AMFW.L Share News (AMFW)

LONDON (Alliance News) - Shares in London ended mixed Friday, with the blue-chip FTSE 100 index swinging between gains and losses during afternoon trade, eventually ending slightly lower, as investors struggled to digest the implications of some much-stronger-than-expected employment numbers from the US.

The dollar rallied strongly against its major rivals as the upbeat jobs data increased the likelihood that the US Federal Reserve will raise interest rates in December.

"A shockingly strong non-farm jobs report sent the markets into a fit this afternoon, as investors struggled to reconcile the weight of the good news against its December rate-hike boosting capabilities," said Connor Campbell, financial analyst at Spreadex.

"Stocks initially dropped following a much better-than-expected October US unemployment report, recovered, then slid back lower again," said Jasper Lawler, market analyst at CMC Markets. "It was not exactly the kind of 'goldilocks' report that the market prefers," he added.

The report said non-farm payroll employment jumped by 271,000 jobs in October following a downwardly revised increase of 137,000 jobs in September, massively exceeding economists' expectations of an increase of about 185,000 jobs in October compared with the addition of 142,000 jobs originally reported for the previous month.

The strong job growth helped push the unemployment rate down to 5.0% in October from 5.1% in September. Encouragingly, the jobs report also revealed that average hourly employee earnings climbed by 0.4% to USD25.20 in October after only inching up in the previous month.

Analysts interpreted the closely watched monthly jobs report as a inclining the Federal Reserve to raise interest rates at its next meeting in December.

"The overriding message from today's employment report is the soft patch is over and the rate hike is on," said Chris Low, chief economist at FTN Financial.

The Fed is scheduled to announce its next monetary policy decision following a two-day meeting concluding on December 16.

"From being 50/50, a December rate hike now looks like a done deal," CMC Markets' Lawler said. "Such is the strength of the report that it's questionable how slow the pace of tightening can be once the Fed does begin," he added.

"If December was a 'live possibility' for a rate hike prior to the October jobs report then today’s numbers may have just sealed the deal," said Craig Erlam, senior market analyst at OANDA. "Ever since the October [Federal Open Market Committee] meeting, today’s jobs report was seen as one of two that could make or break the decision, and based on the data, the decision suddenly looks pretty straight forward," he noted.

"Today’s report was so strong that even a weak jobs report in November may not be enough to encourage the Fed to wait a little longer," Erlam said. "If you ever needed a sign that the economy is recovering, today’s report was it."

The FTSE 100, which had traded within a relatively tight range ahead of the US data, closed down 0.2% at 6,353.83 Friday, meaning it ended the week 0.1% lower, while the FTSE 250 closed up 0.3% at 17,165.92 and the AIM All-Share index closed flat at 746.34. For the week, the mid- and small-cap indices closed up 0.3% and 1.1%, respectively.

In UK economic data Friday, the Office for National Statistics revealed that UK industrial production declined in September, while manufacturing output growth rose sharply.

Industrial production dropped 0.2% month-on-month in September, having been expected to fall by a more modest 0.1%. Manufacturing output growth improved to 0.8% month-on-month, exceeding the expected growth of 0.6%.

Meanwhile, the UK visible trade deficit narrowed by more than expected in September, the ONS reported. The deficit on trade in goods shrank to GBP9.35 billion from GBP10.79 billion, having been forecast to narrow to GBP10.60 billion.

Shortly ahead of the UK stock market close, the National Institute of Economic and Social Research published its UK GDP estimate for the three months to October. It showed that economic output grew by 0.6% in the period, up from the 0.5% seen in the three months to September.

In Europe, stocks ended the day and week significantly higher. The CAC 40 index in Paris closed up 0.1% Friday, meaning that it ended the week up 1.8%, while the DAX 30 index in Frankfurt closed up 0.9% and up 1.3% for the week.

At the close of the UK equity market, sentiment on Wall Street was weak. The NASDAQ Composite index was flat, while the Dow Jones Industrial Average was down 0.2% and the S&P 500 was down 0.4%.

