London close: Footsie undecided as chances of December Fed hike rise

Volatility on Wall Street in the aftermath of Friday´s jobs report rippled across the Atlantic, leading to sharp intraday swings in the top flight index - albeit within a tight range - as the US dollar strengthened and commodity prices took a hit, weighing on related shares.

The Footsie ended the day with marginal losses, off by 11.07 points to 6,353.83 points with a sharp rise in US Treasury debt yields knocking the pound 0.96% lower against the Greenback. The second-tier index on the other hand rose by 48.79 points or 0.29% to 17,165.92.

On the back of the non-farm payrolls numbers brokers Barclays and BNP Paribas brought their rate hike calls for the Fed forward to December 2015.

The US jobs market whirred back into life in October, generating 271,000 new non-farm payrolls. The reversal of a seasonal quirk in the data on wages led to a sharp 0.4% gain in average hourly earnings.

"The Fed's hawks will now argue that they have hard evidence in the most widely-watched (but least reliable, not that it matters right now) data that the tightness of the labor market is pushing wage gains higher. Barring a disaster in November, rates are going to rise in December," Ian Sheperdson, chief economist at Pantheon Macroeconomics, said in a research note e-mailed to clients.

In parallel to the above action, Gilts reeled as traders moved to price in a much higher likelihood of a rate hike by the US Federal Reserve in December.

The yield on the benchmark 10-year Gilt closed seven basis points higher at 2.03%.

Friday´s jobs data left Fed funds futures markets pricing in an approximately 70% chance of a rate hike at the 15-16 December Federal Open Market Committee meeting.

"The October Employment Report is strong from virtually every angle, confirming further improvement in labor markets and solid economic growth in 2015Q4, and it provides vital support for a Fed rate increase in December.

"The very cautious Fed has been looking for economic support to raise rates. This report provides such support.

"Moreover, the markets’ response to the strong employment report of pricing in a December rate hike reduces any chance that a Fed move will “surprise” markets, another factor the Fed will consider. Finally," said Mickey D.Levy, chief economist, Americas and Asia, at Berenberg Capital Markets.

FTSE 100 miners. US dollar strength knocks miners lower

BHP Billiton was hit by the tragic news of multiple deaths from a joint venture mine in Brazil. The major bursting of a tailings dam at a mine 50% owned by BHP in the Minais Gerais region is thought to have left at least 17 people dead and almost 50 missing in the resulting mudslides.

Sector-mate Glencore lost most of its share price gains from earlier in the week. Analysts remained cautious on the company despite its encouraging move to reduce its debt profile and impressive silver streaming deal.

Randgold, Anglo American and Fresnillo were also major fallers as the US dollar strengthened and commodity prices retreated.

Jefferies sent National Grid shares down as it downgraded them to ‘hold’ from ‘buy’. It said that following the strong share price performance in recent months the shares were now at fair value.

Leading the risers, Intercontinental Hotels booked in some solid gains as rumours grew that the company was mulling the possibility of a sale or merger. Bloomberg cited people familiar with the matter as saying that IHG is in discussions with financial advisers about whether to sell itself or merge with a competitor as the sector consolidates.

In a note upgrading its outlook on European equities, UBS sounded an upbeat note about prospects for 2016 and 2017. The Swiss bank's analysts upgraded the construction sector to ‘overweight’ and said it should benefit from a pick-up in economic growth and is the second-most operationally geared sector, noting a particular preference for Irish building products supplier CRH.

IAG soared off its own upgrade, nudging its guidance higher for long-term profit margin, earnings and return-on-invested-capital guidance, also making several boardroom changes at British Airways. The airline group confirmed it was now targeting a return on invested capital in real terms of 15%, compared to 12% previously, and said it believed it can deliver an operating profit margin of 12% to 15% - previously the target compared to 10% to 14%.

FTSE 250: Tullet shares leap

Tullett Prebon and ICAP were the biggest risers on the back of confirmation that Tullett Prebon is in discussions regarding the possible acquisition of its rival’s global broking business.

Thomas Cook Group rebounded after falls on Thursday when the Government announced a halt on all flights between the UK and Sharm al-Sheikh.

Weakness in Synthomer´s paper business and an uncertain latex outlook weighed on the group´s shares despite the chemical group posting third quarter results that showed strong progress across most operations.

Amec Foster Wheeler also prevented the market from rising higher, after UBS and Citigroup downgraded the stock from buy to neutral. It came after having suffered heavy losses in the previous session when the oil and gas engineering services company said it was cutting its dividend by half amid tough market conditions.

Market Movers

FTSE 100 (UKX) 6,353.83 -0.17%
FTSE 250 (MCX) 17,165.92 0.29%
techMARK (TASX) 3,097.70 0.26%

FTSE 100 - Risers

InterContinental Hotels Group (IHG) 2,774.00p 6.20%
International Consolidated Airlines Group SA (CDI) (IAG) 602.00p 3.70%
CRH (CRH) 1,861.00p 3.62%
Inmarsat (ISAT) 1,005.00p 3.24%
Royal Bank of Scotland Group (RBS) 319.30p 2.34%
GKN (GKN) 297.20p 2.24%
HSBC Holdings (HSBA) 527.80p 2.11%
Barclays (BARC) 232.40p 1.86%
ARM Holdings (ARM) 1,064.00p 1.62%
BAE Systems (BA.) 445.00p 1.62%

FTSE 100 - Fallers

BHP Billiton (BLT) 975.00p -5.71%
Glencore (GLEN) 115.85p -4.65%
Randgold Resources Ltd. (RRS) 3,971.00p -3.64%
National Grid (NG.) 894.20p -3.57%
Fresnillo (FRES) 707.00p -2.75%
SSE (SSE) 1,492.00p -2.74%
Pearson (PSON) 827.50p -2.36%
Standard Chartered (STAN) 614.70p -1.96%
United Utilities Group (UU.) 957.50p -1.90%
Hikma Pharmaceuticals (HIK) 2,011.00p -1.81%

FTSE 250 - Risers

Tullett Prebon (TLPR) 358.70p 9.09%
ICAP (IAP) 474.50p 6.97%
Aldermore Group (ALD) 269.40p 4.50%
Euromoney Institutional Investor (ERM) 967.50p 3.92%
Jardine Lloyd Thompson Group (JLT) 881.50p 3.89%
Dignity (DTY) 2,458.00p 3.89%
esure Group (ESUR) 263.50p 3.57%
Supergroup (SGP) 1,674.00p 3.40%
Hays (HAS) 144.30p 3.00%
Elementis (ELM) 241.90p 2.94%

FTSE 250 - Fallers

Kaz Minerals (KAZ) 100.30p -12.33%
Amec Foster Wheeler (AMFW) 524.50p -8.62%
Premier Oil (PMO) 74.85p -6.44%
Petra Diamonds Ltd.(DI) (PDL) 70.75p -5.94%
Synthomer (SYNT) 317.10p -5.91%
Drax Group (DRX) 271.70p -4.70%
Acacia Mining (ACA) 170.60p -3.89%
Morgan Advanced Materials (MGAM) 270.30p -3.43%
Ophir Energy (OPHR) 98.65p -3.34%
Petrofac Ltd. (PFC) 773.50p -3.25%