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(Alliance News) - Bumper data out the US on Thursday saw fears over monetary policy tightening reemerge, knocking equity markets in the process.
Also weighing in London were travel stocks as it was reported that Portugal will be removed from the UK's green travel list.
"Far from beaming the green light on to more destinations, Portugal has been taken off the list, as infection rates increase in the country. Caution is the name of the game for the British government, but it's a hand dealt as a bitter blow to the travel industry," said Susannah Streeter, senior investment & markets analyst at Hargreaves Lansdown.
The FTSE 100 index closed down 43.65 points, or 0.6%, at 7,064.35. The FTSE 250 ended down 130.89 points, or 0.6%, at 22,802.40, and the AIM All-Share closed down 5.70 points or 0.5%, at 1,250.62.
The Cboe UK 100 ended down 0.5% at 704.73, the Cboe UK 250 closed down 0.5% at 20,575.91, and the Cboe Small Companies ended flat at 15,229.17.
In European equities on Thursday, the CAC 40 in Paris ended down 0.2% but the DAX 30 in Frankfurt gained 0.2%.
"Indices have looked wobbly for a few days, with the swift reversal from Tuesday's peak showing that something was amiss with global risk appetite. Today has seen those concerns validated to an extent," said Chris Beauchamp, chief market analyst at IG.
The FTSE 100 ended lower after a deluge of strong data out the US. US initial jobless claims fell to the lowest level since March of last year in a sign that the jobs market is on the road to recovery, while ADP jobs data surged past expectations.
In the week ending May 29, seasonally adjusted initial claims was 385,000, a decrease of 20,000 from the previous week's revised level of 405,000 claims. It was the lowest level for initial claims since March of 2020 and also came in below market expectations, cited by FXStreet, of 395,000.
Elsewhere, ADP said Thursday US private businesses hired 978,000 workers in May, well above a downwardly revised 654,000 in April. The latest reading comfortably beat the market forecast, cited by FXStreet, of 650,000.
Further, two business indicators showed US service sector activity hit record levels last month.
IHS Markit's US services business activity hit registered 70.4 points in May, surging from 64.7 in April and above the flash estimate of 70.1. Any figure over 50 indicates expansion, while one below signals contraction - meaning the US service sector in May boomed after an already strong showing in April.
A separate release from the Institute for Supply Management also painted a picture of a services industry in rude health. The ISM's services PMI reached another record high in May, registering 64.0, up from April's 62.7.
The data all comes ahead of Friday's keenly-awaited US monthly jobs report for May.
"Whatever tomorrow's employment report says, it's important not to get too excited one way or another as an investor. One month is never a trend. In fact, since April was weak, even a strong May jobs growth number might not be that conclusive. We might need to see the June data before any trend can be defined," said JJ Kinahan, chief market strategist at TD Ameritrade.
According to FXStreet, the US economy is expected to have added 664,000 jobs in May after a disappointingly low reading of 266,000 in April.
The US dollar strengthened ahead of the nonfarm payrolls print. The pound and euro edged down against the greenback even after posting strong service sector data of their own.
The IHS Markit-CIPS UK services purchasing managers' index print was 62.9 points in May, up from 61.0 in April and markedly improved from the earlier flash reading for May of 61.8. Markit noted the latest reading pointed to the fastest rate of output growth for 24 years and was above the 50.0 neutral mark for the third month in a row.
Meanwhile, the eurozone services business activity index jumped to its highest level for just under three years in May, recording 55.2 points, up from 50.5 in April and slightly above the flash reading for May of 55.1.
However, pound was quoted at USD1.4108 at the London equities close Thursday, down compared to USD1.4182 at the close on Wednesday, and the euro stood at USD1.2125 at the European equities close, lower against USD1.2214 at the same time on Wednesday.
Against the yen, the dollar was trading at JPY110.27, up compared to JPY109.61 late Wednesday.
Stocks in New York were mixed at the London equities close, with the Dow Jones up 0.2%, the S&P 500 index down 0.2%, and the Nasdaq Composite down 0.8%.
As well as strong US data, weighing on the FTSE 100 on Thursday was British Airways parent International Consolidated Airlines, tumbling 5.4% as it was reported that Portugal will be removed from the UK green travel list.
The summer hotspot will be put on the amber list following a meeting between the Westminster and devolved governments, and the Joint Biosecurity Centre, according to the BBC. People returning to the UK from amber list countries must self-isolate at home for 10 days as part of coronavirus restrictions.
The Department for Transport refused to comment on the reports, but an official announcement is expected to be made later on Thursday.
Many holidaymakers in Portugal face a scramble for flights home before the move is introduced, which is expected to be on Tuesday. The government's decision on Portugal is a huge blow for the travel industry, as the country was the only viable major tourist destination on the green list.
Other London-listed airlines also shed on Thursday, with easyJet ending down 5.1% and Ryanair down 4.5%.
Precious metals miner Fresnillo fell as the stronger dollar weighed on gold prices.
Gold was quoted at USD1,869.72 an ounce at the London equities close Thursday against USD1,904.77 at the close on Wednesday. Fresnillo ended 4.9% lower.
Oil prices fared better. Brent oil was quoted at USD71.25 a barrel at the London equities close Thursday from USD70.96 late Wednesday.
Back in London, B&M European Value Retail fell 3.9% as it warned that earnings from its flagship UK stores will decline as restrictions ease.
For the financial year ended March 27, revenue was up 26% to GBP4.80 billion from GBP3.81 billion the year before and pretax profit doubled to GBP525.4 million from GBP252.0 million.
B&M said it experienced an exceptional year as customers flocked to the discount retailer during stringent restrictions brought about by the Covid-19 pandemic. In the UK, its stores were allowed to stay open as an essential retailer.
The company said the UK B&M business, which made up 85% of revenue and is one of its two brands in the country, experienced very strong sales in the last month of the financial year. But trading has been volatile since restrictions were eased, and it's likely to remain so for the whole of the current financial year as the company faces strong comparatives, B&M said.
The company expects like-for-like revenue in UK B&M to decline in financial 2022, as it focuses on delivering growth over a two-year period.
FTSE 250-listed Chemring rose 5.7% after hiking its interim dividend on the back of profit growth.
Chemring said that, for the six months ended April 30, pretax profit rose 28% to GBP24.3 million from GBP19.0 million a year prior. Revenue also increased, growing 3.9% year-on-year to GBP198.5 million from GBP191.0 million.
The group declared an interim dividend of 1.6 pence, up 23% from 1.3p a year before.
SThree rose 7.3% after raising its pretax profit expectations for the financial year ending November 30 following an upbeat second quarter.
"SThree's trading performance during the second quarter has been stronger than expected across the majority of the Group's portfolio. High levels of demand in Life Sciences and Technology have been seen throughout the quarter and there have been continued strong performances from the US, German and Dutch businesses," the recruitment firm said.
As a result, it expects full-year pretax profit to be materially above consensus of GBP39.7 million.
In the UK corporate calendar on Friday are full-year results from Biotech Growth Trust.
Friday's economic calendar is headlined by the monthly US jobs report at 1330 BST, which includes nonfarm payrolls and the unemployment rate for May. Before this is a UK construction PMI at 0930 BST and eurozone retail sales at 1000 BST.
By Lucy Heming; lucyheming@alliancenews.com
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