London midday: FTSE in the red ahead of payrolls; construction PMI in focus

London stocks were still firmly in the red by midday on Friday as investors mulled the latest UK construction data and eyed the release of the US non-farm payrolls report.

The FTSE 100 was down 0.9% at 7,650.73.

Russ Mould, investment director at AJ Bell, said: "Markets continue to be choppy as investors recalibrate expectations for interest rate cuts this year. After euphoria last November and December amid hopes the Fed would cut rates as soon as March 2024, the central bank has since tried to dampen expectations and the latest meeting minutes further muddied the water.

"Rate cuts now look as if they are going to be a story for the middle of the year and that’s prompted investors to temporarily pause for thought, leading to bouts of profit taking from the recent rally.

"As a result, Wall Street has had a weak start to the year with the Nasdaq Composite falling 3.3% and the S&P 500 down 1.7%.

"The market is also keeping a close eye on recent strength in oil prices, driven by concerns that issues in the Red Sea shipping lanes could disrupt supplies. Higher oil prices and any problems transporting goods to major locations are both key inflationary factors and are naturally driving market concerns that interest rate cuts may not happen until further into the future."

The payrolls report for December is due out at 1330 GMT, along with the unemployment rate and average earnings. Expectations are for 170,000 jobs to have been added, compared to 199,000 in November, while the unemployment rate is expected to have ticked up to 3.8% from 3.7%.

On home shores, a survey out earlier showed that the downturn in the construction sector eased a little in December.

The S&P Global construction purchasing managers’ index printed at 46.8, remaining below the 50.0 mark that separates contraction from expansion for the fourth month in a row amid a continued slump in the house building sector.

However, it was above November’s reading of 45.5 and while housebuilding remained the weakest of the categories - with the index at 41.1, up from 39.2 in November - the rate of decline eased to its slowest since July 2023. The index for civil engineering activity printed at 47.0, meanwhile, which was also a softer pace of contraction.

Commercial construction declined only modestly, with the index down to 47.6 in December from 48.1 the month before, but the speed of the downturn accelerated to its fastest since January 2021. Some firms said concerns about the domestic economic outlook and high borrowing costs had led to greater caution among clients.

Tim Moore, economics director at S&P Global Market Intelligence, said: "Construction companies experienced another fall in business activity at the end of 2023 as weak order books meant a lack of new work to replace completed projects. House building was the worst-performing area of construction activity, but even in this segment there were signs that the downturn has started to ease.

"Elevated borrowing costs and a subsequent slump in market confidence were the main factors leading to falling sales volumes across the construction sector in the second half of 2023. Survey respondents also continued to cite worries about the broader UK economic outlook, especially in relation to prospects for commercial construction.”

Figures from Halifax showed that house prices rose again in December as mortgage rates fell.

House prices picked up 1.1% on the month following a 0.6% increase in November. This marked the third monthly increase in a row following six consecutive declines, and left the average price of a home at £287,105.

On the year, house prices rose 1.7% in December following a 0.8% decline the month before.

Kim Kinnaird, director, Halifax Mortgages, said: "Whilst it’s encouraging that we saw growth in the last three months of the year, this was preceded with property price falls for six consecutive months between April and September.

"The growth we have seen is likely being driven by a shortage of properties on the market, rather than the strength of buyer demand. That said, with mortgage rates continuing to ease, we may see an increase in confidence from buyers over the coming months."

Investors were also mulling the latest figures from BRC-Sensormatic IQ, which showed that British shoppers headed out more reluctantly during the usually busy holiday period, with retail footfall seeing a notable decline.

Corporate news was thin on the ground, but Endeavour Mining tanked after it announced late on Thursday that president and chief executive Sebastien de Montessus had been dismissed with immediate effect for "serious misconduct".

The sacking follows an investigation by the board into "an irregular payment instruction issued by him in relation to an asset disposal undertaken by the company".

The amount of this irregular payment instruction is $5.9m and Endeavour said the board recently became aware of it in the course of a review of acquisitions and disposals, which is ongoing.

On the upside, shipping services provider Clarkson surged as it lifted annual guidance after strong trading during the final quarter of 2023, driven by its broking division. Underlying pre-tax profit is now expected to be at least £108m for the 12 months to December 31, the company said.

In broker note action, Mondi slumped after a downgrade to ‘hold’ from ‘buy’ at Jefferies.

Market Movers

FTSE 100 (UKX) 7,650.73 -0.94%
FTSE 250 (MCX) 19,099.51 -1.41%
techMARK (TASX) 4,246.35 -1.12%

FTSE 100 - Risers

WPP (WPP) 762.40p 2.72%
Convatec Group (CTEC) 244.20p 0.66%
Haleon (HLN) 330.90p 0.38%
Burberry Group (BRBY) 1,364.50p 0.37%
Centrica (CNA) 147.65p 0.20%
Glencore (GLEN) 459.55p 0.07%
Dechra Pharmaceuticals (DPH) 3,858.00p 0.05%
Entain (ENT) 967.40p -0.17%
Reckitt Benckiser Group (RKT) 5,506.00p -0.22%
JD Sports Fashion (JD.) 119.40p -0.25%

FTSE 100 - Fallers

Endeavour Mining (EDV) 1,505.00p -11.16%
RS Group (RS1) 786.20p -4.54%
IMI (IMI) 1,544.00p -4.22%
Ocado Group (OCDO) 708.60p -3.49%
Ashtead Group (AHT) 5,076.00p -3.24%
Mondi (MNDI) 1,490.00p -3.09%
Smurfit Kappa Group (CDI) (SKG) 3,002.00p -2.78%
Kingfisher (KGF) 226.80p -2.66%
Airtel Africa (AAF) 124.70p -2.43%
3i Group (III) 2,281.00p -2.40%

FTSE 250 - Risers

Clarkson (CKN) 3,485.00p 6.74%
Me Group International (MEGP) 124.20p 3.85%
W.A.G Payment Solutions (WPS) 92.00p 2.22%
Bakkavor Group (BAKK) 85.80p 2.14%
Foresight Solar Fund Limited (FSFL) 101.60p 1.60%
Caledonia Investments (CLDN) 3,555.00p 0.85%
Jlen Environmental Assets Group Limited NPV (JLEN) 102.60p 0.59%
C&C Group (CDI) (CCR) 150.20p 0.40%
Scottish American Inv Company (SAIN) 523.00p 0.38%
Pantheon International (PIN) 310.50p 0.32%

FTSE 250 - Fallers

Spectris (SXS) 3,491.00p -5.06%
Diversified Energy Company (DEC) 1,160.00p -4.92%
TI Fluid Systems (TIFS) 144.60p -3.98%
Jupiter Fund Management (JUP) 86.40p -3.68%
Ashmore Group (ASHM) 205.20p -3.66%
Bridgepoint Group (Reg S) (BPT) 260.00p -3.56%
TUI AG Reg Shs (DI) (TUI) 582.50p -3.48%
Trustpilot Group (TRST) 133.80p -3.32%
Breedon Group (BREE) 343.50p -3.24%
Tate & Lyle (TATE) 641.50p -3.02%