London close: Stocks retreat as Fed rate fears outweigh ECB stimulus

Mining stocks were providing a drag in London as commodity prices weakened in the aftermath of lower economic growth forecasts from China this week.

As such, the FTSE 100 fell 0.7% to 6,911.80 by the close, retreating after settling at a new all-time closing record of 6,961.14 on Thursday.

Thursday’s gains were driven by the European Central Bank (ECB), which announced that its €1.1trn quantitative easing package to boost growth and lift prices would start next week. The ECB also lowered its forecasts for inflation to just 0% this year, but lifted its growth estimates for the Eurozone economy.

Markets opened on a cautious note on Friday morning, but selling picked up in afternoon trade after the Labor Department said 295,000 non-farm payrolls were added in February, beating the consensus estimate of 235,000 despite the recent severe winter weather. The unemployment rate declined to a seven-year low of 5.5% versus estimates of 5.6% and below 5.7% in January.

The news sent US stocks lower on Wall Street and sparked a rise in the dollar, with analysts saying that the strong figures have brought forward expectations for the first rate rise by the Federal Reserve. The euro-dollar weakened to below $1.09, its lowest since 2003, while the dollar index jumped 1.2%, its biggest daily gain in four months.

"The dollar has been given a new lease of life this afternoon, on expectations that a robust rate of job creation in the US provides further reason to believe a US rate hike in the middle of this year is on its way," said analyst Chris Beauchamp from IG.

Economist Paul Dales from Capital Economics said that "even if wage growth is still subdued, the Fed can't hang around before raising rates".

Mining shares weaken, Weir and Thomas Cook jump

Miners were amongst some of the biggest fallers as a further erosion of commodity prices on the back of China cutting its 2015 growth target to 7% this week, together with a firmer US dollar after the jobs report. Fresnillo, Randgold, Anglo American and Rio Tinto were all trading lower.

Shares in British engineering giant Weir Group rose on the back of market chatter that a cash-rich private equity consortium in the US is looking to table a 2,500p per share break-up offer for the group, compared with current prices at around 1,800p.

Thomas Cook jumped after the company announced a new strategic partnership with Chinese investment giant Fosun International which will see the latter take a 5% stake in the travel operator. Fosun is investing £91.8m and intends over time to increase its shareholding to around 10%.

Kingfisher slipped after Citigroup said the DIY retailer’s upcoming strategy update at the end of the month is “likely to disappoint”. The bank played down hopes for an announcement of a broad store closure, given management’s cautious approach.

BP was in the red despite getting the green light for a $12bn Egyptian investment project, after Santander downgraded both BP and Royal Dutch Shell, both primarily on valuation but also with the view that both are likely to struggle in 2015. The bank downgraded BP to an 'underweight' and cut Shell to 'hold'.

Meanwhile, Vodafone was hit by comments from Nomura, which said that its dividend still remains "inflated" and will need to be "reset at some juncture".

Market Movers
techMARK 3,166.69 -0.56%
FTSE 100 6,911.80 -0.71%
FTSE 250 17,272.21 -0.22%

FTSE 100 - Risers
Weir Group (WEIR) 1,813.00p +4.26%
ITV (ITV) 246.50p +2.28%
Hargreaves Lansdown (HL.) 1,170.00p +1.65%
Sports Direct International (SPD) 681.50p +1.49%
London Stock Exchange Group (LSE) 2,435.00p +1.33%
Legal & General Group (LGEN) 280.60p +1.01%
BG Group (BG.) 931.10p +0.97%
Standard Chartered (STAN) 1,024.00p +0.94%
Marks & Spencer Group (MKS) 511.00p +0.89%
Prudential (PRU) 1,671.50p +0.78%

FTSE 100 - Fallers
Randgold Resources Ltd. (RRS) 4,581.00p -5.27%
Fresnillo (FRES) 698.50p -5.16%
Intu Properties (INTU) 348.00p -3.92%
Hammerson (HMSO) 667.50p -2.98%
Vodafone Group (VOD) 219.90p -2.81%
British Land Co (BLND) 839.50p -2.67%
Anglo American (AAL) 1,136.00p -2.45%
SSE (SSE) 1,517.00p -2.44%
easyJet (EZJ) 1,680.00p -2.44%
Rio Tinto (RIO) 2,917.50p -2.26%

FTSE 250 - Risers
Thomas Cook Group (TCG) 150.20p +24.54%
Tullett Prebon (TLPR) 377.00p +6.62%
DCC (DCC) 4,017.00p +4.23%
AO World (AO.) 192.30p +3.89%
Alent (ALNT) 391.60p +3.74%
Oxford Instruments (OXIG) 850.00p +3.41%
Premier Oil (PMO) 158.90p +2.85%
Zoopla Property Group (WI) (ZPLA) 175.00p +2.34%
Pets at Home Group (PETS) 240.40p +2.21%
Cairn Energy (CNE) 198.30p +2.16%

FTSE 250 - Fallers
Just Retirement Group (JRG) 160.20p -8.35%
Acacia Mining (ACA) 252.40p -7.41%
Renishaw (RSW) 2,412.00p -5.67%
RPS Group (RPS) 247.20p -4.19%
Lonmin (LMI) 130.80p -4.18%
Dairy Crest Group (DCG) 479.70p -3.42%
Centamin (DI) (CEY) 59.65p -3.32%
IP Group (IPO) 238.00p -3.25%
Fidessa Group (FDSA) 2,193.00p -2.96%
Kaz Minerals (KAZ) 225.60p -2.88%