London close: Stocks firmer as US payrolls beat forecasts

London's financial markets closed positively on Friday as investors digested the latest non-farm payrolls report out of the United States.

The FTSE 100 index gained 0.54% to reach a closing value of 7,554.47 points, while the FTSE 250 index posted an increase of 0.45%, ending the day at 18,701.99.

In currency markets, sterling was last down 0.48% on the dollar, trading at $1.2533, while it experienced a minor decline of 0.04% against the euro to change hands at €1.1662.

"Unlike softer US job opening and ADP employment data earlier in the week, US non-farm payrolls came in stronger-than-expected," said IG senior market analyst Axel Rudolph.

"Employment growth is below the average monthly gain of 240,000 over the prior 12 months but is in line with job growth in recent months while unemployment fell back to 3.7% and average hourly earnings rose slightly more than expected."

Rudolph noted that the US Michigan consumer sentiment index also beat expectations, leading to a probable sixth consecutive week of gains for several global stock markets and soaring US yields from their recent three-month lows.

"The dollar pared initial gains, the gold price slipped and the oil price stabilised but still saw its seventh consecutive week of falling prices ahead of next week's Fed, European Central Bank and Bank of England meetings."

Non-farm payrolls come in higher than expected

In economic news, the Bureau of Labor Statistics reported that the US economy saw better-than-expected job growth in November.

Non-farm payrolls increased by 199,000, surpassing analysts' expectations of a 180,000 gain.

The uptick followed an unrevised 150,000 rise in October.

Additionally, the unemployment rate declined, dropping to 3.7% in November from the prior month's 3.9%, contrary to the expected status quo.

Average hourly earnings also increased 0.4% for the month and 4% year-on-year. While the monthly rise exceeded predictions of 0.3%, the yearly rate remained aligned with expectations.

Job growth was seen primarily in healthcare and government sectors, while manufacturing saw a boost due to the return of auto workers following strike action.

However, the retail trade sector experienced a decline in employment.

"Payroll gains were inflated by returning strikers in November, but the underlying pace of job growth has slowed in recent months," said Nancy Vanden Houten, lead US economist at Oxford Economics.

"That's encouraging for the Fed, which has likely ruled out further rate increases.

"However, the details in the rest of the report were robust enough in our view to keep rate cuts off the table for several more months."

Meanwhile, a survey from the University of Michigan revealed an improvement in US consumer sentiment for December.

The preliminary consumer sentiment index increased to 69.4 from November's 61.3 and December 2022's 59.8.

The current economic conditions index also showed growth, reaching 74.0 in December, up from 68.3 the previous month and significantly higher than the 59.6 recorded in the same month last year.

At the same time, the index of consumer expectations rose to 66.4, compared to 56.8 in November and 60.0 in December 2022.

The improvement in consumer sentiment was attributed to decreasing concerns about inflation.

"Consumer sentiment soared 13% in December, erasing all declines from the previous four months, primarily on the basis of improvements in the expected trajectory of inflation," said the university's surveys of consumers director Joanne Hsu.

"Sentiment is now about 39% above the all-time low measured in June 2022 but still well below pre-pandemic levels.

"All five index components rose this month, led by surges of over 24% for both the short and long-run outlook for business conditions."

On home shores, an industry survey showed a sharp decline in recruitment in the UK in November.

The UK Jobs Report from KPMG and the Recruitment and Employment Confederation reported reduced placements for both permanent and temporary positions.

Permanent placements saw the second-quickest contraction since June 2020, during the initial months of the pandemic.

Temporary hires also decreased after two months of expansion.

At the same time, starting salary inflation dropped to a 32-month low, while the availability of workers increased for the ninth consecutive month, reflecting the impact of economic uncertainty on hiring decisions.

"The balance of supply versus demand is out of sync," said Claire Warnes, skills and productivity partner at KPMG.

"We're seeing even more people looking for work, with candidate supply rising at the fastest pace since the initial pandemic wave three years ago, but the number of available roles falling again.

"Businesses want to plan for the year ahead, but the prospect of faltering UK economic growth means the certainty they need isn't there."

Finally on data, the final estimate of Germany's consumer price index (CPI) confirmed a decline in inflation, marking its lowest point in 29 months for November.

The CPI rose 3.2% year-on-year, down from October's 3.8%, as prices fell by 0.4% during the month.

Germany's federal statistics office Destatis attributed this ongoing decline in annual inflation to falling energy prices and eased price pressures on food.

That marked the fifth consecutive month of falling annual inflation in Germany.

Grafton Group and IG on the rise, Anglo American tumbles

On London's equity markets, J Sainsbury rose 1.93% after an upgrade from Goldman Sachs, which raised its rating on the company from 'neutral' to 'buy.'

Building materials distributor Grafton Group was ahead 2.89% after its announcement that it had extended its share buyback programme, initially set to expire at the end of January, until the end of May 2024.

Online trading platform IG Group Holdings was ahead 3.54% after announcing the appointment of Breon Corcoran, the former chief executive of Paddy Power Betfair, as its new CEO.

On the downside, Flutter Entertainment, the parent company of Paddy Power, reversed earlier gains to close down 0.01%.

The moves came after the company confirmed its plans to list on the New York Stock Exchange in January while reassuring investors that it would not be delisting from the London Stock Exchange.

Miner Anglo American tumbled 18.97% after the company announced ambitious cost-cutting measures to reduce operational costs by around $1bn by the end of 2024.

The decision to curtail production by about 4% was driven by ongoing near-term constraints and volatile market conditions, which weighed heavily on earnings.

Housebuilder Berkeley Group Holdings lost 3.66% after disclosing its decision to abstain from investing in new developments due to an unfavourable planning and regulatory environment.

Instead, Berkeley said it would prioritise "financial strength" following a profit rise in the year's first half.

While pre-tax profit increased by 4.6% to £298m and operating margins held steady at 19.5%, the value of reservations dropped by a third due to elevated interest rates and persistent "elevated political and macro volatility".

Imperial Brands slipped 1.78% after a downgrade from 'outperform' to 'sector perform' by RBC Capital Markets, despite the company's strong performance relative to British American Tobacco.

Publisher and media company Future continued its slide from Thursday, losing 2.54% by the close.

The decline followed its announcement of weaker full-year revenues, primarily attributed to softer trading conditions in the United States.

Reporting by Josh White for Sharecast.com.

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