London close: Stocks weaker despite upside surprise from US payrolls

The FTSE 100 ended the session down 0.17% at 7,516.40, and the FTSE 250 was 1.16% weaker at 21,721.04.

Sterling was also in negative territory, last trading down 0.43% on the dollar at $1.3539, and weakening 0.58% against the euro at €1.1818.

“A surprisingly-good non-farms reading has not provided much cheer for equities, which remain generally lower on the final day of the week,” said IG chief market analyst Chris Beauchamp.

“Wednesday’s ADP report was a complete red herring, as today’s US jobs report came in strong.

“But wages are rising too, which brings the inflation story back into play.”

Beauchamp said markets could never really escape that central theme, which seemed to be hanging over all else at the moment.

“Faced with this fresh sign of inflation markets have come under pressure again, and as this busy and volatile week draws to a close the sellers look to be in charge once again.”

Across the pond, US non-farm payrolls saw a big jump for January, to 467,000 - well above expectations of 125,000 - while the December number was revised up to 510,000 from 199,000.

The numbers meant the American economy added more than 900,000 new jobs over the Christmas and New Year period.

“This was a huge upside surprise, coming on the back of widespread pessimism that we would see a good number from both Fed and government officials, and merely serves to reinforce how difficult it is to read what is happening in the US labour market after this week’s -301k decline in the ADP report,” said CMC Markets chief market analyst Michael Hewson.

The unemployment rate, meanwhile, unexpectedly rose to 4%, while the participation rate improved to 62.2% from 61.9%, indicating that workers were returning to the workforce.

“This improvement in participation is likely to gain traction in the coming months given another sharp rise in wage growth which jumped sharply from 4.9% to 5.7% in January,” Hewson added.

“This was a big surprise and puts the prospect of a 50 basis point hike in the Fed Funds rate in March back on the table, only days after a number of Fed policymakers poured cold water on that prospect.”

On home shores, a survey released earlier showed growth in the UK construction sector hitting a six-month high in January, as cost pressures and worries about Omicron eased.

The IHS/Markit CIPS construction purchasing managers’ index rose to 56.3 from 54.3 in December.

It was the strongest rate out of output expansion since July last year, and well above the 50-point level that separates expansion from contraction.

The survey found that new orders rose at the fastest pace since August 2021 and input buying was the strongest for six months.

“Builders enjoyed their best month since July, bouncing back from December’s doldrums as opportunities unfurled in terms of new orders, job creation and optimism offering a strong start to 2022,” said Duncan Brock, group director at the Chartered Institute of Procurement and Supply.

“Pipelines of commercial work snapped back into action as businesses were more confident in their investment decisions and the sector came out on top with the strongest gap in output growth compared to the residential sector in almost six years.

“Housebuilders became January’s laggards raising concerns that higher interest rates and consumer inflation could feed into a further slowdown in the coming months as affordability rates are weakened.”

Elsewhere, industry data showed the UK retail sector got off to a sluggish start in 2022, despite a fall in Covid cases and the easing of restrictions.

According to the latest BRC-Sensormatic IQ footfall monitor, total UK footfall was down 17.1% on January 2020, and up just 1.5 percentage points on December 2021.

Footfall on high streets was down 24.2%, off 13.0% in retail parks and down 37.5% at shopping centres, all on a year-on-two year basis, given that non-essential retail was closed in January last year.

“It was a slow start to 2022, with only minor improvements to UK footfall, despite a significant decline in Covid-19 cases,” said Helen Dickinson, chief executive of the British Retail Consortium.

“Less people visited retail parks and shopping centres, but those who did went to more stores at each location.

“It is likely the January sales influenced this, encouraging consumers to shop around in their quest to find the best deals.”

Finally on data, the residential property sector had its busiest January on record, as buyer enquiries and homes for sale rose strongly.

According to data from Rightmove, buyer demand increased 16% from a year earlier and 24% from January 2020, as households continued to rethink their property needs in light of the pandemic.

The number of new homes on the market jumped 10% in the second half of January, helping to redress the shortage of supply in the market.

“January is typically one of the busiest months for agents, with both buyers and sellers aiming to start the new year with plans for a new home, but even for a January, agents are reporting this will go down as one of the busiest ever,” said Rightmove’s director of property data, Tim Bannister.

“Strong buyer demand at the beginning of the year, even higher than that of January last year, shows us that people are still evaluating their needs and where they want to live as they consider factors such as space, or returning to the office.”

