By This Is Money Reporters
17.10 (close): A turbulent week for investors ended with a slump today after US jobs figures raised fears of an early finish to the country’s monetary stimulus campaign.
Employers added 175,000 jobs in January, a better than expected figure but not enough to prevent the unemployment rate edging up to 6.7 per cent.
The good news was taken badly on markets because it may convince the US Federal Reserve to hasten the end of quantitative easing, which is still providing 65 billion US dollars a month of emergency support.
Red again: The Footsie lost the benefits of a lunchtime rally in spite of early gains on Wall Street
The FTSE 100 Index was close to its opening mark until the figures were released, before closing 75.8 points lower at 6712.7. The decline caps a volatile few days for investors after a 1.5 per cent slump on Monday caused by Russia’s military intervention in Ukraine.
The figures increased the value of the US dollar, which had earlier fallen to a two-year low against the euro after the Europe’s decision to keep interest rates on hold. The pound was down against the greenback and euro at 1.67 and 1.21 respectively.
The US update also compounded a difficult session for miners after stocks were earlier hit by China’s decision to allow the country’s first corporate bond default.
Leaders want market forces to play a bigger role but analysts are worried about rising corporate debt and the impact this will have on economic growth as China tries to cool a lending boom.
Anglo American was the biggest faller, off six per cent or 102.5p at 1462.5p, while Antofagasta was off 38p at 877p.
Insurance giant Aviva continued to attract buying interest despite the stock surging to its highest level in five years following results on Thursday.
The backing for chief executive Mark Wilson’s turnaround plan kept Aviva near the top of the FTSE 100 Index risers board, up 4.5p to 508.5p alongside rival Legal & General which added 3.6p to 237.2p.
Royal Mail was 2p lower at 587p, having lost initial gains seen after JP Morgan Cazenove raised its target price from 700p to 765p. The review was based on a new assessment of the delivery firm’s pension liabilities.
And outsourcing firm G4S lifted 8.4p to 243.9p on hopes that it will be able to draw a line under a dire past two years when it reports annual figures on Wednesday following a string of damaging blunders.
Among heavyweight fallers, Vodafone was 8.65p lower at 238.65p after Reuters reported that an improved offer from the mobile phone giant had secured a preliminary agreement to buy Spain’s Ono.
In today’s corporate news, AGA Rangemaster lifted 15p to 188p after it said current order intake was more than 6% ahead of the prior year, with the house market recovery among the factors in its improved fortunes.
Operating profits for last year rose 26 per cent to 8.2million as sales of AGA cookers surged 10 per cent, having been down two per cent at the half year stage.
The biggest FTSE 100 risers were G4S up 8.4p at 243.9p, Pearson ahead 21p at 1054p, Petrofac up 27p at 1405p and Legal & General ahead 3.6p at 237.2p.
The biggest fallers were Anglo American down 102.5p at 1462.5p, Glencore Xstrata off 15.1p at 324.85p, Antofagasta down 38p at 877p and Randgold Resources off 185p at 4880p.
15:40: The Footsie’s rally proved short-lived today and by late afternoon the UK blue chip index had turned lower once again in spite of an early advance on Wall Street following data showing better than expected US jobs creation in February.
With less than an hour of trading to go, the FTSE 100 index was down 17.7 points at 6,770.7, back near session lows having bounced to a high of 6,800.7 following the US data release.
Weakness in heavyweight miners was the main drag on sentiment for the Footsie, with the sector dogged by concerns over the strength of the economy in China, the world’s biggest consumer of metals.
Anglo American was the top blue chip faller, down 57.5p at 1,507.5p, while Antofagasta shed 27.0p at 888.0p, and Rio Tinto lost 75.0p at 3,235.5p.
Uncertainties over the situation in Ukraine also weighed on London shares, with investors unwilling to take new positions ahead of the weekend as the tense stand-off with Russia over Crimea continued.
However, US blue chips managed to shrug aside such caution, with the Dow Jones Industrial Average advancing 62.2 points to 16,484.1, although the broader S&P 500 index – which hit record highs this week – was only modestly higher, and the tech-laden Nasdaq dipped lower.
While the rise in US non-farm payrolls last month was bigger than expected after two months of disappointing jobs growth blamed on severe winter weather, an increase in the unemployment rate to 6.7 per cent was a surprise showing that some strains remain in the US economy in spite of the Federal Reserve’s continuing, but diminishing quantitative easing (QE) programme.
Ishaq Siddiqi, market analysts at ETX Capital said: ‘Overall, a respectable report from the US, snapping weeks of poor economic data readings, particularly from the labour market, priming some in the market to think that the Fed can no longer justify further tapering in the face of deteriorating US economic fundamentals.
‘They can, and they will however, as the Fed factors in the poor weather and the unemployment rate is still at a level deemed comfortable to pursue further unwinding of QE.
‘This report will play into the hands of the Fed after the central bank attributed the slowdown in the US to the weather conditions, expecting a pickup as weather conditions improve and this report certainly suggests conditions are not as worrying as some had thought,’ Siddiqi added.
