London open: Stocks steady ahead of payrolls; Direct Line jumps

(Sharecast News) - London stocks were steady in early trade on Friday as investors mulled the latest UK house price data and looked ahead to the release of the US non-farm payrolls report, with deal news in focus as Direct Line agreed to be taken over by Aviva. At 0835 GMT, the FTSE 100 was flat at 8,346.20.

The payrolls report for November is due at 1330 GMT, along with the unemployment rate and average earnings.

Patrick Munnelly at Tickmill Group said: "Forecasts suggest a 200,000 job increase in November, following a dip in October due to hurricanes and strikes. The unemployment rate is anticipated to rise slightly to 4.2% from 4.1%. Markets are hoping for a balanced outcome: not too strong to undermine the likelihood of a rate cut, nor too weak to spark concerns about economic health.

"Futures currently imply a 70% chance of a rate cut by the Fed on December 18, suggesting that a strong jobs report could provoke a significant market reaction, especially as recent softer data has led futures to incorporate another quarter-point cut for 2025."

On home shores, figures released earlier by Halifax showed that house prices rose in November for the fifth month in a row to hit a record high of £298,083.

Prices ticked up 1.3% on the month following a 0.4% jump in October.

Meanwhile, annual house price growth was 4.8% in November - the strongest level since November 2022 - following 4% growth the month before.

Amanda Bryden, head of mortgages at Halifax, said: "Latest figures continue to show improving levels of demand for mortgages, as an easing in mortgage rates boost buyer confidence. However, despite these positive trends, many potential buyers and movers still face significant affordability challenges and buyer confidence may be tested against a changeable economic backdrop.

"As we move towards the end of the year and into 2025, positive employment figures and anticipated decreases in interest rates are expected to continue supporting demand. This should underpin further house price growth, albeit at a modest pace as borrowing costs remain above the average of a few years ago."

Paul Dales, chief UK economist at Capital Economics, said: "The 1.3% m/m leap in Halifax house prices in November mirrors the 1.2% m/m rise in the Nationwide measure and suggests that some relief rally or release of pent-up demand after the Budget has more than offset the latest rise in mortgage rates.

"Prices are very unlikely to continue rising at this rate - the latest rise in mortgage rates will bite eventually. That said, the falls in market swap rates in recent days suggest that mortgages rates will start to drift a little lower in the coming weeks.

"And our forecast that the economy will strengthen next year and a fall in Bank Rate from 4.75% now to 3.50% by early 2026 (rather than to 3.75-4.00% as investors expect) will reduce mortgage rates to just below 4.00%, suggests that house prices will have a decent 2025. We're forecasting a 3.5% rise compared to the consensus forecast of 2.50-3.00%."

In equity markets, Direct Line surged as it accepted a takeover offer from rival Aviva after the latter increased its bid to 275 a share.

The company reiterated that it was confident of its prospects as a standalone operation, but after considering the new offer with advisers and consulting with shareholders it decided the latest bid was at a value that it could recommend acceptance.

Aviva has until 1700 GMT on Christmas Day to make a firm offer under UK takeover rules.

Derren Nathan, head of equity research at Hargreaves Lansdown, said: "The deal, a mix of cash, shares, and a small dividend, delivers a 73% premium to Direct Line's pre-offer price. Direct Line's board had been holding out, insisting they could make it on their own.

"But even they had to admit that Aviva's proposal is a golden ticket they'd struggle to match independently. Confidence in their solo strategy aside, this offer was just too good to pass up.

"Let's not sugarcoat it: Direct Line has hit some serious potholes lately. Market share has been sliding, underwriting hasn't exactly been flawless, and regulators have been knocking on the door. But with a fresh leadership team at the wheel, the company has been working on a bold turnaround plan.

"For Aviva, the price is pushing the limit of good value but snapping up Direct Line could be a strategic jackpot. It cements their place as a heavyweight in the UK home and motor insurance markets and brings fresh opportunities to steer Direct Line's transformation, while squeezing out efficiency gains from their combined scale."

Berkeley Group was in the red as the housebuilder said pre-tax profit in the six months to the end of October fell 7.7% to £275.1m.

In broker note action, AO World was boosted by an initiation at 'buy' by Deutsche Bank.

However, Spirax was hit by a downgrade to 'neutral' at JPMorgan, while AJ Bell was knocked lower by a downgrade to 'hold' at Deutsche Bank.

Market Movers

FTSE 100 (UKX) 8,346.20 -0.04% FTSE 250 (MCX) 20,998.83 -0.01% techMARK (TASX) 4,715.82 0.08%

FTSE 100 - Risers

Vodafone Group (VOD) 72.34p 1.06% Standard Chartered (STAN) 980.60p 1.05% Convatec Group (CTEC) 233.40p 0.86% BP (BP.) 382.25p 0.80% Smurfit Westrock (DI) (SWR) 4,294.00p 0.75% NATWEST GROUP (NWG) 414.70p 0.53% AstraZeneca (AZN) 10,670.00p 0.49% Shell (SHEL) 2,505.50p 0.46% Prudential (PRU) 659.40p 0.46% Mondi (MNDI) 1,194.40p 0.45%

FTSE 100 - Fallers

Spirax Group (SPX) 7,305.00p -2.54% Berkeley Group Holdings (The) (BKG) 4,090.00p -1.82% Next (NXT) 10,110.00p -1.17% Anglo American (AAL) 2,463.00p -1.16% Hiscox Limited (DI) (HSX) 1,128.00p -1.14% Severn Trent (SVT) 2,712.00p -1.09% Marks & Spencer Group (MKS) 393.40p -0.98% Antofagasta (ANTO) 1,724.00p -0.89% DCC (CDI) (DCC) 5,585.00p -0.89% United Utilities Group (UU.) 1,119.00p -0.89%

FTSE 250 - Risers

Direct Line Insurance Group (DLG) 253.80p 7.54% Dr. Martens (DOCS) 73.00p 2.31% AO World (AO.) 109.80p 2.23% PZ Cussons (PZC) 85.40p 1.91% Grafton Group Ut (CDI) (GFTU) 968.40p 1.65% Burberry Group (BRBY) 910.00p 1.54% NCC Group (NCC) 166.60p 1.46% Wizz Air Holdings (WIZZ) 1,353.00p 1.35% Foresight Group Holdings Limited NPV (FSG) 411.00p 1.23% Assura (AGR) 41.04p 1.18%

FTSE 250 - Fallers

PureTech Health (PRTC) 160.00p -3.15% AJ Bell (AJB) 468.00p -2.90% IntegraFin Holding (IHP) 385.50p -2.77% Serco Group (SRP) 151.20p -2.70% Keller Group (KLR) 1,500.00p -2.60% Hill and Smith (HILS) 2,050.00p -1.68% Pantheon International (PIN) 334.00p -1.62% Wood Group (John) (WG.) 64.50p -1.60% CMC Markets (CMCX) 289.00p -1.53% Aberforth Smaller Companies Trust (ASL) 1,476.00p -1.47%