London close: Stocks mixed after big US payrolls disappointment

London stocks finished in a mixed state on Friday, as investors reacted to a US payrolls report that came in well and truly short of expectations.

The FTSE 100 ended the session up 0.47% at 7,485.28, while the FTSE 250 slipped 0.27% to 23,353.25.

Sterling was also going in different directions, last trading 0.33% stronger on the dollar at $1.3576, while it weakened 0.18% against the euro to €1.1959.

“Aside from the FTSE 100, which appears once again to be an island of calm amid the panic, most indices are firmly in the red, and a slightly better performance from the Dow has been reversed as a rise in US yields past their 2021 peak prompted another bout of selling,” said IG chief market analyst Chris Beauchamp.

“Once again investors have been taught not to follow the ADP report too closely - Wednesday’s stellar figure contrasts sharply with the lacklustre headline number in today’s nonfarm payrolls.

“But it is not the headline we should be worried about - this time it’s the sharp drop in the unemployment rate and the bounce in earnings that has caused the lurch lower in stocks.”

Beauchamp said a rate hike from the Fed in March was now a “very real” possibility, thanks to the “rude health” in which the US economy was sitting.

Looking at the jobs figures from across the pond, the United States added 199,000 new jobs in December according to the Bureau of Labor Statistics' nonfarm payrolls report, which was well short of the 400,000 expected by analysts.

November's figure, however, was revised to show that 249,000 jobs were created, up from 210,000, while October's print was also lifted to 648,000 from 546,000.

The US unemployment rate also dropped to 3.9%, down from 4.2% in November as employment continued to trend up in leisure and hospitality, professional and business services, manufacturing, construction and transportation and warehousing.

“The headline nonfarm payroll number falls way short of estimates - nevertheless, it’s a strong report showing evidence of a tightening labour market and justifying the Federal Reserve’s more hawkish stance,” said Mike Owens, global sales trader at Saxo Markets.

“Meanwhile, the December unemployment rate fell to 3.9% from 4.2% previously, and average hourly earnings showed a 4.7% increase year on year which was 0.5% ahead of expectations.

“These figures add to the conviction that we see the Fed now considering the first interest rate hike in March.”

On home shores, a survey released earlier showed growth in the UK construction sector hitting a three-month low in December amid disruption from the Omicron variant.

The IHS Markit/CIPS construction purchasing managers' index fell to 54.3 from 55.5 in November, but remained above the 50.0 mark that separates contraction from expansion.

Some survey respondents said tighter pandemic restrictions and rising Covid cases had acted as a brake on recovery, especially in the commercial sector.

“UK construction companies ended last year on a slightly weaker footing as renewed pandemic restrictions held back the recovery, especially in commercial work and civil engineering,” said Tim Moore, director at IHS Markit.

“Some firms commented on disruption from rising Covid-19 cases, while others noted a lack of new work to sustain the rapid growth rates seen earlier in 2021.”

Consumer caution around Omicron, meanwhile, saw retail footfall slip back in December, with industry data showing an 18.6% decline in the month when compared to the pre-pandemic period two years prior - below the three-month average decline of 16.4%.

The British Retail Consortium’s Footfall Monitor also recorded a 2.9 percentage point decrease from October.

High streets were the most affected as shoppers stayed away from the largely pedestrian destinations, with footfall there declining 23.1% over the pre-Covid comparator in December, which was 3.5 percentage points below November’s rate, and below the three-month average decline of 20.7%.

“Much of the progress made over the last four months was wiped out in December as surging Omicron cases and new work-from-home advice deterred many from shopping in-store, particularly in towns and city centres,” said British Retail Consortium chief executive officer Helen Dickinson.

“As case numbers rose precipitously, many people chose to limit social mixing in the run up to Christmas and shop less frequently.”

House prices were a bright spot on the data front, however, with Halifax reporting them as rising at the fastest annual pace since July 2007 in December, amid strong demand and low supply, although they were expected to cool this year.

Prices rose 9.8% on the year following an 8.2% increase in November, while on the month, they were up 1.1% in December, in line with the previous month, as the average property price now stood at a fresh record high of £276,091.

In cash terms, house prices grew by more than £24,500 in 2021, making for the largest annual cash rise since March 2003.

“The lack of spending opportunities afforded to people while restrictions were in place helped boost household cash reserves,” said Halifax managing director Russell Galley.

“This factor, alongside the Stamp Duty holiday and the race for space as a result of homeworking, will have encouraged buyers to bring forward home purchases that may have been planned for this year.

