Shares tread water ahead of US jobs data

UK shares made gains for the sixth day in a row but investors remain nervous ahead of today's US jobs data after recent mixed signals on the pace of growth in the world's largest economy. 

The FTSE 100 was 26.9 points higher at 5397.9, while the FTSE 250 was 7 points higher at 10,147.

Joshua Raymond, market strategist at City Index, said: 'The resilience shown in the FTSE over the last week or so, where the market has rallied for 6 straight days, has restored some elements of confidence in investors after a poor months trading in August.'

Nonetheless the blue chip index is still below the 5,500 level where it began the year.

Overnight the US Dow Jones Industrial Average index advanced 50.6 points to 10320, encouraged by improving retail sales, a fall in initial jobless claims and an unexpected rise in pending home sales. Futures suggest Wall Street will open just a point or so higher, although that will likely change once today's non-farm payrolls numbers are out.

Economists believe the number will fall for a third consecutive month with the consensus looking for a 105,000 fall in payrolls and an unemployment rate at 9.6%. Like last month, the main focus will be the private sector as this is seen as a key sign of future consumer demand as well as a reflection of the confidence of employers.

After strong growth so far this year, disappointment on the level of new jobs in the private sector could add to growing fears about the future pace of US growth.

The ISM non-manufacturing report will also be very important after a much better than expected manufacturing report lifted markets earlier in the week. 

Ahead of the US news, investors are digesting some mixed news in Europe.

August’s CIPS/Markit Report on Services in the UK - like other data this week - came in far below expectations and provided further evidence UK growth has already peaked and may drop off sharply in the months ahead.

Jonathan Loynes, chief European economist at Capital Economics said: 'The drop in the main business activity index to 51.3 from 53.1 leaves it at its lowest level since April last year and is consistent, on past form, with very little expansion – if any - in activity the biggest sector of the economy.'

While he believes the disappointing news this week still points to growth over the rest of the year he warned that if the surveys continue to weaken in the next few months 'the threat of a renewed contraction in Q4 and beyond would become very real indeed.'