The FTSE 100 traded with a cautious tone on Thursday ahead of key US jobs numbers tomorrow and central bank meetings next week.

London’s leading index was flat at the time of writing, having bounced off lows of 7,480 earlier in the session.

Investors will be bracing for US jobs numbers and a gauge of the strength of the US economy. Markets have quickly priced in rate cuts early next year, providing support for equities, particularly US stocks.

The headline Non-Farm Payrolls report due to be issued tomorrow is widely considered to be the world’s single most important data point. Economists predict the US added 185,000 jobs in November, up from the 150,000 added in October.

Should the actual number significantly beat estimates, it would dash hopes of softer rates in early 2024.

“US jobs numbers tomorrow and central bank meetings next week could inform the market if it has got carried away with the level of rate cuts which are now being priced in for 2024,” said AJ Bell investment director Russ Mould.

This uncertainty was weighing on markets Thursday. In addition, weaker oil prices dented enthusiasm for commodity-heavy UK equity indices.

“Oil prices continued to slump as oil exports from the US surge,” Russ Mould said. “A weaker crude market should at least help on the inflation front but it is not good news for two of the FTSE 100’s heavyweights: BP and Shell.”

BP and Shell were marginally lower at the time of writing after bouncing back from harsher losses at the open on Thursday.

Rising UK house prices

Housebuilders and companies exposed to the property market were a bright spot for UK markets. According to data released by Halifax, UK prices gained 0.5% in the month to November as a lack of supply drove higher prices.

“House prices rose in November, for the second consecutive month. And while sellers still face the tricky business of persuading someone to buy before they can realise these higher prices, we’ve had some more positive news on that front too. It has been a good month for a tough market, but we can’t get carried away just yet,” said Sarah Coles, head of personal finance, Hargreaves Lansdown.

“House prices are robust, and the annual fall is now a modest 1%. In the next couple of months, as we compare to lower prices a year earlier, we could climb back into positive territory on an annual basis, especially if we see more monthly rises.”

The news buoyed housebuilders, with Taylor Wimpey gaining 0.9% and Barratt Developments rising 0.8%.

Rightmove was one of the FTSE 100’s top risers, gaining 1.7%.

Reflecting the cautious tone in markets, utility companies National Grid, United Utilities, and Severn Trent were among the best performers on the day.

Eurasia Mining shares sank on Thursday as investors reacted to the news the company had made little progress in the disposal of its Russian assets or sales of stockpiles worth £3.5m.

The Company said it has prioritised the sale of its Russian assets, but no binding agreements have yet been reached. Shareholders were seemingly unimpressed with assertions that active discussions continue with counterparties in Hong Kong and Russia.

Eurasia Mining shares were down 28% at the time of writing.

In addition to an update on their asset sale, Eurasia provided an overview of their ongoing operations. The company has enough cash to see them through the first quarter, but there are uncertainties around the funding situation past this.

As of 30th November, the Company had approximately £517,000 in cash reserves, held outside Russia and not exposed to ruble fluctuations.

The Company has sufficient working capital through the first quarter of 2024, without the proposed sale of £3.5 million in unsold concentrate inventory. Discussions around the sale of concentrate stockpile from the West Kytlim mine are ongoing, but have been for some time now.

The West Kytlim mine and infrastructure are being maintained for sale. No production is expected in 2024, as in 2023. The 2022 concentrate stockpile is securely stored off-site, with sales discussions ongoing.

A new license was recently acquired for the promising Travyanaya area, which will be added to assets available for potential sale. No work is planned there in 2024.

The Monchetundra and Nyud projects have no planned reserve updates or expenditures. The Nyud expenditure was written off in 2022 results after the expiration of the Rosgeo Agreement.

Smart Metering Systems shares soared on Thursday after the power metering company received an offer from a US private equity group, KRR, with $528 billion in assets under management.

The latest approach for a UK company by US private equity shows that although domestic UK investors do not want to acknowledge the value in UK stocks, leaving them to languish at historically low multiples, US smart money sees an opportunity and is prepared to back their views with takeover approaches.

