London close: FTSE ends flat after blowout payrolls report

London stocks ended flat on Friday following a stronger-than-expected non-farm payrolls report and an upbeat reading on the UK construction sector, as investors continued to mull the implications of escalating tensions in the Middle East.

The FTSE 100 closed steady at 8,280.63.

The main event of the day was the payrolls report, which showed the US economy added far more jobs than expected in September, while the unemployment rate unexpectedly fell, dashing any expectations of a potential 50 basis points rate cut by the Federal Reserve next month.

According to figures from the Labor Department, total non-farm payrolls rose by 254,000 from August, versus expectations for a 140,000 increase. The figure for August was revised up to a 159,000 gain from 142,000.

The unemployment rate fell to 4.1% in September from 4.2% the month before. Economists were expecting it to be unchanged. The data also showed that wage growth ticked up to 4% year-on-year from 3.9% in August. On a monthly basis, wages were up 0.4%, in line with August.

Paul Ashworth, chief North America economist at Capital Economics, said: "Looking at the labour market strength evident in September’s Employment Report, the real debate at the Fed should be about whether to loosen monetary policy at all. Any hopes of a 50bp cut are long gone.

"We continue to expect the Fed to take a more measured approach - cutting rates by 25bp at each meeting until the policy rate is down to between 3.00% and 3.25%."

There was also good news on the UK construction sector, as a survey showed it grew in September at its fastest pace in two-and-a-half years.

The headline S&P Global construction purchasing managers’ index rose to 57.2 from 53.6 in August. It remained above the 50.0 mark that separates contraction from expansion for the seventh month in a row and signalled the steepest rate of growth for 29 months.

Tim Moore, economics director at S&P Global Market Intelligence, said: "UK construction companies indicated a decisive improvement in output growth momentum during September, driven by faster upturns across all three major categories of activity.

"A combination of lower interest rates, domestic economic stability and strong pipelines of infrastructure work have helped to boost order books in recent months.

"New project starts contributed to a moderate expansion of employment numbers and a faster rise in purchasing activity across the construction sector in September. However, greater demand for raw materials and the pass-through of higher wages by suppliers led to the steepest increase in input costs for 16 months.

"Business optimism edged down to the lowest since April, but remained much higher than the low point seen last October. Survey respondents cited rising sales enquires since the general election, as well as lower borrowing costs and the potential for stronger house building demand as factors supporting business activity expectations in September."

In addition, investors digested comments from Bank of England chief economist Huw Pill, who urged caution on interest rate cuts, in contrast to more dovish comments from governor Andrew Bailey a day earlier.

In a speech at the Institute of Chartered Accountants of England and Wales’ annual conference, Pill said there was still "ample reason for caution" when assessing inflationary persistence.

He continued: "While further cuts in Bank Rate remain in prospect, should the economic and inflation outlook evolve broadly as expected, it will be important to guard against the risk of cutting rates either too far or too fast.

"For me, the need for such caution points to a gradual withdrawal of monetary policy restriction."

Overall, the mood was subdued as Israel’s strikes against Lebanon intensified and attention turned to the former’s expected retaliatory strikes against Iran.

David Morrison, senior market analyst at Trade Nation, said: "Comments from President Biden have raised fears that the US may join Israel in launching an attack on Iran’s major oil hubs. There has also been speculation that Israel may target Iran’s nuclear facilities. All this has led to a sharp rebound in crude prices."

In equity markets, JD Wetherspoon ended up as it posted a 33% drop in full-year pre-tax profit after separately disclosed items, but a 73.5% increase in pre-tax profit before separately disclosed items to £73.9m. The pub chain also said that full-year revenue rose 5.7% to £2.04bn as like-for-like sales grew 7.6%.

Watches of Switzerland rallied after saying it had bought Hodinkee, a specialist website for luxury watch enthusiasts, for an undisclosed sum.

SSE was in the red as it emerged that completion of its Dogger Bank A offshore wind project has been pushed back to the second half of 2025.

In terms of sectors, banks were the top performers, with NatWest, Standard Chartered and Lloyds all sharply higher.

Market Movers

FTSE 100 (UKX) 8,280.63 -0.02%
FTSE 250 (MCX) 20,900.08 0.77%
techMARK (TASX) 4,815.79 0.00%

FTSE 100 - Risers

NATWEST GROUP (NWG) 342.50p 3.88%
Schroders (SDR) 360.60p 3.86%
Standard Chartered (STAN) 828.00p 3.84%
Croda International (CRDA) 4,300.00p 3.71%
Barclays (BARC) 226.25p 3.15%
easyJet (EZJ) 493.00p 2.64%
DCC (CDI) (DCC) 5,205.00p 2.56%
Lloyds Banking Group (LLOY) 58.80p 2.37%
BP (BP.) 416.85p 1.92%
Centrica (CNA) 118.20p 1.90%

FTSE 100 - Fallers

Spirax Group (SPX) 7,135.00p -3.39%
SSE (SSE) 1,838.00p -2.78%
JD Sports Fashion (JD.) 138.65p -2.67%
Experian (EXPN) 3,862.00p -2.45%
AstraZeneca (AZN) 11,738.00p -1.89%
Smurfit Westrock (DI) (SWR) 3,532.00p -1.75%
Severn Trent (SVT) 2,568.00p -1.66%
SEGRO (SGRO) 839.60p -1.62%
National Grid (NG.) 997.00p -1.58%
Phoenix Group Holdings (PHNX) 516.00p -1.43%

FTSE 250 - Risers

Raspberry PI Holdings (RPI) 366.80p 6.32%
Watches of Switzerland Group (WOSG) 481.80p 5.52%
Indivior (INDV) 784.50p 5.09%
Aston Martin Lagonda Global Holdings (AML) 109.80p 4.67%
Carnival (CCL) 1,229.00p 4.06%
Crest Nicholson Holdings (CRST) 195.70p 3.93%
Wizz Air Holdings (WIZZ) 1,274.00p 3.66%
Ibstock (IBST) 184.80p 3.47%
Bank of Georgia Group (BGEO) 3,780.00p 3.42%
Moonpig Group (MOON) 215.00p 3.37%

FTSE 250 - Fallers

W.A.G Payment Solutions (WPS) 79.00p -3.66%
Tritax Eurobox (GBP) (EBOX) 69.30p -2.12%
Safestore Holdings (SAFE) 855.50p -1.95%
Close Brothers Group (CBG) 373.80p -1.63%
Foresight Solar Fund Limited (FSFL) 92.20p -1.39%
Big Yellow Group (BYG) 1,228.00p -1.29%
Workspace Group (WKP) 632.00p -1.26%
SSP Group (SSPG) 154.00p -1.22%
Harworth Group (HWG) 186.00p -1.06%
NCC Group (NCC) 169.20p -1.05%