MARKET COMMENT: FTSE 100 Close Higher For Third Consecutive Week

Fri, 04th Apr 2014 16:23

LONDON (Alliance News) - UK stock indices have closed higher Friday, with the FTSE 100 recording its third consecutive weekly gain. Global markets, already buoyed this week by the prospect of quantitative easing by the European Central Bank, received a further boost Friday from the latest US jobs report that showed the effect of the harsh US winter weather was not as bad as previously feared.

A strong week all round for equities has seen the FTSE 100 gain 2.7%, and both the DJIA and the S&P in the US open Friday at fresh all-time highs after the US employment report. Following the strong gains however, markets in the UK and Europe have closed off their highs, and the US markets have dipped marginally into the red.

The FTSE 100 closed up 0.7% Friday at 6,695.55. The FTSE 250 has closed up 0.5% at 16,433.67, while the AIM All-Share has closed up 0.1% at 853.12.

A similar picture in Europe saw the French CAC 40 close up 0.8% at 4,484.55, and the German DAX 30 close up 0.7% at 9,695.77.

"All in all we?ve had another positive week and the failure to crack 1,900 on the S&P500 as well as opening at record highs has prompted a bout of profit taking by investors who are by and large nervous of going into the weekend long of stocks," said CMC Markets chief market analyst Michael Hewson.

After the European close, the DJIA trades down 0.2%, the S&P 500 is down 0.4%, and the Nasdaq Composite is suffering the heaviest falls Friday, trading down 1.9%.

The always highly anticipated, and recently difficult to predict, monthly non-farm payroll report showed the US economy added 192,000 jobs in March, slightly below the 200,000 average prediction.

Released at the same time, the headline rate of unemployment held steady in March. Despite the continued job growth, the rate came in at 6.7%, unchanged from February's reading. Economists had been expecting the rate to dip slightly to 6.6%.

The market expectation of an acceleration in US data improvements has been rising, along with the temperature, as parts of the country emerge from a winter freeze that has been blamed for a string of below-expectation data releases. However, rather than accelerating out of a slump, the March print was lower than expected, while the January and February numbers were revised higher to 144,000 and 197,000 respectively, in a net upward revision of 37,000 jobs.

Analysts suggest that the US jobs data shows both that the winter freeze had less impact on jobs creation than previously thought, but also that growth remains muted compared to pre-crisis levels.

Following a busy week of data that has also shown an unexpected widening of the US trade deficit to USD42.3 billion in February from USD39.3 billion in January, another key takeaway from the week is that, after growth at 2.6% in the fourth quarter of 2013, first quarter US GDP projections need to be revised down to around 2.0% at best, said Rabobank analyst Michael Every.

Earlier data Friday showed a surprise slip UK house prices in March, according to the Halifax house price index, which fell for the first time in three months. The index fell by 1.1% month-on-month, reversing the 2.5% rise seen in February. Economists had expected prices to rise by 0.6%.

Despite the monthly slip, Berenberg UK economist Rob Wood suggests this is just volatility, with the index still rising at 1.4% on average over the last two months, which puts it in line with the 1.1% rise over the last two months recorded by the Nationwide index.

Even so, the slip to the headline number saw the housebuilders underperform Friday, with Barratt Developments leading the sector fallers to close down 1.8%. Fellow FTSE 100 stock Persimmon closed down 1.4%, while in the FTSE 250 Taylor Wimpey closed down 1.5% and Redrow closed down 1.1%.

The airlines were big movers Friday after easyJet and Flybe Group said they flew more passengers and filled more of the seats in their planes in recent weeks. EasyJet said it flew 5.1 million passengers in March, up from nearly 4.9 million in March 2013, while load factor, a measure of how many seats on its planes are filled, rose to 91.5%, from 90.5%.

Easyjet closed up 2.2%, while small-cap stock Flybe closed up 5.5%, and International Consolidated Airlines, owner of British Airways, closed up 1.5% after reporting their own traffic statistics on Thursday.

Irish flag carrier Aer Lingus, on the other hand, said passenger numbers fell to 703,000 in March, from 757,000 a year earlier. The stock is down 0.5%.

Pearson made solid gains to close up 2.5% after receiving an upgrade to Buy from Jefferies. Having visited academics in the US, the bank sees upside to the publisher on the back of improving sentiment there and increased spend on educational resources.

Major currency pairs have come through the volatility caused by the US payroll report to trade relatively flat over the session. At the time of the European market close, the euro trades at USD1.3700, and the pound trades at USD1.6587.

The price of gold has reacted more strongly to the data, rising nearly 1.0% since the print to a weekly high of USD1,306.60 per ounce.

A quieter start to next week brings German industrial production numbers on Monday, with the same numbers from the UK on Tuesday. A key focus of the week may well be the German CPI numbers due on Friday, following the ECB comments this week about possible policy easing if there is a prolonged period of too low inflation.

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