London close: Stocks fall as investors mull strong US payrolls report

London stocks closed with losses on Friday, as investors weighed the impact of a robust US jobs report as well as better-than-expected UK GDP data.

The FTSE 100 fell 1.67% to close at 7,748.35, while the FTSE 250 dropped by 1.7% to end the day at 19,357.46.

Sterling strengthened against the US dollar, gaining 1.2% to last trade at $1.2068, while it rose 0.41% on the euro to reach €1.1315.

“Today’s big losers have been European indices, which have seen losses around the 2% mark,” said IG chief market analyst Chris Beauchamp.

“As the session heads towards its close, only two FTSE 100 stocks are in positive territory, with the rest deep in the red.”

Beauchamp noted that banks and other financials led the decline, mirroring the moves seen on Wall Street yesterday.

“While it looks like this knee-jerk response looks overdone, it certainly isn’t wise to stand in the way of the avalanche of selling, which looks unlikely to reach an end soon.”

Nonfarm payrolls higher than expected, UK GDP surprises

The US Department of Labor reported that non-farm payrolls increased by 311,000 in February, exceeding market expectations for a rise of 225,000.

Private sector payrolls rose by 265,000, while government payrolls grew by 46,000.

Average hourly earnings rose by 0.24%, lower than the anticipated 0.3%.

The leisure and hospitality sector experienced the strongest job growth, increasing by 105,000, while manufacturing payrolls fell by 4,000.

Paul Ashworth, chief North America economist at Capital Economics, judged that February's non-farm payrolls print confirmed that January's blow-out gain of 504,000 was not just a seasonal distortion - although the rest of the report would give some comfort to the Fed.

“The upshot is that it looks like the 25-basis point versus 50-basis point debate surrounding the rate hike decision later this month will come down to February’s CPI report, due next Tuesday," he said.

"We still think the Fed will stick with a 25-basis point increase, but acknowledge that, after Powell’s hawkish testimony this week, it’s a very close call."

On home shores, the UK economy expanded by 0.3% in January, according to data from the Office of National Statistics, raising hopes that the country could avoid a recession.

The services sector grew by 0.5%, with education, transport and storage, human health activities, and arts, entertainment and recreation activities contributing the most.

“The economy partially bounced back from the large fall seen in December,” said ONS director of economic statistics, Darren Morgan.

“Across the last three months as a whole and, indeed over the last 12 months, the economy has, though, shown zero growth.

“The main drivers of January's growth were the return of children to classrooms, following unusually high absences in the run-up to Christmas, the Premier League clubs returned to a full schedule after the end of the World Cup and private health providers also had a strong month.”

Elsewhere, high street sales rose by 11.3% in the week ended 5 March, according to the BDO high street sales tracker, with both in-store and online sales experiencing strong demand.

Footfall grew by 6.9% compared to the same period in 2022.

On the continent, annual consumer price inflation in Germany remained unchanged at 8.7% in February, with both energy and food prices remaining high.

The harmonised index of consumer prices increased by 0.1 percentage points to 9.3%.

“The inflation rate remains at a high level. Households felt the impact of higher food prices in February, as they increased even more than energy prices,” said Ruth Brand, Destatis president.

Finally on the economic front, the Bank of Japan decided to maintain its short-term policy interest rate at -0.1% earlier in the global day, and continue with its current pace of yield curve control.

The central bank also maintained its bond-buying policy to control yields, with 10-year bond yields fluctuating by 0.5 percentage points either side of zero.

Banks under pressure, energy stocks manage gains

Banks were among the top fallers in Friday’s trading, with HSBC Holdings down 4.77%, while Standard Chartered, Barclays and Lloyds Banking Group also fell sharply.

“Lots of banks hold large portfolios of bonds and rising interest rates make these less valuable,” said Russ Mould, investment director at AJ Bell.

“The SVB situation is a reminder that many institutions are sitting on large unrealised losses on their fixed-income holdings.”

