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Stocks flat ahead of US jobs report

Equity markets are broadly unchanged as traders await the US non-farm payroll report at 1.30pm (UK time). 

Volatility is low this morning as dealers are in wait-and-see mode. There has been few corporate stories to grab trader’s attention, but it has been a quiet morning in terms of economic announcements. 

RBS shares are up 2% this morning after the bank posted a first-half profit of £939 million, and that compared with a loss of £2 billion for the same period last year. The bank has a healthy common equity tier 1 ratio of 14.8%, which means it is well positioned to deal with a sudden shock to the economy. This is shows how far the bank has come along since it needed government funding in 2008.

RBS is looking into setting up a European headquarters in Amsterdam to take advantage of the EU passporting service after Brexit. The operation would be relatively small and therefore not cost too much. The bank didn’t put any money aside for payment protection insurances provisions, but it did reach a settlement of $5.5 billion with the US Federal Housing Finance Agency last month. RBS expects to post a full-year loss. 

Shares in Pearson are down on the day after the publisher slashed its dividend and plans to cut 3000 jobs. This is the latest round of restructuring as the struggling publisher is trying to get back on track after enduring a few profit warnings in recent times.

The company is taking advantage of the relatively low share price by undertaking a £300 million share buyback scheme. Last month the firm announced it was selling a stake in Penguin Random House to fund the share buyback. It’s a short-term gain, but ultimately it’s reducing its revenue stream.

Both the EUR/USD and GBP/USD are marginally higher this morning as the traders don’t want to be long the greenback going into the US jobs report.

We are anticipating the Dow Jones to open 34 points higher at 22,060, and we are calling the S&P 500 up 3 at 2475.

At 1.30pm the US will announce the non-farm payroll report, and economists are expecting 183,000 jobs to have been added in July, and for unemployment to drop to 4.3% from 4.4%. Average earnings are tipped to be 0.3% on a month on month basis, and June’s reading was 0.2%.

The strong upward revision to June’s ADP report and the drop in weekly jobless claims yesterday has traders in the mind-set for strong report today.

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