London close: Equities rally on US non-farm payrolls, BoE stimulus

UK equities advanced on Friday after the US non-farm payrolls report smashed expectations.

US employers added 255,000 jobs in July, beating forecasts of 180,000, the Labor Department’s non-farm payrolls report revealed. It followed an upwardly revised 292,000 increase in June.

London´s top flight index finished the session up by 53.31 points or 0.79% to 6,793.47.

The unemployment rate was unchanged at 4.9% in July, compared to estimates of 4.8%. Average hourly earnings rose 0.3% on the month, beating estimates for a 0.2% increase and following a 0.1% rise in June. On the year, hourly earnings growth in July was unchanged at 2.6%, as expected.

“The steady job market improvement and keeps alive the possibility of the Fed hiking rates again this year, but worries about sluggish economic growth and deteriorating productivity, as well as uncertainty created by the presidential election, suggests that any tightening of policy will be delayed until December,” said Chris Williamson, chief business economist at IHS Markit.

“The problem facing the Fed is that the ongoing robust rate of job creation is taking place against a backdrop of weak output growth, suggesting productivity and profit margins are likely to be suffering.”

Less positively, US trade data showed the deficit rose 8.7% in June to a 10-month high of $44.5bn, more than the $43.0bn expected by economists.

Meanwhile, UK stocks continued to receive a boost following the Bank of England’s decision on Thursday to cut interest rates by 25 basis points to 0.25% and to increase its asset purchases by £60bn. The Bank also hinted at a further cut to interest rates this year if economic data worsens.

“Whilst the BoE’s 25bp was fully expected by the market, hints of further cuts to come led the front end to rally further,” said Bank of America Merrill Lynch. “With Bank rate now priced to fall to 10bp by the turn of the year we think the front end is fully priced.”

Housebuilders enjoyed healthy gains on Friday while defensive sectors such as Gas, Water & Multiutilities and Fixed Line Telecommunications slumped as risk appetite picked up on the back of both the US jobs numbers and the BoE´s latest moves.

On the company front, Royal Bank of Scotland was the top faller on the FTSE 100 after reporting a wider first half loss.

Utility stocks slumped, including Severn Trent and United Utilities, after HSBC released a note to investors saying the industry faces the key challenge of resilience in the face of tighter regulations.

Going the other way, Rio Tinto shares jumped as it completed the sale of its Mount Pleasant thermal coal assets to MACH Energy Australia Pty, taking its tally for divestments since January 2013 to $4.7bn.

Bellway trotted higher as the housebuilder said it expected full year housing revenue to increase by around 27% to £2.2bn with a 12.5% increase in the number of housing completions to 8,721.

Cairn Energy was up as UBS upgraded the stock to ‘buy’ from ‘neutral’ following recent underperformance, with an unchanged price target of 220p.

Market Movers

FTSE 100 (UKX) 6,793.47 0.79%
FTSE 250 (MCX) 17,465.35 1.28%
techMARK (TASX) 3,511.75 0.78%

FTSE 100 - Risers

Hikma Pharmaceuticals (HIK) 2,389.00p 7.61%
Paddy Power Betfair (PPB) 9,150.00p 3.62%
Hargreaves Lansdown (HL.) 1,322.00p 3.20%
Standard Life (SL.) 314.70p 3.08%
Persimmon (PSN) 1,723.00p 3.05%
BHP Billiton (BLT) 1,012.50p 3.01%
Berkeley Group Holdings (The) (BKG) 2,658.00p 2.94%
easyJet (EZJ) 1,035.00p 2.68%
Barratt Developments (BDEV) 436.70p 2.66%
WPP (WPP) 1,745.00p 2.65%

FTSE 100 - Fallers

Royal Bank of Scotland Group (RBS) 178.20p -7.19%
Fresnillo (FRES) 1,884.00p -3.58%
Randgold Resources Ltd. (RRS) 8,375.00p -3.01%
Pearson (PSON) 882.50p -1.23%
National Grid (NG.) 1,069.00p -1.16%
Standard Chartered (STAN) 638.60p -1.15%
Centrica (CNA) 232.80p -1.10%
Severn Trent (SVT) 2,399.00p -1.07%
BT Group (BT.A) 406.55p -0.83%
United Utilities Group (UU.) 987.00p -0.70%

FTSE 250 - Risers

Ibstock (IBST) 153.00p 7.67%
Restaurant Group (RTN) 369.30p 6.46%
Cairn Energy (CNE) 193.00p 6.22%
Hastings Group Holdings (HSTG) 209.00p 6.09%
Polypipe Group (PLP) 259.50p 6.00%
McCarthy & Stone (MCS) 179.80p 5.76%
IP Group (IPO) 159.80p 5.13%
Bellway (BWY) 2,131.00p 5.03%
Inmarsat (ISAT) 870.00p 4.95%
Amec Foster Wheeler (AMFW) 461.20p 4.72%

FTSE 250 - Fallers

Hochschild Mining (HOC) 270.20p -6.08%
esure Group (ESUR) 268.50p -4.14%
Acacia Mining (ACA) 569.50p -4.04%
Centamin (DI) (CEY) 164.90p -2.94%
Hays (HAS) 117.20p -2.50%
Circassia Pharmaceuticals (CIR) 94.55p -2.32%
Serco Group (SRP) 128.20p -2.29%
Barr (A.G.) (BAG) 514.50p -2.28%
Capital & Counties Properties (CAPC) 278.90p -2.14%
Cobham (COB) 163.30p -1.51%