London close: Stocks weaker after US payrolls surprise

London stocks were in the red at the close on Friday, as investors digested a better-than-expected payrolls report from across the pond.

The FTSE 100 ended the session down 0.03% at 7,556.23, and the FTSE 250 was off 0.24% at 19,363.28.

For the week as a whole, the top-flight index was a positive performer, with the FTSE 100 gaining 0.93%, or 69.56 points, since opening on Monday.

Sterling was in the green against its major trading pairs, last rising 0.29% on the dollar to $1.2282, as it strengthened 0.31% against the euro to change hands at €1.1682.

“Up until lunchtime, this week had been about a weakening dollar and a steady shift by the Fed away from the hawkishness of much of 2022,” said IG chief market analyst Chris Beauchamp.

“But today’s job and wage numbers have given the greenback a lift, while sending stocks into retreat in the US.”

Beauchamp said that while the gains had been trimmed in Europe, the US was really feeling the losses.

“This was not the report investors had been hoping for, it seems, since it suggests that inflation, and with it the Fed’s push to raise rates, is nowhere near done yet.”

Indeed, the primary focus during the afternoon was the latest US nonfarm payrolls report, which showed hiring holding up better than expected as wage growth accelerated.

According to the Department of Labor, nonfarm payrolls grew by 263,000, well above consensus expectations for an increase of 200,000.

Estimates of hiring in September and October were revised lower by a combined 23,000, to a respective 269,000 and 284,000.

Average hourly earnings were up by 0.55% month-on-month, beating the expected 0.3%, pushing the annual rate of increase to 5.09% compared to the 4.6% pencilled in.

At the same time, the length of the average work week ticked 0.1 hours lower to 34.4 hours.

The unemployment rate - derived from a separate survey than that which generates the nonfarm payrolls numbers - was unchanged against October at 3.7%.

“The resilience of the US jobs numbers while welcome, has acted as a brake on market gains as investors price out the prospect of an imminent sharp slowdown in US rate hiking intentions, given it does little to alter the prospect of a 50-basis point rate move later this month from the Federal Reserve,” said CMC Markets chief market analyst Michael Hewson.

“It does however, make it less likely that we’ll see a rapid slow down in the pace of rate hikes next year - a hare that was set racing by Fed chair Powell’s comments to the Brookings Institute earlier this week.

“Having seen such a strong jobs and wages report today, the focus will now shift to next week’s PPI report, as well as the November CPI report the week after, as to whether we see 50-basis points in January, which appears to have become more likely as opposed to 25-basis points, which had started to get priced in the lead up to today’s jobs numbers.”

On home shores, high street sales pushed higher last week according to industry data, after hard-pressed shoppers snapped up Black Friday bargains.

The latest BDO high street sales tracker showed total like-for-like sales sparked 4.26% in the week ended 27 November.

That compared to an equivalent week a year earlier, which also included Black Friday, when sales jumped 38.98%.

Sales showed large increases a year earlier, as the country emerged from lockdown and other Covid-related measures were relaxed.

In-store like-for-like sales improved 3.72% last week - compared to a 679.54% surge a year previously - while non-store sales increased 4.8% on the same basis.

Last November, they declined 11.13%.

However, despite Black Friday promotions helping to boost overall demand, not all categories saw increases.

Underlying sales of lifestyle goods were largely flat, down 0.1%, while homewares fell 3.83%.

In contrast, fashion strengthened 8.14%, making for the category’s third consecutive rise.

“The weather was unsettled this week, marked by a cold spell accompanied by wet and windy conditions as well as widespread frost in northern parts of the UK,” BDO noted.

Retail footfall however struggled across the month of November, according to another set of industry data, as the cost of living crisis dampened spending.

The BRC-SensormaticIQ footfall monitor showed total UK footfall rising 3.7% year-on-year in the four weeks ended 26 November.

Within that, footfall rose 8% on high streets and by 7% in shopping centres, but fell 4% in retail parks.

Compared to pre-pandemic levels, however, footfall fell sharply, down 13.3% year-on-three-years - 1.5 percentage points below October, and worse than the three-month average decline of 11.5%.

Shopping centres saw footfall slide 23.2% year-on-three-years, while on high streets, it fell 13.6% and by 4.2% in retail parks.

Big cities were particularly hard hit, the British Retail Consortium noted, with Manchester, Birmingham and Bristol seeing the biggest drops in footfall since January.

“Footfall took another stumble as the cost of living crisis put off some consumers,” said Helen Dickinson, BRC chief executive.