14.05: The Footsie rallied modestly higher in early afternoon trade, tracking expectations for a firm start by US stocks after a bigger than expected rise in US non-farm payrolls outweighed a surprise rise in the jobless rate.
The FTSE 100 index bounced 8.4 points higher to 6,724.1, recovering from earlier falls following the US data release, although gains were limited ahead of the weekend by continuing uncertainties over the situation in Ukraine.
The US added 175,000 jobs in February, better than the 140,000 increase expected, while the unemployment rate rose to 6.7 per cent from 6.6 per cent, the Labor Department said, confounding forecasts for it to hold steady.
Jobs please: The Footsie moved higher as US stock futures pointed to early gains after US jobs creation came in above forecasts in February
The unemployment rate edged up because more people entered the labour force in search of jobs but not all of them found one.
Employment gains for January and December, meanwhile, were revised up by a combined 25,000. The number of new jobs created in January was raised to 129,000 from 113,000, while December’s figure was upped to 84,000 from 75,000.
Angus Campbell, senior analyst at FxPro said: ‘Finally we see a payroll figure that has beaten expectations to the upside, however the unemployment rate has risen to 6.7 per cent from 6.6 percent.
‘The rise in unemployment is still unlikely so persuade new Federal Reserve Chairwoman Janet Yellen to slow down the tapering (of its bond buying programme) and the dollar strength we’ve seen since the release of the figure shows the markets don’t expect a taper of the taper.
‘She’s made it perfectly clear to the markets that data would have to be much worse than what we’ve been seeing so far. The subdued US economic recovery remains on track, but if we get some weaker payrolls going forward, such as some consecutive sub 100k figures, then it’s time to worry.’
In other data today, the US trade gap rose slightly to $ 39.1billion in January from a revised $ 39.0 billion in the prior month, the Commerce Department said, below expectations for an increase in the deficit of $ 39.7billion.
Lingering tensions in Ukraine continued to impinge on overall sentiment. Russian President Vladimir Putin has rebuffed a warning from US President Barack Obama over Moscow’s military intervention in Crimea, saying Russia could not ignore calls for help from Russian speakers in Ukraine.
12.45: Weakness in heavyweight mining stocks led the Footsie lower at lunchtime, with the sector unsettled by a landmark corporate bond default in China, the world’s top consumer of metals.
The FTSE 100 index was down 15.4 points by midsession at 6,773.1 points, with investors avoiding placing big bets on the market before the release of the latest US jobs report at 1.30pm.
Uncertainty over how the non-farm payrolls (NFP) data will be interpreted, and continuing tensions between Russia and Ukraine also weighed on equity markets.
Miners drag: Falls by the heavyweight mining sector weighed on the Footsie today
Anita Paluch, trader at Varengold Bank said: ‘Geopolitical tensions in Ukraine are not going away, but they mainly occupy politicians and have relatively minor impact on the markets itself.
‘There is a little bit of pressure in the markets, we may see declines on weekly basis, investors are, however, more concerned with the NFP numbers due out later today. At the moment there is little price action – little events, everyone is waiting on the sidelines until the heavy-impact jobs report.’
Rio Tinto was a top blue chip faller in London, shedding 57.0p at 3,253.5p weighed down by a fall in the price of copper on concerns about slower economic growth in China.
Those concerns were compounded by an unprecedented Chinese domestic bond default after loss-making solar equipment producer Chaori Solar missed an interest payment.
Analysts said the landmark default was likely to force a re-pricing of credit risk in a market that has long assumed even high-yielding debt carried an implicit state guarantee.
Among other weak miners, Anglo American was down 40.5p at 1524.5p and Antofagasta lost 10.5p at 895.5p.
Traders said the fall-out from these signs of possible strains in the Chinese economy was also affecting luxury goods firm Burberry, for which China has been a major engine of growth, with its shares down 19.0p at 1,507.0p.
On the risers board, Aviva continued to advance after its better-than-expected results performance in the previous session, climbing another 15p to 519p, helped by some positive broker comment.
Elsewhere in the sector, Legal & General added 3.6p to 237.2p after its own strong results performance this week, while Prudential was 6.5p higher at 1380.5p.
Other notable blue chip risers included Royal Mail, which was 3p higher at 592p after JP Morgan Cazenove raised its target price from 700p to 765p after undertaking a new assessment of the delivery firm’s pension liabilities.
And outsourcing firm G4S gained 6.6p to 242.1p on hopes that it will be able to draw a line under a dire past two years when it reports annual figures next Wednesday following a string of damaging blunders.
Results for 2013 are expected to reveal another sharp decline in profits, with analysts at Exane BNP Paribas pencilling in a 13 per cent drop in underlying earnings to 450million.
09.40: London shares were dragged lower today as most investors hugged the sidelines, nervous ahead of key figures on the US jobs market due later in the session.
Asian stocks were higher overnight after a strong performance on Wall Street, but the FTSE 100 index was 38.2 points lower at 6,749.3 in midmorning trade awaiting the non-farm payrolls at 1.30pm.
