Market buzz: US jobs reports beats forecasts, Spain dumps PM

1555: Housebuilder Barratt Developments was boosted by an upgrade form JP Morgan to 'overweight' from 'neutral', while reversing that call and downgrading rival Taylor Wimpey to 'neutral'. Persimmon was reiterated at 'overweight'.

Analysts at Stifel upgraded defence contractor Babcock to 'buy' with a 950p target price, while those at HSBC did the same for waste specialists Biffa. Challenger bank CYBG was raised to 'hold' by Investec, and United Utilities was downgraded to 'hold' by Deutsche Bank.

1545: A Mothercare creditors meeting approved the retailer's proposals for a company voluntary arrangement that will enable it to shut 50 of its 137 shops and force through rent reductions on 21 others. The mother's and children's retailer said it was preparing the prospectus for its associated £28m fundraising, which it expects to be priced at 19p per share, though the final price could change depending on the market.

1535: Italian 10-year government bond yield down 13 basis points to 2.66% after an intra-day spike to 2.80%, which saw it push higher for the day.

1500: ISM manufacturing sector purchasing managers' index rises from 57.3 to 58.7 (consensus: 58.1). In parallel, the preliminary reading on IHS Markit's own version of the survey has been revised lower from a preliminary print of 56.6 to 56.4.

1331: US jobs report beats Wall Street expectations across the board, 223K jobs added versus 188-190K forecast, unemployment rate falls to 3.8%, when it had been expected to stay at 3.9%. Wage growth of 0.3% month-on-month, up from 0.1% and ahead of 0.2% estimate, meaning the annual wage growth accelerates to 2.7%.

1150: Spain's new Prime Minister is socialist Pedro Sanchez and while new elections are possible, for now it seems that Sanchez will attempt to garner support to govern and continued with the budget as agreed under the deposed Mariano Rajoy.

"The shift does not need to be traumatic," says Oxford Economics. "Unlikely Italy, all parties in Spain are solidly pro-EU to different degrees.

"There is no discussion regarding eurozone membership and the Spanish economy continues to be one of the strongest performers in the continent. Sánchez has already stated that he will stick to the 2018 budget that was recently approved, ensuring policy continuity in the short term."

Spain’s main equity index was near session highs as Sanchez promised to continue the fiscal programme of his predecessor. Sanchez was backed by six parties to secure the 180 votes to carry the no-confidence motion in Rajoy, with most parties favour respecting fiscal rules. Sanchez’s pledge of "dialogue" over Catalonia was also seen as moderate.

"Early elections are quite possible but the current balance of power in Spain is market friendly," says Ken Odeluga at City Index.

1124: More from Erlam: "You may not guess it based on the current levels in financial markets but it’s been quite a week for investors which has been reflected by a spike in volatility, with politics being the main driver of the unrest."

There have market casualties along the way, he adds, with overall risk appetite having taken a hit at the prospect of Italy returning to the polls in what was being labelled a vote on the euro. "This naturally got investors all over quite nervous with the eurozone debt crisis still very much fresh in the memory. While this week has been a stark reminder of how quickly things can unravel in pockets of the European political scene and reminds us of the risks that still exist in Italy, there is a sense of relief that some form of stability has resumed for now."

1121: Looking to the US jobs report, market analyst Craig Erlam at Oanda said this highly anticipated releases in the market provides important insight into the strength of the US economy, labour market and potential inflationary pressures.

"With unemployment already at 3.9% and the labour market looking quite tight, there is likely to be more emphasis on the wages number as opposed to job creation, although that never falls entirely under the radar.

"Strong wage growth has completely eluded this particular economic recovery, despite the apparent lack of slack in the labour market."

Earnings are expected to tick slightly higher to 2.7, little changed on the last 18 months. This would not represent any shift that would be indicative of labour market tightness flowing through into higher inflation, Erlam adds. The NFP number is expected to come in just below 190,000.

1119: The EU is planning to go to the WTO to not only sue the US, but also China, the latter over its intellectual property practices, Commission officials have told Politico. Both cases should “ideally be launched together,” the College of Commissioners agreed earlier this week, according to the sources.

And while Trump’s move didn’t come as a surprise to the EU, it surprised Canada and Mexico. “Canada considers it frankly absurd that we would in any way be considered to be a national security threat to the United States,” Foreign Minister Chrystia Freeland said.

