US open: Stocks head south following announcement of Iranian sanctions

Wall Street trading started off with losses on Friday as a disappointing set of results overnight from Apple and the reimposition of sanctions against Iran helped offset a stronger-than-expected jobs report and some positive news on the US-China trade front.

As of 1500 GMT, the Dow Jones was down 0.24% to 25,319.70, while the S&P 500 was 0.43% weaker at 2,728.66 and the Nasdaq was 1.01% lower at 7,359.27.

After some early gains on the Street, US stocks took a turn for the worst after the Trump administration announced plans to re-impose sanctions on Iran that had been lifted under the 2015 nuclear deal.

The sanctions, designed to cripple Iran's shipping, banking and oil industries, go into effect on Monday.

Secretary of State Mike Pompeo said the sanctions were aimed at "depriving revenue Iran uses to spread death and destruction."

Oanda analyst Craig Erlam said: “In perhaps another sign that investors have gathered their composure after a tumultuous few weeks, market reaction to today’s stellar US jobs report has been relatively mild.”

“Obviously the caveat to this is that the earnings number was in line with expectations whereas the increase in jobs was partially offset by last month’s revision and likely partly due to the extreme weather conditions in September. Still, we got through the report relatively unscathed, hopefully clearing the way for a relaxed end to the week which will provide an additional layer of comfort heading into what could be a big week for the US.”

Donald Trump has reportedly taken steps to draft a new trade deal with China on after a positive call with Chinese President Xi Jinping.

Trump tweeted that he and his Chinese counterpart had discussed trade and that negotiations were “moving along nicely with meetings being scheduled at the G-20 in Argentina” later this month.

After the call, Trump asked US officials to draft potential terms for a new bilateral trade deal, Bloomberg reported.

This news propelled Asian and then European stocks higher, with the Nikkei up 2.6%, the Hang Seng up 4.2% and the Shanghai Composite up 2.7%, with London's FTSE 100 up 0.6% and Germany's more export-focused DAX up 1.4%.

London Capital Group analyst Jasper Lawler said: “The trade war has been partly to blame for the recent equities rout, so any signs that the two powers are making progress will encourage investors to put risk back on the table and pick up stocks at bargain levels. This remains a fragile situation, but it appears to have turned a corner, providing a floor to the recent equity selloff. Whilst talks are on a positive note we don’t expect to see a repeat of those extreme bouts of selling that we saw across October.”

In corporate news, Apple fell 6.19% in early trade as its fourth consecutive quarter of record revenue and profits posted on Thursday night, driven by higher iPhone price and solid app store sales, was sullied by a weakened outlook following its best year in history.

Synchrony shares were down 8.24% after rumours that retail giant Walmart was suing it for breach of contract and Kraft Heinz dropped 7.15% after falling short of third-quarter profit estimates on the Street.

Starbucks brewed up a 10.76% gain at the bell after its same-store sales of 4% came in ahead of analyst expectations and Newell Brands surged 14.2% after raising its full-year guidance.

Verisign rocketed 18.87% after analysts at JP Morgan upgraded it to ‘neutral’ from its previous ‘underweight’ stance.

On the data front, although October may have been a dire month for the US jobs markets, but you might not have guessed it from looking at the latest monthly non-farm payrolls report.

According to the US Department of Labor, non-farm payrolls accelerated last month to reach a pace of 250,000, comfortably exceeding economists' forecasts for a gain of 200,000.

More important, in parallel average hourly gains picked-up to a year-on-year clip of 3.1% following the advance of 2.8% seen during the month before, surpassing the 3.0% mark for the first time since 2009.

As well, the labour force participation rate increased by two-tenths of a percentage point to 62.9%, a development which will likely please policymakers.

Mickey Levy at Berenberg Capital Markets said: "This encouraging rise in labor force participation for the prime working-age cohort since 2016 has been a key factor that has led us to upgrade our estimates of longer-run potential growth (“Rising U.S. prime working-age labor participation”, September 20, 2018).

"The employment-population ratio for the prime working-age cohort, which moves closely with wages, rose by 0.4pp to 79.7%."