The market has endured a tumultuous week, with tensions over potential conflict in Ukraine sending shares sliding globally on Monday, only to recover their poise in the following session.
Winter jobs: Traders were nervous ahead of US February jobs data which could be impacted again by the severe weather which has battered North America this winter
While investors have decided that the situation in Ukraine has stabilised somewhat, they are still exercising caution heading into the weekend, mindful also that the US jobs data has the propensity to unleash volatility onto the market.
Michael Hewson, chief market analyst at CMC Markets UK said: ‘Expectations for today’s number are for a gain of 150k new jobs, but we should also look for revisions to the previous two months as well, which came in at 76k in December and 113k in January.
‘150k does seem a little optimistic given the lack of improvement seen in the weather in recent weeks, though a poor number is unlikely to dampen expectations about a further taper later this month unless we get a huge miss, of say below 75k. Any number below that could well give the Fed pause and probably split the committee.’
Heavyweight fallers in London included mobile phone giant Vodafone, which dropped 3.2p to 244.1p as the impact of last month’s biggest capital return in corporate history faded.
High street favourite Marks & Spencer was also lower, down 6.7p to 490.1p on worries over competition from employee-owned John Lewis, which posted results yesterday.
Nick Bubb, an independent retail analyst said: ‘Although the John Lewis Partnership (JLP) is neck and neck with Marks &Spencer in terms of UK sales, M&S is still far more profitable and when it comes to profits the end-of-term school report on JLP must be “could do better”.’
On the FTSE 100 risers board, Aviva continued to attract buying interest after its better-than-expected results performance in the previous session, which led JPMorgan Cazemove to hike its target price for the insurer.
With investors encouraged by the recovery progress overseen by chief executive Mark Wilson, shares added a further 8.75p to 512.75p, on top of an 8 per cent rise seen last night.
Other notable risers included Royal Mail, which was 5.25p higher at 594.25p, and BT Group with a gain of 1.75p to 405.65p.
In corporate news, Aga Rangemaster added 4.5p to 177.5p in the wake of the posh cooker company’s full-year results, which showed a 35 per cent drop in pre-tax profits to 1.1million.
Investors were encouraged by evidence that Aga’ sales volumes have improved as the housing market picks up.
08.30: The Footsie edged lower in early deals today, largely treading water as traders nervously awaited the latest US jobs report, due at 1.30 pm.
The FTSE 100 index opened down 9.8 points at 6,778.6, having closed 13.07 points higher yesterday. Investors were avoiding taking strong bets on the market ahead of the key US jobs data which could sway the near-term direction of the market.
US hiring is expected to have picked up enough in February to keep the Federal Reserve on track in reducing its bond buying monetary stimulus programme, but the size of the gain is expected to be modest as the economy struggles to break from the grip of the severe winter weather battering North America.
Jobs key: US and Asian stocks found gains overnight but Footsie was weaker in early deals as traders await US non-farm payrolls data today
Non-farm payrolls are forecast to have increased by 149,000 last month, with the jobless rate holding at a five-year low of 6.6 per cent, according to economists.
Jonathan Sudaria, dealer at Capital Spreads said: ‘As always, everyone’s speculating as to the outcome but interestingly it appears that whatever the number the market’s expected to remain buoyant.
‘If it’s a bad number, so what, the markets will probably shrug it off and blame it on the weather again as has been evidence by the amount of pundits already making apologies for it. If it’s a good number, well the ability to create jobs despite the weather must be a sign of underlying strength.
‘Another sign of the markets buoyancy was the lack of reaction to the US and EU sanctions on Russia. Whether that’s because markets don’t see Russia retaliating in some way or don’t give much credit to their affirmation that they would is unclear, but either way it doesn’t appear to have had much impact.
‘However, fears of another flare up in the Ukraine and the associated carnage meted out last Monday may keep traders cautious going into the weekend and subsequently cap any gains.‘
It was a very quiet day on the corporate earnings front, with no blue chips posting results, and no official UK economic data was scheduled for release.
However, a survey showed that permanent job placements in Britain rose at the fastest pace in almost four years last month and salaries are picking up too, in the latest sign of recovery in the UK labour market.
A monthly index measuring permanent job placements from consultancy KPMG and the Recruitment and Employment Confederation rose to 65.2 in February, its highest level since March 2010, compared with 62.1 in January. Readings above 50 signify growth in the number of placements.
Stocks to Watch include:
RIO TINTO -The miner is considering buying the outstanding 49.2 per cent stake in Vancouver-based mineral exploration and development company Turquoise Hill Resources it does not already own, with speculation of a cash offer at around $ 8 a share, according to the Daily Mail’s market report.
ESSAR ENERGY – The India-focused oil refiner rose on Thursday on talk that the Indian billionaire Ruia brothers, who already own 78 per cent of the equity, are on the verge of increasing their offer for the minority to 86p a share, according to the Daily Mail’s market report.
BP – The oil and gas major said it had mothballed plans to explore in Libya’s Ghadames basin because of security concerns, the latest in a series of companies to rethink their projects amid growing instability.
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