London pre-open: Stocks to rise after NFP report

(Sharecast News) - London stocks were set to rise at the open on Monday as investors continued to take comfort from the weaker-than-expected US non-farm payrolls report, which raised expectations the Federal Reserve will keep rates on hold at its meeting `this month.

The FTSE 100 was called to open 28 points higher.

Ipek Ozkardeskaya, senior analyst at Swissquote, said: "The week starts in a good mood, as last week's economic data from the US gave investors reason to believe that the Federal Reserve (Fed) will skip another rate hike later this month. The PCE data suggested that inflation heated up less than expected in August, while Friday's official jobs figures showed a softer-than-expected NFP number and weaker wage growth.

"The softer-than-expected data initially pulled the US 2-year yield lower as investors scaled back their rate hike expectations, before the yield rebounded. A closer look at Friday's data hinted that the jobs report was not that catastrophic after all. EPB Research, for example, highlighted that 'cyclical payrolls', such as those in construction and manufacturing, which are more sensitive to interest rates and broader macroeconomic conditions like credit and capital spending, provide a clearer signal of whether economic weakness is spreading or reversing, and whether economic momentum is improving or worsening. Construction and manufacturing payrolls reached a new cycle high in September. That, according to EPB analysts, is stronger evidence of a genuine cyclical upturn. Voilà.

"Regardless, expectations of an October Fed hike melted away over the course of last week. Before the data, markets priced in a more than 60% chance of a 25bp hike. This Monday morning, Fed funds futures price in a less than 20% chance of a hike. Inflation remains high, but the latest data don't show an alarming acceleration, and the jobs data look softer - at least judging by the headline figures. The US 2-year yield is consolidating near 4.80% this morning, after approaching 5% last week. The 10-year yield, however, is pushing higher, and the spread between the two is now wider - at around 46bp. The easing of near-term Fed hike expectations is also comforting for broader risk assets."

In corporate news, National Grid said it now expects full-year earnings per share growth to come in slightly ahead of guidance for 13% to 15%, driven by a much strongerthanexpected firsthalf performance in its National Grid Ventures & Other unit.

National Grid, which noted underlying EPS would be weighted toward the second half, said its UK Electricity Transmission and UK Electricity Distribution divisions were expected to deliver broadly even profit splits across the year, while US regulated operations will remain secondhalf weighted, with New England returning to a more typical seasonal profile after the impact of last year's oneoff FERC RoE judgement in H2.

Ithaca Energy said it has agreed with Suncor to buy a portfolio of conventional offshore oil assets located in shallow waters off the East Coast of Newfoundland and Labrador, Canada, for up to $1.1bn.

The assets comprise a 48% operated working interest in Terra Nova, a 40% non-operated interest in the White Rose Existing Lands, and a 38.6% non-operated interest in the White Rose Growth Lands, including the West White Rose Extension.

Metlen Energy & Metals said it had signed a long-term commercial agreement with an unnamed Japanese chemical company for the future supply of gallium, representing up to 16% of total production from its facility in Greece, which is currently under construction.

No financial details were disclosed. The deal is Metlen's second to supply the aluminium by-product, which is used in the production of semiconductors.