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| | London Market Report |  | | FTSE 100 | Euronext | Dax perf | CAC 40 |  |  |  |  | | Please click on the images to view our interactive charts | | | London close: UK stocks tumble as US jobs report underwhelms Moderate losses turned to a steep sell-off on the FTSE 100 on Friday after a cool reaction to the latest labour-market data Stateside sent UK equities tumbling by the close of trade. London's benchmark stock index finished the session down 1.05% at 6,501.14, pulling back sharply after settling at 6,569.96 on Thursday, its best close of the year so far.
Housing stocks were registering heavy losses after weak UK construction figures and broker downgrades, while supermarket shares retreated after a strong surge the previous day.
The market's main focus of the day was the US jobs report and the headline figures mostly impressed: non-farm payrolls increased by 252,000 in December and November's gain was revised higher to 353,000, while the jobless rate fell from 5.8% to 5.6%, its lowest level since June 2008.
However, news that average hourly earnings declined by 0.2% last month dampened sentiment among economists, with the year-on-year rate of wage inflation falling from 1.9% in November to 1.7%. What's more, the labour-force participation rate fell from 62.9% to 62.7%.
Analyst David Madden from IG said the jobs figures "may not have been as impressive as shown on the surface". He said: "The disappointing participation rate and weak wage growth numbers stuck out like a sore thumb, and that is when stocks took a U-turn sound bound."
Data released earlier in the session also disappointed with numbers showing that UK industrial production unexpectedly declined by 0.1% in November, surprisingly economists who were looking for growth. At the same time, the UK trade deficit shrank more than expected to £1.4bn in November.
Housing and supermarket stocks take a hit
Housing stocks such as Taylor Wimpey, Persimmon, Barratt Developments, Zoopla, Bellway, Bovis Homes, Rightmove, Berkeley and Crest Nicholson were trading firmly in the red on Friday after Jefferies cut its recommendations for shares across the sector. Meanwhile, construction output slumped by 2% in November, according to data released during the session.
Supermarket stocks were under pressure on Friday, with Tesco in particular pulling back after a 15% surge the previous session, following the announcement of its turnaround plan and resilient Christmas sales. Moody's cut the UK grocer's debt to 'junk', saying that measures revealed on Thursday to revive the business "will take time to implement". Analysts said that Tesco's "financial profile is likely to remain leveraged beyond what we consider to be commensurate with an investment-grade profile".
Shares in rivals Sainsbury and Morrison were also in reverse after rallying strongly on Thursday.
Electronic components supplier Laird, a key Apple supplier, underwhelmed despite announcing its confidence in meeting expectations for full-year results after a good fourth quarter. Organic growth, however, eased towards the end of the year.
Caitlin was on the rise after confirmation on Friday that it will be acquired by XL Group for around £2.79bn.
Royal Bank of Scotland, Standard Chartered and Barclays led banking stocks lower. |
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| | Market Movers
techMARK 2,982.55 -0.48%
FTSE 100 6,501.14 -1.05%
FTSE 250 16,010.96 -0.46%
FTSE 100 - Risers
ITV (ITV) 213.50p +1.91%
Friends Life Group Limited (FLG) 371.70p +1.81%
Aviva (AV.) 490.40p +1.49%
Johnson Matthey (JMAT) 3,506.00p +1.45%
Pearson (PSON) 1,177.00p +1.20%
Admiral Group (ADM) 1,353.00p +1.20%
Intertek Group (ITRK) 2,459.00p +1.19%
Shire Plc (SHP) 4,741.00p +1.17%
Randgold Resources Ltd. (RRS) 4,931.00p +0.88%
easyJet (EZJ) 1,630.00p +0.87%
FTSE 100 - Fallers
Taylor Wimpey (TW.) 125.70p -5.35%
Persimmon (PSN) 1,459.00p -5.20%
Barratt Developments (BDEV) 431.40p -5.12%
Morrison (Wm) Supermarkets (MRW) 176.30p -4.55%
Sainsbury (J) (SBRY) 241.80p -4.20%
Babcock International Group (BAB) 1,031.00p -3.28%
Hargreaves Lansdown (HL.) 947.50p -3.07%
Royal Bank of Scotland Group (RBS) 367.70p -2.65%
Standard Chartered (STAN) 945.10p -2.64%
Barclays (BARC) 231.00p -2.55%
FTSE 250 - Risers
Catlin Group Ltd. (CGL) 700.00p +5.98%
Hikma Pharmaceuticals (HIK) 2,283.00p +4.97%
Acacia Mining (ACA) 280.50p +3.39%
Henderson Group (HGG) 220.70p +3.37%
Jardine Lloyd Thompson Group (JLT) 926.00p +3.23%
Michael Page International (MPI) 433.70p +3.11%
IG Group Holdings (IGG) 760.50p +2.84%
Go-Ahead Group (GOG) 2,448.00p +2.64%
Restaurant Group (RTN) 702.00p +2.48%
Centamin (DI) (CEY) 64.25p +2.39%
FTSE 250 - Fallers
Laird (LRD) 301.60p -9.07%
Zoopla Property Group (WI) (ZPLA) 171.30p -5.62%
Ashmore Group (ASHM) 259.50p -5.53%
Bellway (BWY) 1,809.00p -5.19%
Drax Group (DRX) 378.50p -5.16%
Bovis Homes Group (BVS) 821.00p -4.92%
Interserve (IRV) 526.50p -4.88%
Rightmove (RMV) 2,157.00p -4.35%
Berkeley Group Holdings (The) (BKG) 2,345.00p -4.29%
Crest Nicholson Holdings (CRST) 368.90p -4.13% |
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| | Europe Market Report | | | | FTSE 100 | Euronext | Dax perf | CAC 40 |  | | | | | | Europe close: Stocks end lower after German and UK data, Chinese inflation European stocks finished the week on a weak note following negative German and UK data along with subdued Chinese inflation figures. German industrial production dropped 0.5% year-on-year in November, following a 1.2% increase a month earlier. However, analysts had pencilled in a 0.6% fall.