In the forex market, the dollar edged higher against its major rivals following the strong US jobs report. At the close of the UK equity market, the pound traded at USD1.5070, while the euro stood at USD1.0746, having traded at USD1.5240 and USD1.0866, respectively, at the same time on Thursday.

In the commodities market, the price of gold slumped in the wake of the US jobs data, as the dollar rose. At the UK equities closing bell, the precious metal traded at USD1,087.20 an ounce, having traded at USD1,105.61 an ounce at the same time Thursday. Brent oil, meanwhile, traded at USD47.42 a barrel, while West Texas Intermediate oil stood at USD44.39 a barrel.

At the individual UK stock level, commodities-related stocks were among the heaviest fallers in the FTSE 100 for the second consecutive day as they continue to give back gains posted earlier in the week on better-than-expected data from China.

BHP Billiton, Glencore, Randgold Resources and Fresnillo were among the biggest losers in the blue-chip index, closing down 5.7%, 6.1%, 2.3% and 1.6%, respectively.

BHP said there had been a "serious incident" at its iron ore operation in Brazil which is run by a joint venture company with Brazilian giant Vale. The miner holds a 50% stake in Samarco Mineracao, the joint venture entity that operates the project, and said it is "concerned for the safety of employees and the local community". Media reports have suggested a burst tailings dam has flooded the local community which has led to "at least" 15 fatalities.

The FTSE 350 mining sector index as a whole ended the day down 3.1%.

At the other end of the spectrum, Irish buildings materials company CRH ended the day among the leading risers in the FTSE 100.

The company closed up 4.0% after it was boosted by the US House of Representatives in Washington passing a new six-year Highway Bill entitled 'Surface Transportation Reauthorisation and Reform Act' by 363 against 64 votes.

"This is a significant positive for CRH, which is the largest provider of raw materials into this end-market," said Barry Dixon, an analyst at broker Davy Research.

International Consolidated Airlines Group, closing up 2.8%, upgraded its long-term guidance on returns and margins and announced a reshuffle of its management team.

The British Airways, Aer Lingus and Iberia owner said it has upgraded its sustainable return on invested capital target for 2016 to 2020 to 15% from 12% previously. It has also upgraded its guidance on operating margin target to between 12% and 15%, up from 10% to 14% previously, and is now targeting average annual growth in its earnings per share over the five-year period of 12%, compared to 10% before.

IAG also said its group traffic, measured in revenue passenger kilometres, rose 17% in October to 20.7 billion, up from 17.8 billion a year earlier. On a pro-forma basis, including the results from recently acquired Aer Lingus, traffic increased 7.6%.

In the FTSE 250, ICAP and Tullett Prebon were the two biggest risers, closing up 7.3% and 8.8%, respectively.

The two interdealer brokers said they are discussing the sale of ICAP's global broking business to Tullett Prebon in exchange for a major stake in the resulting enlarged Tullett business. A deal would represent further consolidation among interdealer brokers, following BGC Partners's takeover of GFI Group earlier this year.

Amec Foster Wheeler, closing down 8.4%, was among the biggest losers in the mid-cap index. The oil and gas engineering services company's shares continued to fall, having closed down 23% on Thursday after it warned on its outlook for the remainder of the year and into 2016. It had said that margin deterioration will hit its second-half results and that it will slash its dividend in half in order to cope with the tough conditions.

UBS downgraded the stock to Neutral from Hold on Friday and slashed its price target to only 600.0p from 875.0p, while Citigroup downgraded Amec to Neutral from Buy and Charles Stanley downgraded the stock to Hold from Accumulate.

In the data calendar, Chinese trade data are released over the weekend. On Monday, German trade data are scheduled to be released ahead of the UK stock market open at 0700 GMT, with November's reading of the eurozone's Sentix Investor Confidence Index due at 0930 GMT. Later on, the US Labor Market Conditions Index for October is expected at 1500 GMT.

In the UK corporate calendar Monday, FTSE 250-listed Aggreko, Dignity, Hiscox and John Laing Infrastructure Fund are scheduled to release trading updates. Carr's Group and Lonmin publish full-year results.

By James Kemp; jameskemp@alliancenews.com; @jamespkemp

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