London close: US payrolls provide little cheer as stocks finish weaker

London stocks closed in negative territory on Friday amid concerns about surging inflation and rate hikes, after non-farm payrolls rose faster than expected in April.

The FTSE 100 ended the session down 1.54% at 7,387.94, and the FTSE 250 was off 1.35% at 19,819.67.

Sterling was also in the red, last trading down 0.07% on the dollar at $1.2353, and weakening 0.4% against the euro to €1.1680.

“From today’s job data it is clear that the US economy continues to motor ahead, and while wage growth might not have been as strong as expected, the overall picture continues to support the Fed’s plan for further tightening of policy,” said IG chief market analyst Chris Beauchamp.

“Stocks had been hoping for a quiet end to the week, with some breathing space after all the volatility, but it is not to be.

“Investors continue to fret about the possibility of a recession in the US and elsewhere caused by monetary tightening.

“Earnings season has done little to assuage concerns about pressured consumer spending, leaving markets on the back foot once again.”

On the economic front, Hiring in the US continued growing at a steady pace last month, with the Department of Labor reporting that non-farm payrolls increased by 428,000 in April.

Economists had pencilled in a rise of 390,000.

The rate of unemployment was unchanged from the month before at 3.6%, as expected, while average hourly earnings expanded at a year-on-year pace of 5.5%.

That was one-tenth of a percentage point less than in March, but also in line with the consensus.

Combined, payrolls data for the previous two months was revised lower by 39,000.

On home shores, UK construction sector growth slowed in April as rising costs and economic uncertainty dented demand.

The S&P Global/CIPS construction purchasing managers’ index fell to 58.2 from 59.1 in March, marking the worst rate of growth since January but coming in above expectations for a reading of 58.0.

A reading above 50.0 indicates expansion, while a reading below signals contraction.

The fastest-growing construction segment remained commercial work, with the index at 60.5, followed by civil engineering at 56.2.

Construction firms highlighted pent-up demand for commercial projects and spending related to Covid recovery plans.

“The construction sector is moving towards a more subdued recovery phase as sharply rising energy and raw material costs hit client budgets," said Tim Moore, economics director at S&P Global.

“Housebuilding saw the greatest loss of momentum in April, with the latest expansion in activity the weakest since September 2021.

“Commercial and civil engineering work were the most resilient segments, supported by Covid-19 recovery spending and major infrastructure projects respectively.”

Elsewhere, UK house prices grew 1.1% month-on-month in April to another new record, according to Halifax's house price index, but the rate of house price growth was projected to slow as incomes remained squeezed.

The average UK house price rose to £286,079 in April, marking a tenth consecutive monthly rise, the longest run since 2016.

Halifax said the rate of annual growth fell slightly to 10.8%, down from 11.1% in March, though that was partly put down to the strength of the market 12 months ago.

Average house prices were now £47,568 higher over the last two years - an increase it took five and half years to make between October 2014 and April 2020 - as average house prices had fallen in just four months since the start of the Covid-19 pandemic.

“There is cause to think house price increases could shortly run out of fuel,” said Martin Beck, EY ITEM Club’s chief economic advisor.

“The squeeze on real incomes from high inflation means fewer people will be able to afford to borrow the necessary amount they need to buy at higher mortgage rates.”

In equity markets, BA and Iberia owner IAG descended 8.29% after it said it expected to turn profitable from the second quarter as it reported narrower losses in the first three months of the year, although it was planning to scale back its summer ramp-up.

InterContinental Hotels was in the red by 1.09% even after it reported a 61% jump in first-quarter group revenue per available room on the year and said it had attained 82% of 2019’s level.

On the upside, promotional merchandise distributor 4imprint rocketed 18.44% after saying it expected annual operating profit to be above forecasts as revenue is on track to hit a better-than-expected £1bn.

Insurer Beazley was ahead 5.86% after it said that 2022 had "started well", with both gross premiums written and premium rates on renewal business increasing in the first quarter.

Outside the FTSE 250, convenience store chain McColl’s Retail Group was halted at 1317 BST after the company entered administration, having surged 46.29% in earlier trade on hopes for a rescue deal from grocer Wm Morrison.

Market Movers

FTSE 100 (UKX) 7,387.94 -1.54%
FTSE 250 (MCX) 19,819.67 -1.35%
techMARK (TASX) 4,297.64 -1.60%

FTSE 100 - Risers

Hikma Pharmaceuticals (HIK) 1,735.00p 2.94%
BP (BP.) 426.65p 1.85%
Avast (AVST) 528.60p 1.49%
Endeavour Mining (EDV) 2,050.00p 1.38%
Mondi (MNDI) 1,589.00p 1.24%
Admiral Group (ADM) 2,345.00p 1.03%
Fresnillo (FRES) 773.80p 1.02%
Antofagasta (ANTO) 1,457.00p 0.73%
Glencore (GLEN) 487.60p 0.72%
Shell (SHEL) 2,299.50p 0.28%

FTSE 100 - Fallers

International Consolidated Airlines Group SA (CDI) (IAG) 131.44p -8.29%
Rightmove (RMV) 558.80p -7.54%
SEGRO (SGRO) 1,109.00p -6.61%
Aveva Group (AVV) 2,144.00p -6.54%
Auto Trader Group (AUTO) 582.20p -5.91%
Croda International (CRDA) 7,038.00p -5.78%
RS Group (RS1) 952.50p -5.56%
B&M European Value Retail S.A. (DI) (BME) 459.50p -5.18%
Intertek Group (ITRK) 4,923.00p -4.63%
Ashtead Group (AHT) 3,879.00p -4.55%

FTSE 250 - Risers

4Imprint Group (FOUR) 2,890.00p 18.44%
Hiscox Limited (DI) (HSX) 926.60p 5.90%
Beazley (BEZ) 430.20p 5.86%
Syncona Limited NPV (SYNC) 178.80p 4.56%
TI Fluid Systems (TIFS) 163.80p 2.89%
Capital & Counties Properties (CAPC) 165.40p 2.86%
Trainline (TRN) 311.90p 2.70%
Harbour Energy (HBR) 511.80p 2.36%
Spirent Communications (SPT) 233.80p 2.19%
Homeserve (HSV) 990.00p 2.17%

FTSE 250 - Fallers

Baillie Gifford US Growth Trust (USA) 178.00p -6.55%
Essentra (ESNT) 295.50p -6.04%
Ferrexpo (FXPO) 152.20p -5.76%
Diploma (DPLM) 2,610.00p -5.50%
PureTech Health (PRTC) 168.00p -5.30%
Tritax Big Box Reit (BBOX) 204.00p -5.29%
JTC (JTC) 673.00p -5.11%
Genus (GNS) 2,284.00p -5.09%
XP Power Ltd. (DI) (XPP) 3,000.00p -5.06%
Biffa (BIFF) 319.60p -5.05%

Reporting by Josh White at Sharecast.com. Additional reporting by Michele Maatouk, Alexander Bueso and Iain Gilbert.