Exports in Europe's biggest economy were down 2.1% month-on-month in November, compared to estimates for a 1% decrease and the previous month's 0.4% dip.
The reports come as the European Central Bank (ECB) is under pressure to introduce full-blown quantitative easing to restore the health of the euro-area. ECB president Mario Draghi has said those measures may include buying government bonds ahead of the bank's 22 January meeting.
The ECB is said to be looking at models for buying as much as €500bn of investment-grade assets, a person familiar with the matter told Bloomberg.
In China, the inflation rate remained near a five-year low in December, rising to only 1.5% from 1.4% the prior month.
"This is a small increase from November's five-year low at 1.4% but still substantially below the government's 3.5% target and points towards the open possibility for monetary easing from the People's Bank of China in the opening months of the year," said Jameel Ahmad, chief market analyst for FXTM.
Meanwhile, UK industrial production rose 1.1% year-on-year in November after a 1.1% increase a month earlier. Analysts expected a 1.6% gain. Manufacturing output jumped 2.7% year-on-year in November after a 1.7% rise in October, more than the 2.3% rise expected.
US non-farm payrolls
US employers added 252,000 jobs in December, more than the 240,000 forecast, the Labor Department revealed. The unemployment rate fell to 5.6% from 5.8% to reach its lowest since June 2008.
"The US labour market continued to boom at the end of last year, adding further fuel to expectations that the [Federal Reserve] will be the first major central bank to start tightening policy in 2015," said Chris Williamson, chief economist at Markit.
Banks slide
Banco Santander SA slumped after its board approved plans to cut its dividend and sell shares for as much as €7.5bn.
Banca Monte dei Paschi di Siena SpA edged lower after the ECB told the Italian bank to raise its minimum capital ratio as part of its fundraising plan.
UK homebuilders Taylor Wimpey, Persimmon and Barratt Developments slipped as a report showed house-price growth in England and Wales slowed on an annual basis.
Tesco declined as Moody's Investors Service cut the UK grocer to below investment grade on expectations profits will remain challenged due to structural shifts.
The euro rose 0.32% to $1.1831. |
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| | US Market Report | | US open: Stocks rise following unemployment rate drop as oil prices slide Markets rose on Friday as US non-farm payrolls beat consensus expectations while the unemployment rate came in lower than projected. Early in the day the Dow Jones Industrial Average increased 1.84% to 17,907.87, the S&P 500 rose by 1.79% and Nasdaq ascended 1.94%.
US non-farm payrolls grew 252,000 month-on-month in December, beating the consensus expectation of 240,000 while the unemployment rate fell from 5.8% to 5.6%, below the 5.7% forecast.
However, not all of the figures impressed with average hourly earnings falling 0.2% over the month.
Senior US economist for Capital Economics Paul Dales added: "Overall, there has been a clear acceleration in job growth since last summer, a faster decline in the unemployment rate, but few signs of faster wage growth.
"If the activity data continue to improve, as we expect, then the Fed may not wait for wage growth to rise and could still raise rates as soon as March."
Meanwhile, analysts at Barclays said: "We continue to forecast the first policy rate hike from the Fed in June of next year, with risks skewed in the direction of a later take-off."
Crude futures fell with WTI down 0.5% at $48.55 a barrel, while Brent futures opened 1.2% lower at $50.34 a barrel.
CMC Markets market analyst Jasper Lawler said: "When assessing the likelihood of firms increasing prices to protect profit margins from increasing costs of production, namely cost-push inflation; oil prices at multi-year lows suggest it's unlikely to come from raw materials."
Over on COMEX, gold futures were advancing 0.5% to $1,214.20 an ounce while the dollar was prevailing against the pound, the yen and the euro.
The yield on a benchmark US 10-year Treasury fell one basis point to 2%.
Banking stocks were mostly lower early on with JPMorgan Chase, Well Fargo and Citigroup trading in the red. |
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| | Broker Tips | | Broker tips: AstraZeneca, Laird, Housing stocks, Oil prices AstraZeneca's drug pipeline is still "under-appreciated", according to UBS which hiked its target for the stock by 10% on Friday.
The bank said it sees a number of "blockbuster opportunities" for the pharmaceutical group in the near term, as it lifted its target for the shares from 5,000p to 5,500p and reiterated its 'buy' recommendation.
Numis Securities has maintained its 'buy' recommendation for Laird, but highlighted a slowdown in organic growth at the electronic components supplier towards the end of the year.
Numis estimates that organic growth for the year in US dollar terms should be around 8%. "While there was a FX tailwind in the fourth quarter, the organic growth rate in US$ revenue at circa 3% was lower than in the first nine months of 11%, largely due to tough comps and some supply shortages in smartphones," said Numis analyst Nick James.
Broker Jefferies was one of several to cut ratings on almost all the homebuilders, with Barratt Developments, Persimmon, Taylor Wimpey, Bovis Homes and others downgraded on the view that valuations were becoming too stretched.
The recent collapse in oil prices will undoubtedly have a big impact on earnings in the energy sector, but should generally result in a decent lift to profits for European companies on the whole, according to Morgan Stanley. | | |
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