London pre-open: Stocks seen up amid trade hopes, ahead of payrolls

London stocks were to rise at the open on Friday amid renewed optimism about Sino-US trade relations and ahead of the release of the latest US non-farm payrolls report.

The FTSE 100 was called to open 43 points higher at 6,735.

Sentiment was expected to be lifted after China’s commerce ministry reportedly said the US and China would hold vice-ministerial level negotiations over trade in Beijing on 7-8 January.

Elsewhere, the release of the US non-farm payrolls report, unemployment rate and average hourly earnings at 1330 GMT will be the highlight on the macro calendar.

London Capital Group analyst Jasper Lawler said: "Wednesday’s dismal manufacturing data combined with growing concerns over the health of the global economy threw into question the Fed’s ability to hike rates this year. As a result, the dollar traded 0.4% lower versus a basket of currencies. Traders will be watching the US non-farm payrolls closely for signs that the Fed could end up cutting rather than hiking rates later this year. A rate cut is now fully priced in for 2020."

The jobs report is expected to show that 177,000 jobs were added in the US in December, while the unemployment rate is expected to have held steady at 3.7%. Average earnings on a yearly basis are forecast to have eased to 3% from 3.1%, but on a monthly basis they are expected to be 0.3%, up from 0.2%.

"The ADP employment report saw the best job creation since February 2017 and the fourth largest monthly job creation since 2009. There is a chance that economists have been caught up in market pessimism, setting up the jobs data for a positive surprise," said Lawler.

"A stronger than forecast reading could help the dollar pare some of the losses from the previous session. However, a weaker than forecast figure would be ammunition for dollar bears, potentially pulling the dollar below 96.00 a level which has acted as a support across the past month, before it moves down to test October’s low of 94.00."

On the UK data front, net lending, consumer credit, mortgage approvals and Markit’s services PMI are at 0930 GMT.

Figures out earlier from Nationwide showed that annual house prices in the UK grew at their slowest pace in nearly six years in December.

Nationwide’s seasonally adjusted measure of house prices fell by 0.7% month-on-month in December, while the year-over-year growth rate fell to 0.5% from 1.9% in November, below consensus expectations of 1.5%.

Nationwide’s chief economist Robert Gardner said: "This marks a noticeable slowdown from previous months, where prices had been rising at a circa 2% pace. However, it is broadly in line with our expectations (since the start of the year we had been anticipating a price rise of c1% in 2018).

"Indicators of housing market activity, such as the number of property transactions and the number of mortgages approved for house purchases, have remained broadly stable in recent months, but forward-looking indicators had suggested some softening was likely.

"In particular, measures of consumer confidence weakened in December and surveyors reported a further fall in new buyer enquiries towards the end of the year. While the number of properties coming onto the market also slowed, this doesn’t appear to have been enough to prevent a modest shift in the balance of demand and supply in favour of buyers."

Corporate news was scarce.

Investment company HarbourVest Global Private Equity has secured a new $600m multi-currency credit facility with Credit Suisse AG and Mitsubishi UFJ Trust Banking Corporation.

The lenders will provide $300m each. The new facility is structured as a five-year evergreen with a two-year initial no-notice provision, giving a guaranteed initial term of seven years.

Johnson Service Group, the provider of work-wear and hospitality linen rental, said trading for the second half of the year had been in line with expectations and that it is planning to open a new laundry in the north of England.

During the six months to 31 December, the company completed the £3.3m investment in its Stalbridge Linen unit in London and successfully integrated the August acquisition of South West Laundry into the Stalbridge brand.