Schroders was down 3.8% following a downgrade to ‘neutral’ from ‘outperform’ at Credit Suisse, while Segro also faced a downgrade to ‘equalweight’ at Barclays, leading to a decline of 1.31%.

Insurer Admiral Group was down 4.84% after a downgrade to ‘hold’ from Deutsche Bank.

On the upside, transport operator FirstGroup reversed earlier losses to trade up by 1.63% after lifting annual guidance, with passenger traffic on its buses and trains continuing to recover from Covid pandemic levels.

Meanwhile, National Grid and SSE managed to hold onto gains, closing up 0.34% and 0.09%, respectively.

Oil and gas stocks were in favour, driven by the recent cold snap in the UK, with Drax Group up 2.76%, Tullow Oil up 4.76%, and Harbour Energy up 2.88%.

Outside the FTSE 350, recruiter Robert Walters ticked higher, reporting record profits and driven by the tight labour market and surging wage inflation.

The announcement of its long-standing CEO stepping down also contributed to the 10.98% rise in its share price.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,748.35 -1.67%
FTSE 250 (MCX) 19,357.46 -1.70%
techMARK (TASX) 4,596.40 -1.31%

FTSE 100 - Risers

Endeavour Mining (EDV) 1,650.00p 1.60%
Fresnillo (FRES) 722.20p 1.35%
BT Group (BT.A) 148.35p 0.71%
National Grid (NG.) 1,050.00p 0.62%
SSE (SSE) 1,731.50p 0.32%
Centrica (CNA) 106.50p 0.28%
Flutter Entertainment (CDI) (FLTR) 14,090.00p 0.11%
Berkeley Group Holdings (The) (BKG) 4,039.00p 0.07%
Anglo American (AAL) 2,812.00p -0.04%
Glencore (GLEN) 473.00p -0.08%

FTSE 100 - Fallers

Ocado Group (OCDO) 451.10p -6.53%
Hargreaves Lansdown (HL.) 788.20p -5.63%
Admiral Group (ADM) 1,881.50p -5.09%
Rolls-Royce Holdings (RR.) 150.10p -5.02%
HSBC Holdings (HSBA) 592.60p -4.59%
Standard Chartered (STAN) 739.80p -4.54%
Legal & General Group (LGEN) 252.00p -4.26%
DCC (CDI) (DCC) 4,459.00p -4.25%
Pershing Square Holdings Ltd NPV (PSH) 2,835.00p -4.06%
Prudential (PRU) 1,228.50p -3.99%

FTSE 250 - Risers

Tullow Oil (TLW) 34.38p 5.01%
National Express Group (NEX) 138.90p 3.19%
Centamin (DI) (CEY) 101.90p 2.89%
Drax Group (DRX) 650.50p 2.76%
Harbour Energy (HBR) 295.30p 2.53%
Babcock International Group (BAB) 331.00p 2.29%
FirstGroup (FGP) 108.00p 1.79%
Tritax Eurobox (GBP) (EBOX) 64.50p 1.74%
Watches of Switzerland Group (WOSG) 815.50p 1.69%
Petershill Partners (PHLL) 166.20p 1.34%

FTSE 250 - Fallers

Molten Ventures (GROW) 315.60p -14.01%
ASOS (ASC) 830.50p -8.64%
Bridgepoint Group (Reg S) (BPT) 222.20p -7.95%
Aston Martin Lagonda Global Holdings (AML) 245.70p -7.28%
Intermediate Capital Group (ICP) 1,306.50p -6.44%
Genus (GNS) 2,938.00p -5.41%
Liontrust Asset Management (LIO) 1,098.00p -5.02%
Moonpig Group (MOON) 125.80p -4.70%
Allianz Technology Trust (ATT) 215.00p -4.45%
Edinburgh Worldwide Inv Trust (EWI) 155.20p -4.43%