LONDON MARKET CLOSE: US jobs report reassures, send stocks higher

(Alliance News) - Stocks on both sides of the Atlantic were given a much needed boost on Friday afternoon, with the FTSE 100 adding nearly 2% following as a well-received US jobs report overcame a disappointing day for UK housebuilders.

US nonfarm payrolls were in line with forecasts for August, data showed, but the unemployment rate unexpectedly increased.

The US economy added 315,000 jobs last month, the Bureau of Labor Statistics said. This was well below the 526,000 jobs created in July. However, market consensus for August, according to FXStreet, was an addition of 300,000 jobs, meaning August's data was largely as expected.

"After what has been a uniformly negative week, today's US payrolls report has served to offer a brief respite to markets with a solid but not spectacular set of numbers, although the unemployment rate did see an increase from 3.5% to 3.7%," CMC Markets analyst Michael Hewson said.

In New York, all three major major benchmarks were 1.1% higher.

The FTSE 100 index closed up 132.69 points, or 1.9%, at 7,281.19 on Friday - but still suffered a 2.7% drop this week.

The mid-cap FTSE 250 index ended up 359.48 points, or 1.9%, at 18,853.22, clawing back some of the losses seen earlier in the week but still ended down 2.1% over the past five sessions. The AIM All-Share index closed up 4.17 points, or 0.5%, at 866.19 - but gave back 3.8% this week.

The Cboe UK 100 index closed up 2.0% at 727.70. The Cboe 250 ended up 1.9% at 16,149.77, but the Cboe Small Companies was down 0.1% at 13,727.30.

In mainland Europe, the CAC 40 in Paris was up 2.2%. Frankfurt's DAX 40 was up 3.3%.

IG's Joshua Mahony, senior market analyst at IG, added: "While many have questioned whether this raft of employment data had the ability to shift markets in the face of an inflation-focused Federal Reserve, the jump in unemployment and lower-than-expected wage growth figure did help ease market concerns. However, markets continue to price in a 75% chance of a third consecutive 75-basis point rate hike in three-week's time."

Mahony believes Friday rally is "unlikely to last".

"For now, the jobs market remains relatively strong, with two jobs available for every unemployed person. Unfortunately for bulls, that is unlikely to derail the Feds policy decisions aimed at driving down the problematic inflation rate," he added.

Brent oil was trading at USD94.00 a barrel, higher than USD92.53 late Thursday but still more than USD10 off the week's peak of USD105 a barrel.

The rise in oil prices was benefiting London's energy majors, with Shell adding 2.2% and BP 2.8%.

Shell lagged its fellow energy major on a Reuters report that Ben van Beurden is set to leave as chief executive next year after almost 10 years leading the firm.

Citing two company sources, the news agency said plans for Beurden's replacement are underway, with a succession committee, led by Chair Andrew Mackenzie, having met "several times in recent months".

CMC's Hewson said: "Today's gains have been broad based with today's outperformers including the likes of abrdn, which appears to be enjoying some buying interest ahead of what is likely to be its eviction from the FTSE100 at the next reshuffle in what has been a disappointing year to date for the asset management sector."

abrdn advanced 7.5% and ended the day the best performer in the blue chip index. The asset manager - formerly known as Standard Life Aberdeen - was booted from the FTSE 100 on Wednesday. Standard Life joined the FTSE 100 in September 2006 and has remained a member ever since.

At the other end of the blue chip index, the UK's housebuilders were anchored to the bottom of the FTSE 100.

HSBC has taken a downbeat view on the UK housing market due to a recent surge in mortgage rates.

After slashing UK interest rates to a record low of 0.10% during the pandemic, the Bank of England has ratcheted rates back up in recent months to deal with soaring inflation. After a bumper 50 basis point hike in August, Bank Rate now stands at 1.75%.

The UK is "on the cusp of a housing downturn", said HSBC, with a jump in mortgage rates this summer set to pummel demand.

"The HSBC Building Materials team now forecasts a 20% fall in UK housing demand for a year from this autumn, a concomitant 7.5% fall in UK existing house prices, excluding Central London at double that, and a 5% fall in UK new build prices," said HSBC.

Earnings are expected to fall around 32% to 53% over 2023 to 2024 for the housebuilders under its coverage.

Shares in London-listed housebuilders were lower as a result. Shares in Berkeley closed down 2.7% on Friday, Persimmon down 1.9%, Barratt Developments down 1.2% and Taylor Wimpey down 0.2%.

In the FTSE 250, Ashmore rose 9.1%, despite saying assets under management were hit by "widespread risk aversion" in the second half of its financial year, posting a dive in annual profit.

Assets under management fell to USD64.0 billion as at June 30 from USD94.4 billion a year prior, Ashmore reported. This 32% decline was due to negative investment performance of USD16.6 billion and net outflows of USD13.5 billion.

But the London-based emerging markets investment manager said it has a positive outlook, "underpinned by exceptionally attractive valuations across emerging markets".

Sterling was quoted at USD1.1575 Friday evening, higher than USD1.1534 at the London equities close on Thursday.

The euro traded at USD0.0027, dipping from USD1.0044 late Thursday. Against the yen, the dollar was quoted at JPY140.05, up versus JPY139.94.

Gold was quoted at USD1,713.90 an ounce Friday, up from USD1,694.00 on Thursday.

In the international economic calendar next week, Monday kicks us off with a slew of services PMIs, with Japan and China overnight, followed by France, Germany, the eurozone, and the UK in the morning. There is also eurozone retail sales at 1000 BST.

On Tuesday, there is a Reserve Bank of Australia interest rate decision at 0530 BST and Germany factory orders at 0700 BST. There is a US services PMI print at 1445 BST. On Wednesday there is Chinese trade figures overnight then eurozone employment and GDP figures at 1000 BST.

Thursday has Japan GDP figures overnight, followed by the headline event of the week with an ECB rate decision at 1315 BST. Friday has Chinese consumer prices to keep an eye on.

In the local corporate calendar on Monday, there is interim results from real estate agent Belvoir Group and full-year results from Dechra Pharmaceuticals.

By Paul McGowan; paulmcgowan@alliancenews.com

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