LONDON MARKET CLOSE: Stocks rise as weak US data soothes taper fears

Mon, 06th Sep 2021 17:02

(Alliance News) - Stocks in London ended higher on Monday after Friday's US nonfarm payrolls miss fuelled optimism that the Federal Reserve will hold fire on tapering its massive financial support programme.

The FTSE 100 index ended up 50.17 points, or 0.7%, at 7,188.52. The mid-cap FTSE 250 index closed up 53.74 points, or 0.2%, at 24,248.35. The AIM All-Share index rose 4.30 points, or 0.3%, to 1,314.45.

The Cboe UK 100 index ended up 0.7% at 714.70. The Cboe 250 ended up 0.3% at 22,051.40, and the Cboe Small Companies rose 0.4% to 15,575.10.

In mainland Europe, the CAC 40 stock index in Paris closed up 0.8% and the DAX 30 in Frankfurt closed up 1.0%.

The US economy added 235,000 jobs in August, down sharply from a revised 1.1 million additions in July, according to the Labor Department on Friday.

IG Group's Chris Beauchamp said: "Having started the day with gains, indices across Europe have held on to their bullishness throughout the session, with Friday's nervousness being swept aside. After all, a poorer outlook for US jobs would most likely prompt a significant delay for the Fed's tapering programme, keeping support measures in place and providing a rationale for further equity inflows, in a revival of the 'bad news is good news' trade of yesteryear.

"It has been a solid session for ex-US stocks, Europe having taken its cue from a strong session in Asia, where the Nikkei has hit a five-month high as the prospect of change at the top of the Japanese government sparks a wave of buying in Japanese equities."

In the FTSE 100, commodities house Glencore closed up 1.6% on the back of higher aluminium prices. Russian steelmaker Evraz closed up 1.8%.

Aluminium prices surged to a 10-year high amid political unrest and volatility in Guinea, a country rich in aluminium's raw material bauxite. Special forces in Guinea seized power on Sunday, arresting the president and imposing an indefinite curfew in the west African country.

In the FTSE 250, Japanese-focused investment trusts closed higher tracking gains in Japanese equity markets. In Tokyo, the Nikkei 225 closed up 1.8%, having advanced 2.3% on Friday.

The Nikkei continued to advance after surging on Friday in the wake of Japan's Prime Minister Yoshihide Suga announcing he will not run for his ruling party's leadership, effectively ending his tenure and throwing wide open the race for the next premier.

Suga's departure lifts the prospect of stimulus measures, Oanda analyst Jeffrey Halley noted, with Fumio Kishida, a leading successor to Suga, promising an economic help scheme.

JPMorgan Japanese Investment Trust finished 2.4% higher. Baillie Gifford Shin Nippon rose 2.2%. Baillie Gifford Japan Trust closed up 2.1%.

At the other end of the midcaps, Dechra Pharmaceuticals closed down 3.3%. The veterinary pharmaceutical company saw its pretax profit jump to GBP74.0 million in the 12 months ended June 30, up 81% from GBP40.9 million a year prior and more than double the GBP27.8 million registered two years earlier.

Revenue climbed to GBP608.0 million in the company's recent financial year, up 18% from GBP515.1 million the year prior. Income remained 26% above the GBP481.8 million reported in financial 2019.

The pound was quoted at USD1.3820 at the London equities close, down from USD1.3866 at the close Friday, stifled by disappointing UK economic data.

The UK's construction sector expanded again in August, though numbers on Monday signalled growth faded to its lowest level since February.

The headline seasonally adjusted IHS Markit/CIPS UK construction purchasing managers' index fell to 55.2 points in August, from 58.7 points in July. Though still above the 50.0 threshold which separates growth from decline, August's figure suggests the level of expansion has waned.

On the political front, UK Prime Minister Boris Johnson faces a Tory backlash over plans to hike National Insurance to help fund social care reforms as Cabinet talks over the final details of the policy continued.

The PM is set to break a manifesto commitment by increasing National Insurance, risking unrest within his Cabinet and on the backbenches.

Johnson, Health Secretary Sajid Javid and Chancellor Rishi Sunak have been thrashing out the details, as the government prepares to announce its long-awaited reforms to social care.

Reports suggested that GBP5.5 billion more funding has been agreed for NHS shortfalls later this year, including to help clear the backlog caused by the coronavirus pandemic. But Downing Street sources said details of the social care plans were still being worked out on Sunday night and that a day for the announcement was yet to be confirmed.

"Focus lies on PM Boris Johnson, who is attempting to push through an increase in national insurance in order to fund social care - supposedly something that many of his party oppose. Other than this, political focus remains on the pandemic. According to Sky News, the NHS is already at 'mid-winter crisis levels during the summer' and this raises further concerns about the impact of Covid-19 on our health service," explained analysts at OFX.

The euro stood at USD1.1860 at the European equities close, down from USD1.1883 late Friday, following a disappointing PMI reading from the continent.

The eurozone's construction sector suffered another contraction in August, figures on Monday showed, with firms suffering from labour and raw material shortages.

The IHS Markit eurozone construction purchasing managers' index fell to 49.5 points in August from 49.8 in July. With the figure further below the 50.0 no change mark, Markit's data suggests the eurozone construction sector suffered a deeper decline than a month earlier.

Against the yen, the dollar was trading at JPY109.85, up from JPY109.64 late Friday.

Brent oil was quoted at USD72.20 a barrel at the equities close, down from USD72.96 at the close Friday.

Gold was quoted at USD1,822.55 an ounce at the London equities close, lower against USD1,831.95 late Friday.

The economic events calendar on Tuesday has China trade data overnight, UK Halifax house prices at 0700 BST and eurozone economic growth figures at 1000 BST.

The UK corporate calendar on Tuesday has trading statements from packaging maker DS Smith, storage provider Safestore Holdings and fashion retailer Ted Baker. There are also interim results from marine services provider James Fisher, interdealer broke TP ICAP and housebuilder Vistry Group.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com