London close: Stocks rise as US payrolls beat expectations

Stocks in London closed higher on Friday as investors digested the latest nonfarm payrolls data from the US ahead of the King's coronation weekend.

The FTSE 100 index rose 0.98% to close at 7,778.38, while the FTSE 250 gained 1.08% to end the session at 19,452.50.

Investors were buoyed by the US payrolls data, which beat expectations, adding to the already-optimistic mood after positive results earlier from the likes of British Airways owner IAG.

Sterling also performed well, last rising 0.6% on the dollar to trade at $1.2649, while it strengthened 0.49% against the euro to change hands at €1.1473.

“Few would have put ‘market rally’ as the result of a strong payrolls report this afternoon, but that is where we are,” said IG chief market analyst Chris Beauchamp.

“Thirteen successive payrolls reports have come in better than expected, and markets are taking this report as a clear sign of US economic strength which will drive earnings higher, even with the potential for interest rate increases.”

Beauchamp noted that the afternoon bounce still left the FTSE 100 down for the week, but with a broad swathe of gainers on the index, it looked “well-positioned” to continue its rebound beyond the long weekend.

“The FTSE 250 has much more ground to make up to recoup 2022’s losses, but a post-coronation boost from consumer spending might provide it with the fuel to move higher.”

Nonfarm payrolls beat expectations, UK housebuilding declines

In economic news, new job figures in the US beat expectations for April, with the Bureau of Labor Statistics reporting that nonfarm payrolls rose 253,000, surpassing the predicted 180,000 increase.

However, data for March was revised down, with 165,000 jobs added instead of the previously recorded 236,000.

Average hourly earnings increased by 0.5% to $33.36, beating expectations of 0.3%, and the unemployment rate dropped to 3.4% from 3.5% in March.

Andrew Hunter, deputy chief US economist at Capital Economics, said the gain in payrolls "suggests that the labour market remains resilient despite the banking sector turmoil and broader signs of an economic slowdown".

"Nevertheless, that stronger-than-expected gain was offset by sharp downward revisions to previous months, and, in any case, we doubt it will have the Fed reconsidering its plans for a pause given the wider evidence that labour market conditions are cooling," he said.

On home shores, data showed that while construction activity in the UK grew in April, housebuilding suffered a setback, experiencing the sharpest rate of decline since May 2020, according to the S&P Global/CIPS construction purchasing managers' index (PMI).

Commercial building and civil engineering activity saw growth, while the index for housebuilding declined from 44.2 in March to 43.0.

“The construction sector stretched out its current phase of expansion to three months in April, signalling a modest rebound from the downturn seen at the turn of the year,” said Tim Moore, economics director at S&P Global Market Intelligence.

“Commercial building work continued to outperform, helped by stabilising domestic economic conditions and a gradual rebound in business confidence.

“Civil engineering activity was also a driver of construction growth during April, with rising infrastructure work contributing to the best phase of expansion in this segment since the first half of 2022.”

Elsewhere, first-time homebuyers in the UK were paying nearly £200 more per month on their mortgages, according to industry research from Rightmove.

Those with a 15% deposit were now paying an average of £1,056 per month, up from £865 a year earlier but lower than October's £1,218 per month.

Although mortgage rates had stabilised since the government's botched autumn ‘mini-budget’, a highly competitive rental market and ongoing interest in home ownership had sustained demand.

“The combination of a new record price and higher mortgage rates than last year means it is a challenge for first-time buyers,” said Rightmove mortgage specialist Matt Smith.

“Our data indicates that first time buyers who are able to raise their deposit are still finding buying compelling, with the number of people looking to move in this sector currently higher than the last, more normal market of 2019.”

On the continent, the cost-of-living crisis looked to be affecting retail sales in the eurozone, with official data showing a 3.8% fall on an annual basis in March, worse than the predicted 3.1%.

Sales also fell 1.2% on a month-on-month basis.

In Germany, new data from Destatis showed factory orders fell 10.7% month-on-month in March, missing expectations and reversing gains seen in February.

The decline was the strongest since April 2020.

Finally on data, growth in China's services sector slowed in April, according to the Caixin services PMI, which came in at 56.4, below the expected 57.0.

While it marked the second-highest figure recorded since November 2020, it was lower than the March reading of 57.8.

Travel stocks in the green, IHG slides on CEO departure

On London’s equity markets, BP and Shell both rose, with BP seeing a 3.32% increase and Shell up 1.92%.

Ithaca Energy's announcement that it had struck a deal with Shell to market its 30% stake in the Cambo North Sea oil and gas prospect also boosted the latter's shares.

British Airways and Iberia owner IAG experienced a 2.31% rise after it raised its full-year earnings forecasts on the back of strong summer demand.

The company's first-quarter profits performance beat expectations, with operating profit at €9m, compared to a €718m loss a year earlier, and the summer outlook looking encouraging.

Other travel-related companies such as Carnival, easyJet, and Wizz Air Holdings also experienced gains.

Banks were also in the green, with NatWest Group up 2.73%, HSBC Holdings up 2.71%, and Barclays up 3.37%.

The rejection of a proposal to split HSBC and spin-off the Asian arm, which was backed by the bank's largest shareholder, Chinese insurer Ping An Asset Management, helped to boost the Anglo-Asian banking giant.

On the downside, InterContinental Hotels Group was down 1.92% after it announced the departure of CEO Keith Barr, who would be replaced by Elie Maalouf.

Meanwhile, Virgin Money UK's shares continued to fall after disappointing results were announced on Thursday, with the company experiencing a 1.87% decline by the close on Friday.

Reporting by Josh White for Sharecast.com.

FTSE 100 +75.74 (+0.98%) 7,778.38

RISERS
Carnival +4.87% 702.4p
TUI +4.12% 531p
BHP Group +3.98% 2,393p
Antofagasta +3.52% 1,469.5p
Barclays +3.37% 153.24p
BP +3.32% 492.3p
Anglo American +2.94% 2,447p
WPP +2.87% 889p
Ocado +2.76% 495.5p
NatWest Group +2.73% 259.3p

FALLERS
InterContinental Hotels Group -1.92% 5,412p
Compass -1.48% 2,069p
Hargreaves Lansdown -1% 792.4p
Reckitt Benckiser -0.71% 6,434p
Smith & Nephew -0.67% 1,266p
Relx -0.65% 2,434p
Burberry Group -0.59% 2,543p
Rentokil -0.57% 630.4p
National Grid -0.43% 1,150.5p
Sage -0.42% 812.4p

FTSE 250 +207.59 (+1.08%) 19,452.50

RISERS
Cineworld +8.14% 0.93p
Hochschild +6.67% 78.4p
Restaurant Group +6.14% 46.65p
Vanquis Banking +4.63% 226p
Hilton Food +4.4% 736p
Synthomer +3.81% 117.3p
IP Group +3.77% 55p
HarbourVest Global +3.68% 26.4p
Marshalls +3.62% 298p
Petrofac +3.58% 70.9p

FALLERS
Watches of Switzerland Group -2.71% 772p
Virgin Money UK -1.87% 144.45p
QinetiQ -1.72% 366.4p
Morgan Advanced Materials -1.49% 297.5p
888 Holdings -1.33% 78p
Coats Group -1.07% 74p
Serco -0.79% 150.6p
Rathbones -0.72% 1,920p
REL -0.71% 569p
Babcock International -0.64% 312p