International Airlines Share News (IAG)

LONDON (Alliance News) - The UK's main equity indices closed significantly higher Friday, with stocks around the world enjoying a strong rebound from the heavy sell-off suffered earlier in the week amid geopolitical worries and eurozone growth concerns.

A particularly strong September jobs report from the US gave investors something to cheer and sent the dollar significantly higher against other major currencies, as well as gold down to its lowest level of the year.

The significantly lower gold price weighed on the UK-listed mining stocks, while easyJet was the stand out gainer on the London market after it raised its profit guidance for the financial year that just ended.

The FTSE 100 closed up 1.3% at 6,527.91, the FTSE 250 closed up 1.5% at 15,230.08, and the AIM All-Share closed up 0.3% at 739.61. For the week as a whole, the FTSE 100 still made a significant loss of 121 points, or 1.8%.

In Europe, the French CAC 40 gained 0.9%, while the German DAX was closed for the country's Day of Unity.

After the European close, US stock markets were also higher, with the DJIA up 0.8%, the S&P 500 up 0.8%, and the Nasdaq Composite up 1.1%.

The US economy added 248,000 jobs in September, more than the 215,000 that had been expected. Moreover, the August print was revised up to 180,000, from 142,000. The US unemployment rate fell to 5.9%, from 6.1% in August, and now stands at its lowest level since July 2008.

The only disappointing part of the jobs report was average hourly earnings, which stagnated over the month of September, missing forecasts for growth of 0.2%.

The market took the jobs report as a very strong reading of the US economy and the US dollar subsequently rallied strongly against other major currencies.

At the time the European equity markets closed, the euro was trading at a two-year low of USD1.2507, a level not seen since September 2012 when the US Federal Reserve was embarking on its third round of quantitative easing, a programme that finally comes to an end this month. The pound broke below the USD1.60 barrier for the first time this year and was trading at an 11-month low of USD1.5962.

"After a disappointing August, this month's results have shown that investors were certainly right to be optimistic ahead of today’s announcement," said UFX.com Managing Director Dennis de Jong. "September’s figures are more than encouraging and, with the labour market recovering and momentum building, expectations of an interest rate hike will grow".

The rush to the dollar dragged the price of gold beneath the USD1,200 per ounce barrier for the first time this year. The yellow metal was trading at USD1,192.72 per ounce when the European equity markets closed.

The European markets got off to a good start ahead of the US data, after Asian markets gained as pro-democracy activists in Hong Kong agreed to enter talks with officials to end their occupation of streets in the centre of the city. After re-opening from a two day holiday, Hong Kong's Hang Seng index rose 0.6% Friday.

Late in the European day, however, equity markets fell from their best levels of the day amid reports that student leaders have called off the talks due to a rally site being destroyed by opponents to the pro-democracy campaign.

Stocks had been hit Thursday by fears that the European Central Bank is doing enough to boost growth in the Eurozone, and Purchasing Managers Index data Friday pointed to further weakness in the region.

The eurozone Markit services PMI fell to 52.4 in September, from 53.1 in August, missing expectations for a print of 52.8. The composite PMI for the single currency block fell to 52.0, from 52.5, missing expectations for 52.3.

UK service sector growth also cooled a little in September, with a Markit PMI reading of 58.7, down from 60.5 in August and missing expectations for a print of 59.1.

The significant fall in the price of gold dragged on the London-listed mining stocks, with the FTSE 350 mining sector index down 0.7%. Fresnillo ended as the heaviest faller amongst the large cap miners, down 2.8%, with Rio Tinto down 1.3%, Anglo American down 0.9%, and Randgold Resources down 1.5%.

Tesco ended as the worst FTSE 100 performer again, down 2.9%. The latest knock to the shares was provided by Billionaire investor Warren Buffet, when he said on Thursday that he made a "huge mistake" when he decided to take a 3.7% stake in the supermarket and has lost hundreds of millions as a result.

Tesco shares have now fallen more than 48% so far in 2014, the worst performing stock in the FTSE 100, and trade at an 11-year low. Peers Wm Morrison Supermarkets and J Sainsbury are the next worst performers this year in the index, down 40% and 37%, respectively, amid pressure on the whole listed grocery sector.

At the other end of the FTSE 100, airlines has a good day, with easyJet continuing a recent rally to close as the second-best blue chip performer, up 5.0%. The low-cost airline raised its full-year pretax profit guidance, saying it had taken about GBP5 million of revenue from Air France after that airline was hit by a costly pilots strike and after fuel prices swung in its favour. EasyJet said it now expects pretax profit for the year that ended on September 30 to come in between GBP575 million and GBP580 million, up from the GBP545 million to GBP570 million guidance it gave in July.

British Airways parent International Consolidated Airlines Group was the best performer in the FTSE 100, gaining 5.1% after reporting strong traffic growth in September. IAG said group traffic measured in revenue passenger kilometres rose 8.5% compared with September 2013, outperforming an 8.4% increase in capacity measured in available seat kilometres, meaning its passenger load factor - a measure of how full its planes are - rose 0.1 percentage points to 84.5%, from 84.4%. Its most profitable premium traffic grew 7.6%.

United Utilities shares responded positively to the group scaling back its future infrastructure spending plans, closing up 3.3%. The Utilities group said it now plans to reduce planned total expenditure by about GBP370 million, with about GBP280 million of that coming from cost efficiencies it expects to make between 2015 and 2020. The other GBP90 million will come from scaling back its trunk mains resilience work and National Environmental Programme work.

FTSE 250-listed Renishaw closed up 5.8% after the engineering company said its financial year has started well, with strong first quarter trading expected to continue into the second quarter. Renishaw said its first-quarter revenue increased to GBP101 million, from GBP79 million a year earlier, boosted by growth in its Asian business.

Dunelm closed up 4.4% after saying strong trading in the first quarter of its financial year was helped by weaker comparatives, but that it also continues to be buoyed by an improving UK economy, new store openings and improvements in its online offering. The homeware retailer said sales in the 13 weeks to September 27 rose 17% to GBP180.6 million, up from GBP154.3 million a year earlier. Like-for-like sales grew by 8.9%, which it said was helped by a relatively weak performance in the same quarter last year, when footfall was subdued by unusually warm weather.

Looking ahead to next week, Monday's UK corporate calendar brings a trading update from FTSE 250-listed food producer Cranswick, as well as full year numbers from FTSE Fledgling stock Waterman Group.

The Chinese market remains closed Monday for its near-week-long holiday, while Germany will be back from its Day of Unity. German factory orders and the eurozone Sentix investor confidence survey for October are the main economic releases of note.

By Jon Darby; jondarby@alliancenews.com; @jondarby100

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