London close: Investors and analysts cautious after 'sizzling' US jobs report

For investors who had grown accustomed to market conditions where 'bad news' on the economy was 'good news' for stocks, Friday's much stronger-than-expected reading on the US jobs proved a disappointment.

According to the US Department of Labor, non-farm payrolls surged by 528,000 in July, more than doubling the consensus, alongside faster-than-expected wage growth and a dip in the unemployment rate to 3.5%, a near record low

The FTSE 100 edged down by 0.11% to 7,439.74, even as the pound gave back 0.86% against the US dollar to 1.2056 as markets priced in the risk of larger interest rate hikes by the Federal Reserve.

On a weekly basis however the top-flight index was up by 16.31 points at 7,439.74.

For IG chief market analyst, Chris Beauchamp "while America might be in good shape, the rest of the world is worse off, and this risks pulling the USA into a recession in spite of good US data.

"Sterling in particular seems likely to weaken further as the disparity between the US and UK grows wider. Further drops for sterling will counter much of the BoE’s efforts to control inflation, leaving yesterday’s gloomy outlook firmly in place."

"After a few weeks of strong performance, “safe” and “risky” assets have both generally sold off today after the strong US payrolls data. We expect this to continue over the rest of 2022," chipped in James Reilly, assistant economist at Capital Economics.

On home shores, the latest survey from Halifax showed that house prices fell in July for the first time in a year amid rising interest rates and surging inflation.

House prices dipped 0.1% on the month following a 1.4% increase in June. On the year, house price growth eased to 11.8% in July from 12.5% the month before, with the average house price now standing at £293,221 compared to £293,586 in June.

Halifax managing director Russell Galley said: "While we shouldn't read too much into any single month, especially as the fall is only fractional, a slowdown in annual house price growth has been expected for some time. Leading indicators of the housing market have recently shown a softening of activity, while rising borrowing costs are adding to the squeeze on household budgets against a backdrop of exceptionally high house price-to-income ratios.

"That said, some of the drivers of the buoyant market we’ve seen over recent years - such as extra funds saved during the pandemic, fundamental changes in how people use their homes, and investment demand, still remain evident. The extremely short supply of homes for sale is also a significant long-term challenge but serves to underpin high property prices."

In equity markets, WPP slumped 9% even as the advertising giant reported a rise in interim profits, driven by strong client demand across all services.

Russ Mould, investment director at AJ Bell, said: "WPP’s first-half numbers actually look fairly solid, but investors are so concerned about the economic backdrop, and what it says about WPP’s prospects, they have reacted negatively.

"Clearly there is a belief that WPP’s recent momentum, which helped it lift its annual sales outlook, can’t last in the long-term."

Pets At Home edged down despite saying it delivered a "continued strong performance" in the first quarter, with all channels remaining in growth.

Tullow Oil gushed lower after saying it had plugged and abandoned an exploration well offshore Guyana.

Hargreaves Lansdown rallied despite reporting a fall in assets under management for the full year as the war in Ukraine, inflation and cost-of-living crisis shook investor confidence.

London Stock Exchange gained after it announced the launch of a £750m share buyback, posted a jump in first-half profit and lifted its dividend.

In broker note action, Next was knocked lower by a downgrade to ‘neutral’ at Goldman Sachs, while Just Group was boosted by an upgrade to ‘market perform’ at KBW. Unite Group was lower after a downgrade to ‘hold’ at Stifel.

Market Movers

FTSE 100 (UKX) 7,439.74 -0.11%
FTSE 250 (MCX) 20,051.48 -0.52%
techMARK (TASX) 4,359.01 -0.21%

FTSE 100 - Risers

Hargreaves Lansdown (HL.) 885.80p 4.98%
Antofagasta (ANTO) 1,170.50p 3.58%
Airtel Africa (AAF) 152.10p 2.62%
Vodafone Group (VOD) 121.44p 2.36%
BT Group (BT.A) 159.55p 2.14%
Rio Tinto (RIO) 4,911.00p 2.02%
Harbour Energy (HBR) 361.50p 1.94%
Fresnillo (FRES) 707.80p 1.71%
London Stock Exchange Group (LSEG) 8,278.00p 1.65%
Glencore (GLEN) 466.80p 1.53%

FTSE 100 - Fallers

WPP (WPP) 814.60p -8.76%
Ocado Group (OCDO) 883.20p -6.32%
Dechra Pharmaceuticals (DPH) 3,578.00p -5.44%
Spirax-Sarco Engineering (SPX) 11,465.00p -4.19%
Next (NXT) 6,444.00p -4.02%
Halma (HLMA) 2,237.00p -3.91%
Taylor Wimpey (TW.) 123.15p -3.68%
Unite Group (UTG) 1,113.00p -3.55%
SEGRO (SGRO) 1,048.50p -3.45%
Mondi (MNDI) 1,479.50p -3.24%

FTSE 250 - Risers

Ferrexpo (FXPO) 148.80p 7.05%
TP Icap Group (TCAP) 137.80p 6.66%
NB Private Equity Partners Ltd. (NBPE) 1,635.00p 5.14%
Just Group (JUST) 75.20p 4.88%
Clarkson (CKN) 3,555.00p 3.80%
The Renewables Infrastructure Group Limited (TRIG) 143.80p 3.72%
Wood Group (John) (WG.) 155.10p 3.69%
Tullow Oil (TLW) 52.10p 3.37%
Syncona Limited NPV (SYNC) 205.00p 2.97%
Foresight Solar Fund Limited (FSFL) 124.80p 2.96%

FTSE 250 - Fallers

Wizz Air Holdings (WIZZ) 2,185.00p -7.34%
IP Group (IPO) 83.00p -5.79%
Morgan Sindall Group (MGNS) 1,840.00p -5.54%
Serco Group (SRP) 174.80p -4.59%
Countryside Partnerships (CSP) 278.00p -4.40%
Dr. Martens (DOCS) 257.20p -4.32%
Dunelm Group (DNLM) 814.00p -4.24%
Trainline (TRN) 391.50p -4.06%
Marshalls (MSLH) 465.60p -3.88%
IWG (IWG) 189.50p -3.81%