Today’s approach by KKR for Smart Metering Systems follows yesterday’s news Ten Entertainment received a cash offer from another US private equity group, Trive Capital Partners.

KKR’s 955p offer for Smart Metering Systems values the company at an enterprise value of £1.4bn and an EV/EBITDA multiple of 20x. The 955p offer represents a 40% premium to the share price as of the close 6th December.

Smart Metering Systems shares were trading 41% higher at 958p at the time of writing on Thursday – above the 955p offer price. This suggests shareholders may reject the offer and await an improved bid. In the upcoming vote, 75% of SMS shareholders are required to vote in favour of the takeover.

Smart Metering Systems’ low-carbon energy infrastructure is a crucial part of the UK government’s net zero plans.

The company was listed in London in 2011 and has consistently grown revenue in line with increasing smart meter installations. Smart Metering Systems also provides electric vehicle charging and has a network of grid-scale battery power storage facilities.

In a release by Smart Metering Systems on Thursday, the company said continuing in a private setting would provide the capital required to capture the opportunity in the energy transition. In other words, Smart Metering Systems and KRR feel funding opportunities as a public company are not conducive to growing a clean energy company.

Tara Davies, Partner and Co-Head of European Infrastructure at KKR, commented on the acquisition:

“SMS has a strong asset base and a clear strategy across different business lines which are critical enablers of the UK’s Net Zero goals, and we share the team’s vision of putting SMS at the heart of the UK’s energy transition.”

“Achieving this growth opportunity requires significant capital of a scale, flexibility and certainty which is best facilitated in the private markets. KKR is a major investor in UK infrastructure and behind the energy transition, and we will bring our expertise and operational resources to bear in supporting SMS to invest at the level required and successfully scale its business over the long-term.”

The FTSE 100 was trading with a positive tone on Wednesday after a solid Asian session helped European stocks open higher, and investors await vital jobs data from the US.

The FTSE 100 was 0.45% higher at the time of writing and is 1.4% higher over the past five trading sessions.

Optimism around interest rates is starting to grow, but one would caution this could quickly unwind on adverse US Non-Farm Payrolls due to be released on Friday.

“The FTSE 100 moved higher on Wednesday as it responded to positive trading in Asia,” said AJ Bell investment director Russ Mould.

“Cooling job vacancy data from the US helped bolster expectations that we are at the pivot point of this rate hiking cycle – though more news on the US labour market through the course of this week will provide a fuller picture.”

Miners have recently been at the forefront of the FTSE 100’s moves. The trend continued on Wednesday after upbeat comments by Rio Tinto’s CEO.

“Miners were in demand as Rio Tinto CEO Jakob Stausholm briefed investors that Chinese steel mills were ‘producing flat out’. This is good news for iron ore producers like Rio, with the patchy recovery in China a big reason why the mining sector has had a difficult time in 2023,” Mould said.

“Rio also announced big spending plans. Along with signs of burgeoning M&A elsewhere in the sector, any excitement felt by investors at the growth potential may be tempered by concerns the industry is losing some of the discipline it has demonstrated in recent years.” 

Rio Tinto gained 1.75%, Anglo American rose 1.7%, and Glencore added 1.45%.

Prudential was the top riser, gaining 3.2%, as the mood around China and Asia improved.

British American Tobacco

British American Tobacco was the top faller after revenue growth came in at the lower end of expectations as the company struggled to contend with lower smoking rates and a transition to vapes and other new categories.

“Despite weak demand from smokers in the important US market it’s managed to eek out a year of revenue growth albeit at the lower end of previous guidance,” said Derren Nathan, head of equity research at Hargreaves Lansdown.

“Meanwhile the rollout of new categories such as vapes, heated tobacco and oral pouches is continuing apace with breakeven now expected in the current period, two years ahead of the original plan.

“Management now sees these products as the cornerstone of the company’s future expecting them to deliver half of group revenues by 2035. But that’s a long way off. Non-combustible products should contribute to the bottom line in 2024 but beyond that the long-term outlook for margins is still unclear.”

British American Tobacco shares were down 7% at the time of writing.