UK

FTSE 100 index exepected to bounce higher but all eyes on volatile US jobs report

The FTSE 100 index is expected to bounce higher in early trade on Thursday as US and Asia markets rose overnight on coronavirus vaccine hopes, although all eyes later will be on US jobs data and the path for recovery from the pandemic.

Spread betting firm CMC Markets expects the blue-chip index to open around 40 points higher at 6,198, having shed 11.78 points on Wednesday.

Asian stocks tracked higher on Thursday, with Japans Nikkei ahead 0.4%, Chinas blue-chip index up 0.6%, while Hong Kongs Hang Seng index rose 1.7%. Meanwhile, on commodity markets, copper prices jumped to more than six-month highs on a better global outlook and supply fears in top producer Chile.

Overnight in New York, the Dow Jones Industrials Average ended around 78 points, 0.3% lower after some profit-taking following strong opening gains to close at 25,734..97.

But the broader S&P 500 index added 0.5%, and the tech-laden Nasdaq Composite gained 1.0% helped by a better than expected US ADP private payrolls report.

The big focus on Thursday, however, will be the June US jobs report brought forward by a day because of the Independence Day holiday weekend, meaning it will be announced on the same day as the more timely initial weekly jobless claims.

Head-scratching on jobs path

Michael Hewson, chief market analyst at CMC Markets UK commented: “Yesterdays ADP payrolls report may well have come in slightly below expectations, at 2.37m jobs added, but it wasnt that number that stole the headlines, it was the revision to the May number, that prompted a huge amount of head-scratching. In May, ADP reported that -2.76m jobs were lost, however in yesterdays revision this was changed to 3.06m jobs added, a swing of nearly 6m jobs.

He added: “After the loss of a record 20m jobs in April, expectations were high that Mays non-farm payrolls report would produce further job losses in the millions, given how disappointing the ADP report a few days before had been. This belief was turned on its head, on both counts, as the BLS numbers for May confounded expectations with 2.5m jobs added, while yesterday we discovered that ADP revised their May numbers by a record 6m, prompting a head-wrenching turnaround to 3.06m jobs added.”

Hewson continued: “The extent of yesterdays revision, suggests that we can expect further volatility later in the US jobs data in the days and weeks ahead, however it does offer hope that, over the course of the next few months, more furloughed staff will return to work.”

He concluded: “Expectations for todays June employment report are for further jobs gains, though the estimates vary widely from just under a million to as high as 8m, though the consensus is for just over 3m. In light of the revision to the May ADP number we should also be mindful of a similarly significant revision here as well.

“The unemployment rate is expected to fall from 13.3% to 12.5%, however before we get too carried away, while these job gains are very welcome, further progress could become much more difficult given the sharp rise in coronavirus infection rates we are already seeing in a number of US states, which has seen them either close back down, or delay their re-opening plans.”

ABF sees Primark tills ring once again

On the corporate front, Primark owner Associated British Foods PLC (LON:ABF) is expected to issue a trading update on Thursday, around two and a half weeks after outlets of the cheap clothing chain reopened for business amid a relaxation of UK lockdown restrictions.

Investors will be keen to hear about initial trading as hordes of UK consumers queued up for the companys products, as well as how badly the closures during lockdown have the companys bottom line.

Meggitt PLC (LON:MGGT) will also provide a trading update on Thursday, with the aerospace engineer now back as a FTSE 250 company again, with its relegation from the blue chip index confirmed last month as its shares have halved since the start of the year back to roughly where they were 13 years ago.

Despite being part of the consortium of engineering and manufacturing companies working on ventilators to help the NHS shortage amid the coronavirus pandemic, its civil aerospace business has been hit by a sharp drop in demand.

Significant events expected on Thursday July 2:

Trading updates: Associated British Foods PLC (LON:ABF), Meggitt PLC (LON:MGGT)

Finals: DS Smith plc (LON:SMDS)

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