LONDON MARKET CLOSE: Stocks Mixed As BP Leads On US Settlement

LONDON (Alliance News) - UK stocks ended mixed Thursday, after Greece left centre stage for the day as investors focused on a flurry of economic data from the US that showed weaker-than-expected job growth in June, even as the US unemployment rate fell to a seven-year low.

In London, BP was the best blue-chip stock performer after it came close to ending its long-running battle over the Gulf of Mexico oil spill in 2010, reaching an agreement in principle to settle all US federal and state claims.

The FTSE 100 closed up 0.3% at 6,630.47, the FTSE 250 ended down 0.2% at 17,686.02, and the AIM All-Share finished down 0.1% at 761.31.

In Europe, major indices ended lower following Wednesday's gains, with the CAC 40 in Paris down 1.0% and the DAX 30 in Frankfurt down 0.8%.

European investor attention shifted briefly from Greece to the US, where US nonfarm payrolls, unemployment, earnings and factory orders data were released Thursday.

The closely watched US Labor Department report showed non-farm payroll employment increased by 223,000 jobs in June, modestly below the addition of 230,000 jobs anticipated by economists.

The increase reflected job growth in professional and business services, health care, retail, financial activities, and transportation and warehousing. The report also showed downward revisions to the pace of job growth in April and May, with the revised data showing increases of 187,000 jobs and 254,000 jobs, respectively.

With the revisions, the US Labor Department said employment gains in April and May combined were 60,000 lower than previously reported. Nonetheless, the unemployment rate still fell to 5.3% in June from 5.5% in May. Economists had expected the unemployment rate to dip just to 5.4%.

The report also said average hourly employee earnings in June were unchanged compared to the previous month at USD24.95. The annual rate of average hourly earnings growth subsequently slowed to 2.0% in June from 2.3% in May.

A separate report from the US Labor Department showed an unexpected increase in initial jobless claims in the week ended June 27th. The report said initial jobless claims rose to 281,000, an increase of 10,000 from the previous week's unrevised level of 271,000. The modest increase came as a surprise to economists, who had expected jobless claims to edge down to 270,000.

The pound was flat against the dollar when the European equity markets closed, at USD1.5619.

At the European stock market close, Wall Street was lower, with the DJIA down 0.2%, the S&P 500 index down 0.1% and the Nasdaq Composite down 0.3%. US stock markets will be closed Friday for the Independence Day celebration.

Additionally, new orders for US manufactured goods fell by much more than expected in the month of May, according to a report released by the US Commerce Department. The report said factory orders fell by 1.0% in May following a revised 0.7% decrease in April. Economists had expected orders to dip by 0.5% compared to the 0.4% drop originally reported for the previous month.

The bigger than expected decrease in factory orders was largely due to another steep drop in orders for durable goods, which slumped by 2.2% in May after tumbling by 1.7% in April.

Outside the US, the head of the Eurogroup, Jeroen Dijsselbloem, said it would be "extremely difficult" to keep Greece in the eurozone if the country votes "no" in this weekend's referendum.

On Sunday, Greek voters will be asked whether the country should accept reform proposals made by its creditors. Greece's Prime Minister Alexis Tsipras is telling people to reject the measures, arguing that a "no" would give him a mandate for new bailout negotiations. Opinion polls published this week suggest the Greek public is split on Sunday's referendum.

But Dijsselbloem said a "no" vote would remove any grounds for granting Athens more rescue aid and make it "very questionable whether there is even a basis for Greece [to stay] in the eurozone". Dijsselbloem made the remarks to parliament in the Netherlands, where he is finance minister.

"The Greek government gives the impression that the future of their country after a 'no' vote will be simpler. That is not being honest with the Greek voters," Dijsselbloem said.

Earlier Thursday, Greek Finance Minister Yanis Varoufakis predicted that voters would reject the reform proposals by voting "no". Upping the ante, he said he would resign if they voted the other way. Asked in an interview on Bloomberg Television whether he would still be finance minister by Monday evening if a majority votes "yes", Varoufakis replied, "I will not".

Greece needs more than EUR60 billion in new financial help over the next three years and faces decades of living in the shadow of a daunting debt mountain that would make it vulnerable to future crises, the International Monetary Fund has warned, according to the Financial Times Thursday.

On the London Stock Exchange, BP was the biggest gainer in the FTSE 100, up 4.5%. The oil giant said it reached an agreement in principle to settle all US federal and state claims arising from the Deepwater Horizon spill in the Gulf of Mexico in 2010.

The company Thursday said its BP Exploration and Production subsidiary, its US upstream unit, has reached agreements with the US federal government and five Gulf Coast states, comprising Alabama, Florida, Louisiana, Mississippi and Texas. The agreement also settles claims made by more than 400 local government entities. BP said the agreement will see it pay out a total of USD18.7 billion in compensation, with the payments to be spread over 18 years.

Meanwhile, decreasing credit risk in the UK economy has led Standard & Poor's to reaffirm its ratings on eight UK-based banking groups, with the ratings agency citing a more manageable private credit to gross domestic product ratio and an expectation that losses from loans will remain low for the next two years.

In a statement issued on Thursday, Standard & Poor's affirmed the ratings and maintained the stable outlooks on Barclays Bank, FCE Bank, HSBC Bank, Lloyds Bank, Nationwide Building Society, and Royal Bank of Scotland. It affirmed the ratings and maintained the negative outlook on AIB Group (UK) and Santander UK, while maintaining the ratings on Clydesdale Bank on CreditWatch with negative implications as it prepares to demerge from Australian parent National Australia Bank.

Banking stocks closed mostly higher, with HSBC Holdings up 1.2%, Royal Bank of Scotland Group up 0.9% and Barclays down 0.1%. Standard Chartered closed up 1.4%.

A number of broker changes also drove stock movements Thursday. AstraZeneca closed up 1.7% after Berenberg raised it to Buy from Hold. Intertek Group ended down 3.2% after Jefferies cut it to Underperform from Hold, and Jimmy Choo rose 5.8% after Barclays initiated coverage of the company with an Overweight rating.

In the corporate calendar Friday, International Consolidated Airlines Group releases its June traffic statistics, likely in the afternoon, while Ferrexpo publishes its second-quarter production results. SVM UK Emerging Fund, Polar Capital Technology Trust and Eco Animal Health release full-year results. Marshalls issues a trading statement.

In the economic calendar, France's and Germany's Markit services Purchasing Manager's Index are due at 0850 BST and 0855 BST, respectively, while the same for the Eurozone and the UK are due at 0900 BST and 0930, respectively. Eurozone's retail sales are expected at 1000 BST.

By Daniel Ruiz; danielruiz@alliancenews.com

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