1009: Manufacturing purchasing managers index survey results from around the world today. China's Caixin remained at 51.1, versus 51.0 expected.

Across Europe we had the Spanish PMI fall to 53.4 from 54.4, versus 53.9 expected; Italy fell to 52.7 from 53.5, falling short of the 52.9 consensus estimate; while the German PMI crept up to 56.9 from 56.8, with no change expected.

All in all for the eurozone PMI it remained unchanged at 55.5 as forecast.

1003: UK in-store like-for-like sales were down by 3% this week, a weekly survey from BDO reveals, with homeware was the star retail category and lifestyle shops also creeping into growth, but fashion remaining in negative territory.

"This week ended with the weekend just prior to the Spring bank holiday Monday and marked the beginning of half term for many areas, such that mini-breaks and holidays may have dented weekend footfall. The equivalent week last year also ended on the Sunday prior to the bank holiday Monday amid sunny weather," BDO said.

1001: The EU's Federica Mogherini says the bloc will proceed with its WTO case against the US after it imposed tariffs on steel and aluminium imports from the EU at midnight.

0950: On the UK manufacturing PMI, which has seen the pound mount a feeble rally, David Cheetham, chief market analyst at currency broker XTB, said while the figure itself remains relatively weak in being the third lowest in the past 12 months, it still was better than expected and will raise hopes for next week’s more important services PMI release.

"The pound remains slightly lower on the week against the US dollar and is on course for a 6th weekly loss out of 7. You have to go back to last November to find a lower weekly closing price for this pair, although there have been some tentative signs of support in recent days with buyers stepping in to defend the 1.32 handle. "

0947: Spain's prime minister Mariano Rajoy is preparing for defeat, telling reporters outside a restaurant near parliament that it has been "an honour" to hold the role. An expected vote of no confidence in parliament proposed by opposition leader Pedro Sánchez is likely to see the PSOE leader become prime minister-designate and call a new general election.

0938: UK manufacturing PMI index for May beat consensus forecasts, but with the gains made as firms worked through the backlog of work from earlier in the year, it was not the most convincing.

The PMI rose to 54.4 in May from the 53.9 17-month low from a month before. The market had expected a slight fall to 53.5.

0901: The Friday ondon open market report shows the FTSE 100 is up 53.54 or 0.7% to 7,731.74, back towards recent all-time highs, as the pound lost territory on the dollar, falling below $1.33 again, and remained little moved against the euro at 1.1365.

The Italian political agreement provides some immediate respite for investors, maybe, says Neil Wilson at Markets.com, but the 10-year BTP is still above 2.6%, pushing 2.7%, well north of the 1.7%-1.8% level before the mini-crisis blew up.

"So, some calm but certainly the market is still pricing expansionary fiscal policies and/or a run-in with the EU on borrowing and the expectation of ballooning debt-to-GDP. Whatever it is there is still risk in there, but the redenomination/Eurozone breakup risks (the tail risk that wagged the dog this week) have decidedly retreated with the approval of the govt," he says.

0812: More bad news for Deutsche Bank as credit agency S&P downgrades the bank from ‘A-‘ to ‘BBB+’, which could put the stock under a bit more pressure today after the US Federal Deposit Insurance Corporation placed Deutsche's US business on its ‘problem banks’ list yesterday.

S&P didn't call into question DB's soundness, notes analyst Neil Wilson at Markets.com. "The downgrade is two-fold. One, the restructuring is big and risky; that is 'deeper' and with ‘non-negligible execution risks’ – ie it could all go very wrong. Two, Deutsche Bank just isn’t profitable enough and will trail peers – who are now pretty well done with their post-crisis clean outs - for a while yet. The fact is that while restructuring can deliver important cost reductions, it is less clear what Deutsche’s plans are to grow revenues thereafter. Deutsche has been slow to restructure and now it’s got to sprint to catch up."

0645: The leaders of the populist Italian parties Movement 5 Stars and the League reached an agreement late on Thursday to break Italy’s political deadlock and finally form a new government.

After president Sergio Mattarella refused to support their chosen economy minister Paolo Savona for threatening to exit Italy from the EU and appointed Carlo Cottarelli as temporary prime minister, it all pointed towards new elections as early as July.

M5S and the League leaders Luigi di Maio and Matteo Salvini resumed negotiations to try and avoid the ballot boxes in the summer and reached an agreement yesterday.