In equity markets, BP was up 3.44%, John Wood Group rose 4.85%, Harbour Energy added 4.34% and Energean gushed 4.39% higher as oil prices rallied, with both Brent crude and West Texas Intermediate last 2.5% higher.

Shell was the sector’s odd one out, reversing earlier gains to close down 1.24%, a day after it announced a huge upswing in full-year profits.

Elsewhere, BT Group was ahead 3.44% after the telecoms giant suffered heavy losses in the previous session.

Airport and train station caterer SSP Group managed gains of 0.72%, even after it said the Omicron variant of Covid-19 and government restrictions saw trading in the eight weeks to 20 January slump to 57% of pre-pandemic levels.

The Upper Crust owner said recent weeks "have been more encouraging", as curbs were lifted in the UK and some continental European markets, with sales now trending positively again, driven mainly by strengthening trading in the rail sector as commuter travel returns.

On the downside, mobile operator Airtel Africa closed 1.15% lower despite reporting a sharp rise in third-quarter profit, driven by strong revenue growth.

Chilean copper miner Antofagasta was 2.5% weaker, having fallen earlier in the week after a top policymaker in Chile indicated the government would need to raise taxes amid concerns about inflation.

Banks were in the red, with Lloyds Banking Group down 3.6%, Barclays losing 1.88% and NatWest Group in the red by 2.61%, after they gained on Thursday following the Bank of England’s interest rate hike.

Future tumbled 3.6%, having fallen on Thursday after the media group backed its full-year expectations and said trading in the four months to the end of January had been in line with expectations.

Travel-related stocks were on the back foot, with budget airline Wizz Air descending 3.19% and cruise operator Carnival ending 4.16% lower.

Market Movers

FTSE 100 (UKX) 7,516.40 -0.17%
FTSE 250 (MCX) 21,712.04 -1.16%
techMARK (TASX) 4,385.60 -0.12%

FTSE 100 - Risers

BP (BP.) 405.90p 3.44%
BT Group (BT.A) 192.45p 3.44%
Avast (AVST) 620.00p 2.68%
WPP (WPP) 1,183.50p 1.89%
DCC (CDI) (DCC) 6,334.00p 1.18%
Imperial Brands (IMB) 1,744.00p 1.16%
Informa (INF) 555.60p 1.02%
Burberry Group (BRBY) 1,870.50p 0.89%
Compass Group (CPG) 1,734.00p 0.81%
British American Tobacco (BATS) 3,211.00p 0.64%

FTSE 100 - Fallers

Intermediate Capital Group (ICP) 1,852.00p -4.15%
Kingfisher (KGF) 313.40p -3.92%
Lloyds Banking Group (LLOY) 51.38p -3.60%
Hargreaves Lansdown (HL.) 1,307.00p -3.51%
B&M European Value Retail S.A. (DI) (BME) 555.20p -3.17%
Reckitt Benckiser Group (RKT) 5,802.00p -2.96%
Ashtead Group (AHT) 5,008.00p -2.91%
Associated British Foods (ABF) 1,884.50p -2.89%
3i Group (III) 1,352.50p -2.70%
United Utilities Group (UU.) 1,039.00p -2.68%

FTSE 250 - Risers

Wood Group (John) (WG.) 229.00p 4.85%
Energean (ENOG) 952.50p 4.39%
Harbour Energy (HBR) 365.20p 4.34%
Capricorn Energy (CNE) 208.40p 3.17%
JTC (JTC) 761.00p 2.70%
Oxford Biomedica (OXB) 828.00p 2.35%
Centamin (DI) (CEY) 91.10p 2.29%
PureTech Health (PRTC) 260.50p 2.16%
Baillie Gifford US Growth Trust (USA) 230.00p 2.00%
NCC Group (NCC) 185.60p 1.98%

FTSE 250 - Fallers

Hipgnosis Songs Fund Limited C Shs NPV (SONC) 112.50p -100.00%
Future (FUTR) 2,890.00p -6.05%
Trustpilot Group (TRST) 154.00p -5.93%
Bridgepoint Group (Reg S) (BPT) 365.50p -4.32%
Carnival (CCL) 1,331.60p -4.16%
Marks & Spencer Group (MKS) 204.70p -4.05%
Tritax Big Box Reit (BBOX) 232.60p -3.88%
Redrow (RDW) 601.80p -3.77%
Sirius Real Estate Ltd. (SRE) 128.60p -3.74%
Reach (RCH) 245.50p -3.73%