London open: Stocks rise ahead of payrolls; IAG flies higher
London stocks rose in early trade on Friday following heavy losses in the previous session, as investors eyed the latest US non-farm payrolls report, with upbeat results from BA owner IAG helping to lift the mood.
At 0825 BST, the FTSE 100 was up 0.8% at 7,762.40.
Sentiment was also boosted by better-than-expected results from Apple.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: "Apple’s beat has fed into some optimism on the US markets, with futures edging slightly higher."
Looking ahead to the rest of the day, the payrolls report is due at 1330 BST, along with the unemployment rate and average earnings.
CMC Markets analyst Michael Hewson said: "Having seen the Federal Reserve hike by another 25bps rate hike earlier this, a strong number today would keep the prospect of another rate hike in June, although it would need to be a bumper number to do that.
"There is a school of thought after Wednesday that the Fed is now on pause, and the only real question is not whether we saw another hike, but when we see the first rate cut.
"A strong, or in line number today, along with next week’s April CPI, will shape the discussion here, but for now, even with the current banking turmoil, the timing of when the Fed starts cutting is likely to shape market direction from here on in."
Investors were digesting the latest data out of China, which showed that growth in the services sector was a little weaker than expected in April.
The Caixin services purchasing managers’ index dipped to 56.4 from 57.8 in March, coming in below consensus expectations for a reading of 57.0. Still, it remained above the 50.0 mark that separates contraction from expansion for the fourth month in a row. It also marked the second-highest figure recorded since November 2020.
Wang Zhe, senior economist at Caixin Insight Group, said the reading indicates that services activity is still "undergoing a fast recovery".
"There was still a lot of optimism in the services sector in April, with the reading for expectations for future activity remaining well above the neutral 50.0 level," he said, adding that "businesses continued to express confidence in a better market environment as the impact from Covid waned".
The Caixin China general manufacturing purchasing managers’ index fell to 49.5 in April from 50.0 in March. This was the first reading below 50 in three months.
On home shores, data out earlier showed that footfall jumped on high streets last month, despite the ongoing cost-of-living crisis and record inflation.
According to the latest BRC-Sensormatic IQ footfall monitor, total UK footfall dipped 1.5 percentage points on March in April but was 5.3% higher than April 2022.
Within that, footfall on high streets jumped 10.5% year-on-year, while shopping centres reported a 7.9% improvement. Retail parks saw a 6.9% decline.
Helen Dickinson, chief executive of the British Retail Consortium, said: "Footfall [improved year-on-year] mainly in high streets and shopping centres, which were the most affected during the pandemic and still have the furthest to catch up.
"Retail is finding a new balance, as the rise in online shopping and spread of hybrid working has changed consumer shopping habits. As a result, while we expect footfall to continue to improve, it may never reach the levels seen prior to the pandemic."
In equity markets, British Airways and Iberia parent IAG flew to the top of the FTSE 100 as it lifted its full-year earnings forecasts on the back of strong summer demand as its first-quarter profits performance beat expectations.
The group, which also owns Aer Lingus, now expects annual profit at the top end of a €1.8 - 2.3bn range given in February. Operating profit for the three months to March was €9m, compared with a €718m loss a year earlier and smashing the €179m loss forecast by analysts.
IAG said the summer outlook was encouraging, adding that capacity in the North Atlantic and Latin American markets was now back at pre-pandemic levels, driven by leisure demand.
Shell and BP were among the top performers. Shell was in focus after Ithaca Energy said it had struck a deal with the oil giant to market its 30% stake in the giant Cambo North Sea oil and gas prospect.
On the downside, InterContinental Hotels fell after it announced the departure of chief executive Keith Barr and said it had seen a "good start" to the year. Barr will be replaced by Elie Maalouf, who has led IHG’s Americas business as regional chief executive for the last eight years.