LONDON MARKET CLOSE: Stocks Soar As US Jobs Report Beats Expectations

(Alliance News) - Stocks in London ended sharply higher on Thursday after a blockbuster US jobs report smashed market expectations, fuelling hopes of an economic rebound.

US nonfarm payroll employment surged by a more-than-expected 4.8 million in June, according to the latest figures from the Bureau of Labor Statistics. Analysts had expected 3 million jobs to be added in June.

Consensus, according to FXStreet, had expected 3.0 million jobs to be added in June after May's 2.7 million increase. For context, though, April and March combined saw a loss of over 21 million jobs.

The unemployment rate, meanwhile, edged down to 11.1% in June from 13.3% in May. Economists had expected a more moderate climb down to 12.3%.

The FTSE 100 index closed up 82.40 points, or 1.3%, at 6,240.36. The FTSE 250 ended up 178.43 points, or 1.0%, at 17,367.86, while the AIM All-Share closed up 8.72 points, or 1.0% at 891.86.

The Cboe UK 100 ended up 1.3% at 621.89, the Cboe UK 250 closed up 1.1% at 14,806.73, and the Cboe Small Companies ended up 0.1% at 9,229.82.

In Paris the CAC 40 ended up 2.4%, while the DAX 30 in Frankfurt ended up 2.9%.

Stocks in New York were higher at the London equities close as investors cheered encouraging news about progress towards a coronavirus vaccine and a solid recovery in US employment.

The DJIA was up 0.7%, the S&P 500 index up 0.8% and the Nasdaq Composite up 1.0%.

"The markets got their wish on Thursday, a huge nonfarm jobs report allowing them to pretend that the US isn't posting daily Covid-19 case increase records. While less surprising that May's shock jobs addition, June's figures were even more muscular, with 4.8 million Americans hired across the month. Unquestionably the biggest one-month gain in the history of the nation (record-breaking economic data isn't something this pandemic has been short on)," Spreadex analyst Connor Campbell said.

President Donald Trump hailed June's US jobs report as "spectacular news," saying the return to work of 4.8 million workers marks a huge comeback for an economy hit hard by the coronavirus pandemic.

Sentiment had already been largely positive after hopes for a vaccine were given a boost when Germany's BioNTech and US pharmaceutical giant Pfizer late Wednesday reported positive preliminary results from a joint project.

However, coronavirus fears remain a prevalent theme with a record-high number of cases across the US Sunbelt has led other states to put their own reopening plans on hold. Florida posted record single-day increase with more than 10,000 new cases reported overnight. As such, several US states have imposed 14-day quarantines on visitors ahead of the July 4 weekend celebrations.

The Sun Belt comprises the southern tier of the US including the states of Alabama, Arizona, Florida, Georgia, Louisiana, Mississippi, New Mexico, South Carolina, Texas, roughly two-thirds of California and parts of North Carolina, Nevada, and Utah.

On the London Stock Exchange, International Consolidated Airlines ended the best blue-chip performer, up 5.7% with the UK government set to give permission to travel to up to 75 countries without having to self-isolate - effectively ending the 14-day quarantine, according to the Daily Telegraph.

Irish carrier Ryanair Holdings closed up 3.1% and budget airline easyJet closed up 2.2%.

At the other end of the large-cap index, DS Smith ended the worst performer, down 6.9% after the paper and packaging firm skipped its final dividend despite benefiting from increased online shopping during the pandemic.

DS Smith reported a rise annual profit - with box volumes ahead of internal targets - but has opted against a shareholder payout. For the 12 months to April 30, the London-headquartered packaging firm's pretax profit improved 5.1% to GBP368 million from GBP350 million. Revenue, however, slipped 2.1% to GBP6.04 billion from GBP6.17 billion.

Profit grew despite a drop in revenue, DS Smith said, as it recorded GBP237 million in profit from discontinued operations, compared to GBP12 million the year before. The packaging firm has already declared it would not issue an interim dividend, but has now also decided against a final dividend too - as its short term outlook "remains too uncertain".

DS Smith added, however, it "will actively consider the resumption of dividend payments", when it has "greater clarity" over its outlook.

National Grid closed down 5.2%. The power transmission and distribution went ex-dividend, meaning new buyers no longer qualify for the latest payout.

The pound was quoted at USD1.2465 at the London equities close, marginally higher from USD1.2459 at the close Thursday.

Sterling retreated from an intraday high of USD1.2530 after the latest round of talks between the UK and the EU on a post-Brexit trade deal ended early with "significant differences" remaining between the two sides.

The talks this week - which have been taking place in Brussels with the negotiating teams meeting face-to-face for the first time since the Covid-19 outbreak - had been due to continue to Friday. In a statement, the UK's chief negotiator David Frost said that while the ability to meet in person had given "extra depth and flexibility" to the discussions, there was more to do.

Frost's counterpart Michel Barnier said that while Brussels had engaged "constructively", officials needed to see an "equivalent engagement from the UK side".

The euro stood at USD1.1236 at the European equities close, down from USD1.1260 late Wednesday.

Against the yen, the dollar was trading at JPY107.55, little changed from JPY107.52 late Wednesday.

Brent oil was quoted at USD42.30 a barrel at the London close, up from USD41.80 at the close Wednesday.

"Oil prices are settling above the USD40 level after a strong US nonfarm payroll report suggests the US economic rebound continues and that crude demand should follow suit. Crude prices have been supported on better-than-expected OPEC+ compliance, US crude stockpiles continue to slide, and as vaccine hopes have energy markets pricing in a better outlook for improving air travel in 2021," explained OANDA analyst Edward Moya.

Gold was quoted at USD1,775.75 an ounce at the London equities close, higher against USD1,764.23 late Wednesday.

The economic events calendar on Friday has services PMI readings from France, Germany, the eurozone and the UK at 0850 BST, 0855 BST, 0900 BST and 0930 BST respectively. In addition, financial markets in the US will be closed on Friday to commemorate Independence Day.

The UK corporate calendar on Friday has annual results from pub operator Mitchells & Butlers and from music royalties specialist Hipgnosis Songs Fund.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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