London close: Stocks weaker after strong US payrolls report

London stocks closed in the red on Friday after a choppy session, as US nonfarm payrolls came in slightly higher than expected during late trading.

The FTSE 100 ended the session down 0.09% at 6,991.09, and the FTSE 250 was off 1.58% at 17,353.28.

Sterling was also in negative territory, last falling 0.47% on the dollar to $1.1110, and weakening 0.22% against the euro to €1.1375.

“Those hoping for a Fed pivot have been sorely disappointed with today’s job numbers, which have confirmed that the US economy continues to rumble along quite well,” said IG chief market analyst Chris Beauchamp.

“The latest bear market bounce has now begun to wilt as investors wearily return to expectations of at least 125-basis points of tightening by the end of the year, with more to come in 2023.”

Beauchamp said markets were back to buying the dollar and selling stocks, in a continuation of themes that had been strong throughout the year.

“Even the impending commencement of earnings season offers little hope, given how weak performance here has been.”

Indeed, the US jobs market continued generating jobs at a steady pace last month, with the Department of Labor reporting a 263,000 rise in nonfarm payrolls in September.

Economists had pencilled in an increase of 250,000, while net revisions for the prior two months combined came to 11,000.

At the same time, the unemployment rate - derived from the results of a different survey - fell by two tenths of a percentage point to 3.5%, below expectations for 3.7%.

Average hourly earnings grew at a month-on-month pace of 0.3%, in line with consensus, while in annual terms they were ahead by 5%, just shy of the 5.1% anticipated.

The labour force participation rate slipped by one tenth of a point from the month before, to 62.3%.

Ian Shepherdson, chief US economist at Pantheon Macroeconomics, said there were very preliminary signs of slower wage growth, adding that the trend in participation was still pointing higher, notwithstanding Friday's numbers.

He did, however, concede that for now hiring remained "very rapid", presumably due to continued post-Covid catch-up.

“The household data are meaningless month-to-month, but that doesn’t stop the Fed looking at the data and discussing them as though they mean something," Shepherdson added.

"And with [Fed] chair Powell now just as obsessed with the labour market as with the current inflation data, this report just about nails-on a 75-basis point hike next month.

“Things might look different by December.”

On home shores, the housing market showed early signs of slowing in September, according to industry data released earlier, as house prices nudged lower.

According to the Halifax house price index, house prices eased 0.1% in September, compared to a marginal rise of 0.3% in August, making for the second decrease in three months.

The annual growth rate also eased, to 9.9% from 11.4%.

Halifax said the average UK property now cost £293,835, a slight reduction on the previous figure of £293,992, though it remained near record highs.

“The events of the last few weeks have led to greater uncertainty,” said Kim Kinnaird, director at Halifax Mortgages.

“However, in reality, house prices have been largely flat since June, up by around £250.

“This compares to a rise of more than £10,000 during the previous quarter, suggesting that the housing market may have already entered a more sustained period of slower growth.”

Elsewhere, high street sales faltered in September, as hard-pressed consumers tightened their belts.

According to the latest BDO high street sales tracker, total like-for-like sales - which combine in-store and online sales - grew by 2.8% year-on-year, the worst performance since the end of lockdown measures.

September’s data compared to August’s 3.6% growth, the previous lowest post-lockdown performance, and the 19.7% spike seen in September 2021.

In-store sales rose by 7.2%, the lowest since February 2021, while non-store sales fell 2.5%.

Overall footfall was positive in the first three weeks of the month, BDO found, before dipping in the final seven days, which included the extra bank holiday to mark the funeral of Queen Elizabeth II.

Sophie Michael, BDO’s head of retail and wholesale, said many retailers would have been hoping for a strong showing in September following a "poor" August.

“September has clearly not provided the much-needed boost as we head into the final three months of this year, which is critical for most retailers," she said.

"The actual performance for retailers may be even worse than these results suggest.

“With rising inflation, data suggest that the actual volume of sales is down significantly, while it is higher prices that are driving the growth.”

Finally on data from across the channel, German retail sales edged higher last month if changes in prices are not taken into account.

According to Destatis, in seasonal and calendar adjusted terms, retail sales rose at a month-on-month pace of 0.1% in August, compared to consensus expectations for a fall of 1%.

In comparison to the year earlier period, they were 5.4% higher.