“The extension of the government’s job and income support schemes also supported the labour market and may have given some households the confidence to proceed with purchases.”

In equity markets, miners gained as metals price rose, with Rio Tinto up 2.64%, Anglo American rising 2.94%, BHP ahead 2.69%, and Antofagasta 1.88% higher.

Shell nudged up 1.05% after it said its $7bn share buyback programme would continue "at pace" despite weaker oil product sales due to the Omicron variant, and currency headwinds in Turkey.

Fellow oil giant BP was also in the green, rising 2.08% after an upgrade to ‘outperform’ at Exane.

Shipping broker Clarkson advanced 4.06% after it lifted annual profit guidance for the second time in a month following stronger-than-anticipated trading in December.

Essentra jumped 4.85% after saying it expects to meet market expectations for 2021 operating profit, while luxury car maker Aston Martin Lagonda rallied 6.6% after reporting that sales to dealers surged 82% in 2021 on the back of sales of its DBX sports utility model.

Centamin shone, rising 3.27% after rating upgrades at Liberum and Berenberg.

Liberum upped the shares to ‘buy’ from ‘sell’ saying that if all went to plan, the company’s flagship Sukari gold mine would be reliably averaging around 500,000 ounces of gold per annum over the 2022 to 2033 period.

On the downside, cider maker C&C lost 2.07% of its effervescence after reporting that trading conditions in December for its on-trade business were "significantly impacted" by renewed government restrictions across the UK and Ireland.

B&M European Value Retail slid 2.23%, a day after it said full-year profits were set to be above analyst expectations following a "strong" performance over the Christmas period.

Market Movers

FTSE 100 (UKX) 7,485.28 0.47%
FTSE 250 (MCX) 23,353.25 -0.27%
techMARK (TASX) 4,486.64 -0.19%

FTSE 100 - Risers

Anglo American (AAL) 3,257.00p 2.94%
BHP Group (BHP) 2,305.50p 2.69%
Prudential (PRU) 1,320.00p 2.68%
Rio Tinto (RIO) 5,207.00p 2.64%
Legal & General Group (LGEN) 307.80p 2.60%
Barclays (BARC) 205.25p 2.39%
BP (BP.) 361.90p 2.08%
Standard Chartered (STAN) 487.00p 2.03%
Antofagasta (ANTO) 1,357.00p 1.88%
Mondi (MNDI) 1,889.00p 1.86%

FTSE 100 - Fallers

Diageo (DGE) 3,872.00p -2.61%
B&M European Value Retail S.A. (DI) (BME) 603.60p -2.23%
Spirax-Sarco Engineering (SPX) 15,210.00p -2.09%
Aveva Group (AVV) 3,069.00p -2.07%
Dechra Pharmaceuticals (DPH) 4,478.00p -2.06%
Ocado Group (OCDO) 1,561.00p -1.86%
Burberry Group (BRBY) 1,786.50p -1.84%
Sainsbury (J) (SBRY) 275.20p -1.75%
Kingfisher (KGF) 349.50p -1.74%
Scottish Mortgage Inv Trust (SMT) 1,201.00p -1.48%

FTSE 250 - Risers

Aston Martin Lagonda Global Holdings (AML) 1,461.00p 6.60%
Essentra (ESNT) 357.00p 4.85%
Clarkson (CKN) 3,970.00p 4.06%
Centamin (DI) (CEY) 89.66p 3.27%
Coats Group (COA) 71.40p 2.59%
Marks & Spencer Group (MKS) 256.60p 2.27%
Syncona Limited NPV (SYNC) 216.00p 2.12%
Hiscox Limited (DI) (HSX) 924.00p 1.96%
Beazley (BEZ) 485.30p 1.93%
Virgin Money UK (VMUK) 186.65p 1.86%

FTSE 250 - Fallers

Ninety One (N91) 258.80p -5.84%
Kainos Group (KNOS) 1,700.00p -3.74%
Baillie Gifford Shin Nippon (BGS) 203.50p -3.58%
Chrysalis Investments Limited NPV (CHRY) 226.00p -3.42%
Bridgepoint Group (Reg S) (BPT) 420.00p -3.01%
C&C Group (CDI) (CCR) 230.20p -2.70%
Baltic Classifieds Group (BCG) 242.00p -2.42%
NCC Group (NCC) 223.50p -2.40%
Edinburgh Worldwide Inv Trust (EWI) 263.50p -2.23%
Baillie Gifford US Growth Trust (USA) 269.00p -2.19%