London pre-open: Stocks set to dip after weak UK employment data

Stocks are set to dip following the release of an unexpectedly weak reading on UK employment for the three months to February.

Also dragging on market sentiment were the moderate falls seen on Wall Street overnight, driven by weakness in technology stocks focused on Tesla and chip-maker Nvidia.

The latter fell after the UK government said it would look into the national security implications of its acquisition of ARM Holdings.

Swissquote analyst, Ipek Ozkardeskaya, sounded a bearish note on the outlook for stocks.

Ozkardeskaya told clients: "Stocks are poised to extend gains through uncharted territories, even with the valuations that do no longer make sense as stock prices trade on average near 40 times this year’s earnings and some 23 times the next year’s earnings according to Bloomberg.

"Suppressing shorts is now adding a perilous asymmetry to the market valuation and increases the risk of seeing a bigger bubble built as we inevitably move toward tighter financial conditions on the back of improved economic data."

As of 0700 GMT, futures tracking the FTSE 100 were down by 4.5 points at 6,961.5, while cable was edging up 0.01% to 1.3988, having earlier briefly hit 1.4237.

UK payrolls fell unexpectedly, dropping by 56,000 in March, the first decline in four months.

The unemployment rate for the three months to February also surprised to the downside, falling by one tenth of a percentage point to 4.9% (consensus: 5.1%), but only as a result of Britons leaving the workforce.

Across the Channel meanwhile, the spotlight will be on the European Central Bank's Bank Lending Survey for the first quarter of 2021.

The European Union's General Affairs Council is also due to meet via video conference to analyse the state of relations with the UK, among other matters.

No major economic releases are scheduled in the US, with the spotlight expected to be on Netflix's earnings which are due out after the close of trading in New York.

ABF to return furlough monies, pay interim dividend

Associated British Foods saw its bottom line more than halve over the half-year ended on 27 February. However, citing its "success" in a number of new markets, ranging from Poland to Florida, the board announced that the food ingredients maker would repay the monies received from the government's job retention scheme during the present financial year and declared an interim dividend. Group revenues fell 18% at constant currencies to reach £6.31bn. Adjusted profits before tax meanwhile halved to £319m while earnings per share reduced by 59% to 25.1p. Net debt including lease liabilities stood at £2.72bn at period end. ABF's board declared a dividend payout of 6.2p.

Rio Tinto reported a 7% improvement in Pilbara iron ore shipments year-on-year to 77.8 million tonnes for the first quarter on Tuesday, with production down 2% to 76.4 million tonnes. The FTSE 100 mining giant said bauxite production slipped 2% to 13.6 million tonnes, while aluminium production grew 3% to 0.8 million tonnes. Mined copper production of 120,500 tonnes was 9% lower than in 2020, while titanium dioxide slag production was 5% lower year-on-year at 279,000 tonnes and production of pellets and concentrate at the Iron Ore Company of Canada (IOC) was 8% lower than in 2020.

Cybersecurity software company Avast said first quarter revenue rose 10.4% to $237.1m on an organic basis, with its Consumer Direct business continuing to deliver good growth, while the SMB business also sustained positive momentum. The FTSE 100 company said adjusted EBITDA was 10.3% for the period at $133.7m, resulting in an adjusted EBITDA margin of 56.4%.