London open: Stocks dip ahead of payrolls

(Sharecast News) - London stocks dipped in early trade on Friday ahead of the latest US non-farm payrolls report and as investors kept an eye on developments in the Middle East conflict.

At 0822 BST, the FTSE 100 was 0.2% lower at 10,338.31, while Brent crude was down 0.2% at $94.86 a barrel.

The non-farm payrolls report, average earnings and unemployment rate for May are all due at 1330 BST.

Susannah Streeter, chief investment strategist at Wealth Club, said: "The mood is cautious at the end of the week, which has seen hopes rise and fall about a resolution in the Middle East conflict and nervousness creeping in about breathtakingly high AI-powered valuations."

Streeter said investor sentiment remains fragile as the drawn-out conflict between the US and Iran continues to cloud the outlook. "The longer it continues, and energy supplies and other commodities are snarled up, the greater the inflationary pressures will be," she said.

"Key US jobs figures out later for May will be closely watched for the effect the conflict is having on business sentiment, with employers appearing increasingly cautious about taking on new staff. The non-farm payrolls report is expected to show a decline in new hires to around 85,000, as the jobs market cools down from 115,000 in April."

On the geopolitical front, Streeter said conflicting messages from both Iran and the US have seen sentiment turn erratic.

"For now, oil prices are managing to stabilise around $95 a barrel, in the absence of a big reignition in the US military campaign. But there remain big questions about how negotiations can meaningfully progress, especially with Israel's actions in Lebanon such a sticking point. Hezbollah rejected proposals for a ceasefire, and although there are now reports it's seeking fresh talks with the US, this will be a highly complex situation to resolve."

On home shores, the latest data from Halifax showed that house prices unexpectedly declined in May.

House prices fell 0.1% on the month, matching April's fall but missing expectations for an increase of 0.1%. On the year, house prices were up 0.5% in May following a 0.4% rise the month before, but missing expectations for a 1% jump.

Amanda Bryden, head of mortgages at Halifax, said: "Property price trends continue to reflect the uncertainty linked to developments in the Middle East. Despite recent cuts to mortgage rates, higher inflation expectations have kept borrowing costs above the level seen at the start of the year, continuing to stretch affordability for many buyers and temper demand.

"Even so, overall activity has held up well, reflecting the underlying resilience of the UK housing market. Latest industry figures show transaction levels remain relatively stable, suggesting buyers and sellers are still moving.

"Among firsttime buyers, annual growth is more subdued at +0.3%. While getting onto the property ladder remains a big challenge, there has been increasing support from lenders, including more flexible affordability checks and a growing range of lowdeposit options.

"Looking ahead, borrowing costs and consumer confidence are likely to continue shaping activity in the coming months, with house prices expected to be broadly stable while interest rates stay elevated. The housing market remains closely tied to wider global developments, with a return to sustained house price growth dependent on an improvement in the inflation outlook and a fall in mortgage costs."

In equity markets, Asia-focused banks Prudential, Standard Chartered and HSBC were under the cosh again, having fallen sharply on Thursday following a report that some banks have suspended opening Hong Kong bank accounts for mainland China clients that could be used for overseas investments.

Bodycote tumbled as it said Apollo Management had pulled out of its proposed �1.5bn offer for the UK thermal processing company. "The board of Bodycote has strong confidence in Bodycote's potential and its strategy to create a high-performing, resilient business with attractive growth prospects," the company said.

Raspberry Pi surged as it lifted its full-year profit outlook after a "strong" first half.

Evoke shot higher after the William Hill owner accepted a �243m takeover offer from Greek gambling company Bally's Intralot.