by year end."

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

On home shores, figures from Halifax showed that house prices fell in June at the steepest annual pace in 12 years.

Prices declined by 2.6% following a 1.1% fall in May. This was the worst drop since June 2011.

Kim Kinnaird, director, Halifax Mortgages, said: "Concerns about persistent inflation have led to a significant increase in the cost of funding. Coupled with base rate rising by another 50bp, this contributed to a big jump in typical mortgage rates over the last month.

"The resulting squeeze on affordability will inevitably act as a brake on demand, as buyers consider what they can realistically afford to offer. While there's always a lag effect when rates go up, many existing mortgage holders with variable deals or rolling off fixed rates will likely face an increase in the next year."

In equity markets, Coca-Cola HBC upgraded full-year earnings guidance after a stronger than anticipated finish to the first half of the year.

The soft-drink bottler said performance in June, "one of our most significant months, was very good overall". As a result, it expects to deliver strong organic earnings before interest and tax growth for 2023 of 9-12%, from prior guidance of the top end of a -3 to +3% range.

"Our mid-term guidance from 2024 onwards is unchanged. We expect average annual organic revenue growth of 6-7% and average annual organic EBIT margin expansion of 20-40 basis points per annum," Coca-Cola HBC said.

Sportswear retailer JD Sports Fashion said it was buying the minority holding in Iberian Sports Retail Group currently held by Balaiko Firaja Invest and Sonae Holdings for €500.1m.

ISRG currently operates more than 460 stores across Europe including JD in Iberia, Sprinter in Spain, Sport Zone in Portugal and Aktiesport and Perry Sport in the Netherlands.