On London’s equity markets, pub group JD Wetherspoon shot 15.4% higher after saying it had narrowed its annual losses, and that like-for-like sales in the first nine weeks of the new financial year were up 10%.

The company posted a loss of £30.4m before tax and exceptional items, compared with a £167m loss in 2021 when Covid lockdowns were in place.

Rival pub group Mitchells & Butlers also gained on the news, closing up 1.92%.

Elsewhere, BAE Systems gained 3.37% after JPMorgan lifted its price target to 1,000p from 965p.

The bank said it has lifted its 2023 to 2025 earnings per share estimates by 4% to 5% per year, on the back of a stronger US dollar and lower UK corporation tax.

"We also see potential for further upside if there is an improvement in market conditions in Saudi Arabia and from higher UK defence spending," JPMorgan said.

On the downside, PureTech Health slid 10.94% after it confirmed a possible tie-up with US biopharmaceutical group Nektar Therapeutics.

The shares had risen sharply on Thursday on speculation of a deal.

Paving specialist Marshalls tumbled 16.62% after saying it now expected its outturn for the full year to be below the bottom end of current market expectations for profit of between £95.1m and £101m.

Shares in other building suppliers fell as well, with Grafton Group down 4.75%, Howden Joinery Group losing 5.15%, and Travis Perkins 4.81% lower.

Outside the FTSE 350, fashion brand Superdry rallied 10.94% after it swung to a full-year profit as revenues rose, thanks in part to an increase in full price sales.

The faux-Japanese label did, however, warn that profit for the 2023 period was set to fall amid cost inflation.

Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk, Frank Prenesti, Abigail Townsend and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 6,991.09 -0.09%
FTSE 250 (MCX) 17,353.28 -1.58%
techMARK (TASX) 4,160.34 -0.61%

FTSE 100 - Risers

Centrica (CNA) 70.94p 3.65%
BAE Systems (BA.) 846.20p 3.37%
Imperial Brands (IMB) 1,991.00p 2.42%
AstraZeneca (AZN) 10,030.00p 1.95%
BP (BP.) 469.10p 1.90%
International Consolidated Airlines Group SA (CDI) (IAG) 101.22p 1.57%
GSK (GSK) 1,342.60p 1.51%
British American Tobacco (BATS) 3,313.50p 1.45%
Shell (SHEL) 2,345.50p 1.45%
Aveva Group (AVV) 3,187.00p 0.76%

FTSE 100 - Fallers

Ocado Group (OCDO) 432.20p -5.78%
JD Sports Fashion (JD.) 99.74p -4.19%
Kingfisher (KGF) 205.60p -4.10%
Taylor Wimpey (TW.) 89.44p -3.85%
Scottish Mortgage Inv Trust (SMT) 759.00p -3.80%
Next (NXT) 4,457.00p -3.76%
Ashtead Group (AHT) 4,235.00p -3.75%
Persimmon (PSN) 1,219.50p -3.65%
Unite Group (UTG) 795.50p -3.63%
RS Group (RS1) 979.50p -3.59%

FTSE 250 - Risers

Wetherspoon (J.D.) (JDW) 505.00p 15.40%
Drax Group (DRX) 564.50p 3.23%
BH Macro Ltd. GBP Shares (BHMG) 4,750.00p 2.93%
Home Reit (HOME) 90.10p 2.83%
Hammerson (HMSO) 18.85p 2.81%
HGCapital Trust (HGT) 347.00p 2.65%
Energean (ENOG) 1,424.00p 2.08%
Mitchells & Butlers (MAB) 111.50p 1.92%
Network International Holdings (NETW) 306.40p 1.59%
Bluefield Solar Income Fund Limited (BSIF) 134.50p 1.13%

FTSE 250 - Fallers

Marshalls (MSLH) 251.80p -16.62%
PureTech Health (PRTC) 228.00p -10.94%
Auction Technology Group (ATG) 732.00p -8.04%
ICG Enterprise Trust (ICGT) 1,004.00p -7.75%
Bytes Technology Group (BYIT) 408.80p -7.68%
Liontrust Asset Management (LIO) 799.00p -6.33%
Genuit Group (GEN) 280.50p -5.87%
Molten Ventures (GROW) 298.40p -5.75%
Carnival (CCL) 526.00p -5.57%
Aston Martin Lagonda Global Holdings (AML) 96.26p -5.44%