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FTSE 100 index set to retreat after a week of strong gains, with US jobs data in the cross-hairs

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The FTSE 100 index looks set to retreat at the start on Friday following four sessions of gains so far this week, dipping back below the recaptured 5,900 level as investors take some risk off the table ahead of the weekend and today’s US non-farm payrolls data, plus the still too-close-to-call US presidential election outcome.

Spread betting firm IG expects the blue-chip index to open around 28 points lower at 5,878, having gained 22.92 points on Thursday to close at 5,906.18 – over a 300 point advance over the week.

The gains continued yesterday in New York, the Dow Jones Industrials Average ended 542 points, or 2% higher at 28,390, while the broader S&P 500 index gained 2.0% and the tech-laden Nasdaq Composite jumped 2.6%.

However, US index futures were weak today, probably on profit-taking, as well as some uncertainty on the incredibly close continuing vote counts in the US swing states still to complete, plus cautious comments from the latest Federal Reserve meeting and with the US jobs report to come.

Asian markets were mixed in response on Friday, with Japan’s Nikkei 225 index up 1.0%, but Hong Kong’s Hang Seng index losing 0.5%.

Jeffrey Halley, senior market analyst, Asia Pacific at OANDA commented: “Charge the flux capacitors, the world’s financial markets appear to be moving back to a pre-US-election future. In that past future, industries directly tied to the COVID-19 work-from-home mega-trend outperformed (read ‘tech). A never-ending tsunami of loose monetary policy, notably from the US, inflates asset prices everywhere as investors scramble for any sort of yield on capital that is above zero per cent.”

He noted: “Overnight, the FOMC hinted that more easing is on the way, likely in December. The FOMC left everything unchanged but signalled ongoing concern about the economic impact of the COVID-19 pandemic, now pushing record daily levels in the US. With any hope of meaningful fiscal stimulus disappearing rapidly, it will be left to the Federal Reserve to do the heavy lifting once again. For a picture of what that means for financial markets, go to mid-March and scroll forward to early October.”

Halley added: “With the impasse in Washington DC, the US recovery is almost certain to underperform versus Asia, with the region nicely tucked up on China’s event horizon. The arrival of COVID-19 vaccines in 2021 will amplify that divide.”

He thinks that today’s US non-farm payrolls could hurry that process along if they underperform.

“The street is forecasting a lower gain than last month of around 600,000 jobs. There is a danger of this underperforming though, if temporary census workers drop out of the data tonight. Any dip in equities is likely to be temporary though, as the street will quickly realise that more monetary easing will definitely happen in December. As we advance, unless the US starts getting COVID-19 under control, the data, including the Non-Farms, will begin reflecting that,” Halley concluded.

UK housing sideshow; RSA bid?

In the UK, there will be some macro data in the form of Halifax house prices. Last month’s report showed a 1.6% month-on-month increase or up 7.3% on the year. For October the monthly rise is seen softening to 0.5% but the annual gain growing to 8.2%.

In related microeconomic data, there should also be an update from housebuilder Redrow PLC (LON:RDW) alongside its annual shareholder meeting, which will be an online-only affair.

Back in September’s full-year results, the FTSE 250-listed group said it expected to resume dividend payments next year as it scales back London investment to focus on regional growth plans, with the coronavirus pandemic changing house-buyers’ priorities towards larger homes with more outside space, closer to green spaces.

Redrow, which reported a 66% fall in full-year profits as its numbers of completed house sales fell even before the impact of the coronavirus pandemic, entered the new financial year with a record order book of £1.42bn, inflated from £1.02bn in 2019 by a lockdown backlog and a demand spike ahead of changes to the Help to Buy scheme.

The other UK corporate focus should be on RSA Insurance PLC (LON:RSA) which, after issuing a third-quarter trading update yesterday, revealed after the London market close that it was in talks with two overseas insurers over a £7bn deal which could result in the takeover and break-up of one of the FTSE 100’s oldest companies.

The two possible buyers are Canadian insurer Intact Financial Corpor and Danish insurer Tryg. Under the terms of the offer they would pay £6.9bn for RSA’s shares, while investors in the More Than insurance brand group would also receive an already announced £83m dividend.

Around the Markets:

  • Pound up 0.2% to US$1.3123
  • Gold down 0.5% to US$1,940.80
  • Brent Crude Oil down 0.5% to US$39.88

6.45 am: Early Markets: Asia / Australia

Stocks in Asia-Pacific were mixed today as investors continue to wait for a clear result from the US election.

Mainland Chinese stocks were lower with the Shanghai composite down 0.36% while the Hong Kong’s Hang Seng index slipped 0.24%.

In Japan, the Nikkei 225 gained 0.91% and South Korea’s Kospi was up by 0.10%.

Australia’s S&P/ASX 200 surged 0.82% adding to what has been a positive week for Aussie shares with the index ~4% higher.

READ OUR ASX REPORT HERE

Proactive Australia news:

RPM Automotive Group Ltd (ASX:RPM) has completed all transaction-related conditions for the acquisition of Citic Autoparts Pty Ltd and took ownership of the business on November 1, 2020.

VRX Silica Ltd (ASX:VRX) has taken another key step towards production at the Arrowsmith North and Arrowsmith Central silica sand projects north of Perth in Western Australia after receiving Aboriginal heritage clearance.

Red River Resources Limited (ASX:RVR) is trading higher after mining high-grade polymetallic ore described as exceptional at the Far West underground mine, part of its Thalanga Operations in northern Queensland.

ioneer Ltd (ASX:INR) (OTCMKTS:GSCCF) (FRA:4G1) is targeting first production in mid-2023 from the Rhyolite Ridge Lithium-Boron project in the US as it moves closer to gaining environmental approval.

IG Group Holdings plc’s (LON:IGG) institutional prime services arm IG Prime has released a new white paper predicting that the pharma and tech sectors are set to grow and keep on growing post-pandemic.

St George Mining Ltd (ASX:SGQ) is strongly focused on progressing its key projects in areas of Western Australia that are attracting strong interest – Paterson Province and the Agnew-Wiluna Belt of the North-Eastern Goldfields.

VIP Gloves Ltd (ASX:VIP) is planning to construct a new production facility in the outskirts of Kuala Lumpur in Malaysia to increase the production of gloves.

Cauldron Energy Ltd (ASX:CXU) has raised $1.6 million in a placement to new sophisticated and professional investors and will fast-track exploration at the Blackwood Gold Project in Victoria.

Carnavale Resources Limited (ASX:CAV) has completed the phase one drilling campaign targeting nickel sulphide at its Grey Dam Nickel Project, with all assays received.

Megado Gold Ltd’s (ASX:MEG) fieldwork at Babicho Gold Project in the Adola Gold Belt of southern Ethiopia has confirmed strong upside at a number of targets ahead of its first drilling next week.

H&T reports good trading as gold price and watch demand buoy revenues

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