“Others opted to stay home due to the scattering of rail strikes, or chose the World Cup over shopping visits.

“Rising inflation and low consumer confidence continue to dampen spending expectations in the run up to Christmas.”

Finally on data, Germany recorded a fall in both exports and imports in October according to officials, leading to a larger-than-expected trade surplus.

The Destatis federal statistics office said exports eased by a larger-than-forecast 0.6% month-on-month to €133.5bn, while imports also fell more than anticipated, down 3.7% at €126.6bn.

Exports to the European Union fell 2.4%, while imports from the bloc were down 3.0%.

Outside of Europe, exports increased 1.6% while imports fell 4.3%.

As a result, the trade surplus - a country’s balance of exported and imported goods - declined to €5.3bn from €12.5bn a year earlier.

On London’s equity markets, BP was down 1.75%, Harbour Energy lost 1.82% and Shell slipped 0.69% as investors looked to talks between OPEC and its allies.

IT infrastructure provider Softcat reversed earlier gains to close down 0.15%, after it announced the appointment of Dr Kathryn Mecklenburgh - the current interim chief financial officer of online fashion retailer ASOS - as its new finance chief.

On the upside, Primark owner Associated British Foods jumped 5.04% after upgrades to ‘overweight’ at Morgan Stanley and to ‘neutral’ at Goldman Sachs.

AJ Bell leapt 8.33%, meanwhile, after an upgrade to ‘buy’ at Jefferies.

Low-cost carrier Wizz Air ascended 2.74% after reporting a jump in passenger numbers in November.

A total of 3.68 million passengers were booked onto Wizz flights last month, making for a 70% hike over November last year.

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

Market Movers

FTSE 100 (UKX) 7,555.97 -0.03%
FTSE 250 (MCX) 19,363.28 -0.24%
techMARK (TASX) 4,418.87 -0.10%

FTSE 100 - Risers

Associated British Foods (ABF) 1,667.50p 5.04%
Rolls-Royce Holdings (RR.) 90.25p 3.82%
Hargreaves Lansdown (HL.) 871.80p 2.25%
Antofagasta (ANTO) 1,434.50p 2.06%
NATWEST GROUP (NWG) 261.90p 1.75%
St James's Place (STJ) 1,185.00p 1.50%
Prudential (PRU) 1,030.50p 1.43%
Land Securities Group (LAND) 621.80p 1.40%
SEGRO (SGRO) 817.80p 1.36%
Halma (HLMA) 2,249.00p 1.35%

FTSE 100 - Fallers

Intermediate Capital Group (ICP) 1,243.00p -1.97%
Harbour Energy (HBR) 312.60p -1.82%
BP (BP.) 480.90p -1.75%
Melrose Industries (MRO) 128.50p -1.53%
Ashtead Group (AHT) 5,012.00p -1.45%
Airtel Africa (AAF) 121.80p -1.38%
Sage Group (SGE) 801.80p -1.21%
Admiral Group (ADM) 2,036.00p -1.12%
Scottish Mortgage Inv Trust (SMT) 787.80p -1.08%
SSE (SSE) 1,723.00p -0.98%

FTSE 250 - Risers

AJ Bell (AJB) 390.00p 8.33%
Petrofac Ltd. (PFC) 87.60p 8.01%
Aston Martin Lagonda Global Holdings (AML) 142.55p 4.82%
SSP Group (SSPG) 218.80p 4.19%
Home Reit (HOME) 52.90p 3.73%
Virgin Money UK (VMUK) 177.65p 3.53%
Investec (INVP) 485.10p 3.30%
Bank of Georgia Group (BGEO) 2,585.00p 2.99%
Wizz Air Holdings (WIZZ) 2,363.00p 2.74%
Safestore Holdings (SAFE) 950.00p 2.65%

FTSE 250 - Fallers

Energean (ENOG) 1,365.00p -8.33%
Auction Technology Group (ATG) 747.00p -5.20%
RIT Capital Partners (RCP) 2,160.00p -4.64%
Trainline (TRN) 320.70p -4.50%
Bridgepoint Group (Reg S) (BPT) 203.60p -4.23%
Carnival (CCL) 696.60p -4.02%
HGCapital Trust (HGT) 358.50p -3.76%
Telecom Plus (TEP) 2,410.00p -3.60%
Hipgnosis Songs Fund Limited NPV (SONG) 83.40p -3.58%
Spirent Communications (SPT) 274.60p -3.31%