London close: Stocks close weaker as investors digest jobs data

London stocks closed in the red on Thursday, as investors mulled the latest UK jobs data, as well as US employment numbers that were little changed, and economic growth figures out of China.

The FTSE 100 ended the session down 0.67% at 6,250.69, and the FTSE 250 was off 0.57% at 17,321.29.

Sterling was last 0.11% stronger against the dollar, trading at $1.2601, but was flat on the euro at €1.1029.

The City’s benchmark index had rallied on Wednesday, amid reports that positive results would soon be announced from the Oxford coronavirus vaccine trials.

“After some mixed numbers from China, where rebounding GDP is no longer enough to provide a bullish catalyst, we were treated to some dire UK jobs data,” said Chris Beauchamp, chief market analyst at IG.

“However, even the loss of hundreds of thousands of jobs was not enough to put a dent in sterling, which continues to take advantage of the dollar weakness that has been such a feature of recent weeks.

“In part this desire to move away from the greenback is a wish to cut exposure to an economy that is still struggling with its Covid response, let alone the entirely different challenge of easing lockdown, but also the hope that more open economies in other parts of the world will see a rebound in growth in coming months, making them more attractive to capital flows.”

Thursday’s downbeat tone came despite encouraging news from China, however, after figures from the National Bureau of Statistics showed the economy bounced back in the second quarter after taking a hit from the pandemic.

Gross domestic product grew 3.2% year-on-year following a 6.8% contraction in the first quarter, beating expectations for 2.5% growth.

The first quarter contraction was the worst since quarterly GDP records began.

In seasonally-adjusted terms, GDP rose 11.5% quarter-on-quarter following a 10% decline in the first quarter, taking GDP back above the pre-coronavirus high reached in the fourth quarter of last year.

Industrial production and fixed asset investment data also beat expectations, but retail sales were a disappointment.

On home shores, meanwhile, figures from the Office for National Statistics showed the number of people on payrolls declined by 649,000 between March and June.

Compared with May, 74,000 people lost their jobs.

“As the pandemic took hold, the labour market weakened markedly, but that rate of decline slowed into June, though this is before recent reports of job losses,” said Jonathan Athow, ONS deputy national statistician for economic statistics.

“There are now almost two-thirds of a million fewer employees on the payroll than before the lockdown, according to the latest tax data.”

The unemployment rate was steady at 3.9% for the three months to May, beating expectations for a rise to 4.2%.

Self-employment fell by 178,000 between March and June to 4.85 million - marking the worst quarter on record - and vacancies in April to June were at their lowest level since the vacancy survey began, at an estimated 333,000.

That was 23% lower than the previous record low in April to June 2009.

June’s claimant count rate came in at 7.3%, compared to 7.4% in May, which was the highest level since May 1996.

The figures also showed that jobless claims fell by 28,100 in May after surging by 853,000 in April and 566,400 in March.

Between March and June, average weekly hours worked per person declined by 5.5 hours to a record low of 26.7.

“Unemployment claims were better than feared but we can pin this on furlough schemes which are extending the pretence, delaying the worst and providing a soft landing; but the jobless numbers clearly do not reflect the true extent of what’s coming,” said Neil Wilson, chief market analyst at Markets.com.

“Meanwhile the number of hours worked - a key metric for the nation’s productivity - has collapsed.”

Data out of the US during the afternoon showed little change to initial jobless claims over the preceding week, hinting at the growing toll that moves to dial-back on the reopening of the economy were taking on the country's labour market.

According to the Department of Labor, initial jobless claims dipped by just 10,000 over the week ending on 11 July, to reach 1.3 million.

That was on top of minimal downward revision of 4,000 to the prior week's print to 1.31 million.

Economists had anticipated a larger reduction in the pace of firings to 1.2m.

Finally, rate-setters at the European Central Bank kept all their main policy settings unchanged following the Governing Council’s meeting earlier in the day.

“This continues to look as a very strong package, and it is enough to support the economy and markets, at least for now," said Claus Vistesen at Pantheon Macroeconomics.

More broadly, souring relations between the US and China weighed on the mood too, following reports the White House was mulling a ban on Chinese Communist Party members travelling to the US.

Should it be introduced, the ban would apply to all party members and their families, and would also authorise the US government to revoke visas for members who were already in America, according to the New York Times.

In equity markets, Coral and Ladbrokes owner GVC Holdings slid 2.56% after it reported a fall in net gaming revenue as coronavirus lockdowns forced store closures.

The company also announced the departure of chief executive Kenneth Alexander.

Hays was in the red by 1.28% as it said annual profit would almost halve after recruitment fees fell by a third in the fourth quarter, with the UK and Ireland the worst-hit.

Fellow recruiter PageGroup was also on the back foot, closing down 2.26%.

Energy company SSE bucked the trend, rising 2.46% after it said it still intended to declare a dividend in November as the impact of Covid-19 on the business remained in line with expectations during the first three months of the fiscal year.

Market Movers

FTSE 100 (UKX) 6,250.69 -0.67%
FTSE 250 (MCX) 17,321.29 -0.57%
techMARK (TASX) 3,761.68 -1.10%

FTSE 100 - Risers

SSE (SSE) 1,395.00p 2.46%
WPP (WPP) 624.20p 2.26%
Intermediate Capital Group (ICP) 1,365.00p 2.17%
Avast (AVST) 574.00p 1.50%
BT Group (BT.A) 115.15p 1.50%
Next (NXT) 5,066.00p 1.40%
Kingfisher (KGF) 228.80p 1.37%
Smurfit Kappa Group (SKG) 2,512.00p 1.29%
Admiral Group (ADM) 2,376.00p 1.15%
RSA Insurance Group (RSA) 434.00p 0.93%

FTSE 100 - Fallers

Melrose Industries (MRO) 117.75p -3.88%
GVC Holdings (GVC) 879.80p -3.68%
Smith & Nephew (SN.) 1,602.00p -3.49%
Compass Group (CPG) 1,150.50p -2.87%
Whitbread (WTB) 2,344.00p -2.82%
British American Tobacco (BATS) 2,796.50p -2.58%
BAE Systems (BA.) 479.40p -2.47%
Just Eat Takeaway.Com N.V. (CDI) (JET) 8,212.00p -2.36%
Burberry Group (BRBY) 1,435.50p -2.35%
International Consolidated Airlines Group SA (CDI) (IAG) 224.10p -2.27%

FTSE 250 - Risers

Oxford Biomedica (OXB) 845.00p 8.47%
Dunelm Group (DNLM) 1,255.00p 6.81%
TI Fluid Systems (TIFS) 183.20p 6.71%
FDM Group (Holdings) (FDM) 956.00p 5.43%
Biffa (BIFF) 205.00p 5.24%
Hochschild Mining (HOC) 224.40p 4.76%
Gamesys Group (GYS) 905.00p 4.11%
Dixons Carphone (DC.) 81.50p 3.95%
AJ Bell (AJB) 408.00p 3.95%
Energean (ENOG) 544.00p 3.45%

FTSE 250 - Fallers

Greencore Group (GNC) 115.00p -5.74%
Micro Focus International (MCRO) 305.80p -5.44%
FirstGroup (FGP) 32.44p -5.31%
Fidelity China Special Situations (FCSS) 293.00p -4.88%
TUI AG Reg Shs (DI) (TUI) 362.90p -4.63%
Rank Group (RNK) 149.00p -4.52%
Sirius Real Estate Ltd. (SRE) 78.10p -4.52%
Capita (CPI) 37.52p -4.07%
Barr (A.G.) (BAG) 444.00p -3.58%
Coats Group (COA) 52.50p -3.49%