London open: Stocks edge higher ahead of payrolls

At 0820 BST, the FTSE 100 was 0.2% firmer at 7,451.02.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown (LON:HRGV), said: “Next up on the economic data front is the US payroll data due later. A tighter-than-expected job market will add fuel to the inflation fire, while a slowdown would be welcome and suggest that monetary tightening is starting to have some effect. There’s growing hope that interest rates are going to remain in their current position, rather than rise, at the next meeting, and the jobs data will be an important component of that. There’s also an argument to say that we’ve only just started restrictive cuts, everything else has been playing catch up to deal with inflation, so if heat is to come out the economy, cuts may be needed.

“There’s a disconnect between economic reality and interest rate expectations at the moment, which could lead to some disappointment on the markets.”

The payrolls, unemployment rate and average earnings are all due at 1330 BST.

China was in focus after Caixin figures revealed that activity in the country’s manufacturing sector unexpectedly grew in August. The manufacturing purchasing managers’ index rose to 51.0 from 49.2 the month before, coming in above the 50.0 that separates contraction from expansion.

This was also comfortably above analysts’ expectations of 49.3 and marked the highest reading since February.

Wang Zhe, senior economist at Caixin Insight Group, said: “In August, the manufacturing sector showed overall improvement. Apart from sluggish exports, the gauges for supply, total demand, and employment were all in expansionary territory.”

On home shores, Nationwide data showed that house prices suffered their sharpest year-on-year decline in 14 years in August, amid rising borrowing costs.

House prices fell 5.3% on the year following a 3.8% decline in July and versus expectations of a 3.9% drop. On the month, they were down 0.8% in August following a 0.3% dip the month before. Analysts were expecting a more modest 0.4% fall.

The average price of a home stood at £259,153, down from £260,828.

Nationwide chief economist Robert Gardner said: “The softening is not surprising, given the extent of the rise in borrowing costs in recent months, which has resulted in activity in the housing market running well below pre-pandemic levels. For example, mortgage approvals have been around 20% below the 2019 average in recent months and mortgage application data suggests the weakness has been maintained more recently.

“Nevertheless, a relatively soft landing is still achievable, providing broader economic conditions evolve in line with our (and most other forecasters’) expectations.”

Andrew Wishart, senior property economist at Capital Economics, said: “With mortgage rates set to remain between 5.5% and 6.0% for the next 12 months, and second-hand supply on the market becoming less tight, we think the August data marks the start of a significant further drop in house prices.

“Indeed the RICS survey, which is the best leading indicator of house prices, is consistent with house prices falling by a similar amount month-on-month for the next five months at least.”

Market participants were also mulling the latest data from the British Retail Consortium, which showed that poor weather and strong comparisons with last year meant that footfall across the UK retailing sector was down in August.

In equity markets, Diversified Energy gained after it reported increased half-year profits as its hedging policy and higher production offset weaker oil and gas prices.

Direct Line lost ground after the insurer said it was reviewing cases where it charged existing motor and home insurance customers higher prices for policy renewal than for new customers, in a move that could cost it £30m. Admiral also fell.

Market Movers

FTSE 100 (UKX) 7,451.02 0.16%

FTSE 250 (MCX) 18,589.29 -0.09%

techMARK (TASX) 4,291.47 -0.23%

FTSE 100 – Risers

Melrose Industries (LON:MRON) (MRO) 523.00p 2.03%

BP (LON:BP.) 495.90p 1.72%

Antofagasta (LON:ANTO) 1,468.50p 1.42%

Glencore (LON:GLEN) 426.85p 1.28%

Rio Tinto (LON:RIO) 4,927.00p 1.12%

Shell (LON:RDSa) (SHEL) 2,437.50p 1.08%

Standard Chartered (LON:STAN) 719.00p 1.04%

Whitbread (LON:WTB) 3,465.00p 0.73%

Anglo American (LON:AAL) 2,115.50p 0.71%

Airtel Africa (AAF) 114.70p 0.61%

FTSE 100 – Fallers

Admiral Group (LON:ADML) (ADM) 2,464.00p -1.04%

F&C Investment Trust (FCIT) 858.00p -0.92%

Diageo (LON:DGE) 3,221.00p -0.69%

Unilever (LON:ULVR) 4,017.50p -0.61%

Pershing Square (NYSE:SQ) Holdings Ltd NPV (PSH) 2,970.00p -0.60%

SSE (LON:SSE) 1,617.00p -0.58%

Smith & Nephew (SN.) 1,064.00p -0.56%

Abrdn (ABDN) 164.20p -0.55%

AstraZeneca (NASDAQ:AZN) 10,604.00p -0.54%

Haleon (LON:HLN) 320.75p -0.54%

FTSE 250 – Risers

Diversified Energy Company (DEC) 95.00p 3.77%

WH Smith (LON:SMWH) 1,521.00p 3.68%

Grafton Group Ut (CDI) (GFTU) 888.00p 2.96%

LondonMetric (LON:LMPL) Property (LMP) 185.50p 2.37%

Ibstock (IBST) 152.10p 2.15%

Baltic Classifieds Group (BCG) 215.00p 2.14%

Intermediate Capital Group (LON:ICP) 1,380.50p 2.07%

Mitchells & Butlers (MAB) 225.00p 1.99%

Harbour Energy (LON:HBR) 253.00p 1.20%

FirstGroup (LON:FGP) 146.70p 1.10%

FTSE 250 – Fallers

Direct Line Insurance Group (DLG) 158.00p -2.56%

Ninety One (N91) 167.10p -2.45%

Pets at Home Group (PETS) 368.40p -2.44%

Bodycote (BOY) 648.00p -2.41%

RHI Magnesita N.V. (DI) (RHIM) 2,770.00p -2.19%

TP Icap Group (TCAP) 161.60p -2.18%

Balfour Beatty (LON:BALF) (BBY) 320.60p -2.02%

NextEnergy Solar Fund Limited Red (LON:NESF) 87.10p -1.91%

JTC (JTC) 684.00p -1.87%

Polar Capital Technology Trust (PCT) 2,220.00p -1.77%