MARKET COMMENT: FTSE 100 Slides On US Jobs Data, Miners Weigh

LONDON (Alliance News) - The FTSE 100 ended lower Friday, and ended down over the week as a whole, as London-listed mining stocks were again hit by lower commodity prices, and as stocks in the US were hit by a by a better-than-expected US jobs report that raised expectations the Federal Reserve could start raising interest rates as soon as June.

The FTSE 100 was lower from the start as mining stocks came under pressure from lower commodity prices. The index has a large number of constituents in the sector. It dropped further once the US jobs data was released.

The blue-chip index closed down 0.7% at 6,911.80, meaning it was down 0.5% for the week as a whole. The FTSE 250 closed down 0.2% at 17,272.21, while the AIM All-Share index outperformed, closing up 0.6% at 718.11.

The US Labor Department said non-farm payroll employment jumped by 295,000 jobs in February, following a downwardly revised increase of 239,000 jobs in January. Economists had expected employment to increase by about 230,000 jobs compared with the addition of 257,000 jobs originally reported for the previous month.

The US unemployment rate fell to 5.5% in February, from 5.7% in January, coming in below economists' estimates for a rate of 5.6% and recording its lowest level since hitting 5.4% in May of 2008.

"I think this is a very good labour market report and will only feed into expectations for a rate hike from the Federal Reserve in June," said Oanda analyst Craig Erlam.

But Erlam thinks the June meeting may just come a little soon, with wage growth not quite taking off yet. "I still believe that the Fed will wait until September to act. They are clearly in no rush to make this decision and with inflation below target, they don’t need to," he said.

The dollar strengthened further against its major counterparts in the wake of the report, trading the pound at USD1.5081 while the euro was at its lowest level since September 2003 at USD1.0876.

The gold price fell due to the dollar's rise, and was quoted at USD1,174.02 when the London equity markets closed, its lowest level since early January.

When the London equity markets closed, Wall Street was lower, with the DJIA down 1.0%, the S&P 500 down 0.8% and the Nasdaq Composite down 0.6%. Tech giant Apple will replace AT&T in the DJIA on March 18.

In Europe, the CAC 40 in Paris closed up 0.1%, and the DAX 30 in Frankfurt ended up 0.4%.

Fourth quarter eurozone GDP met expectations, rising 0.9% quarter-on-quarter. The figure was a slight improvement on the third quarter reading of 0.8%. The year-on-year figure also matched estimates of 0.3% growth, marginally higher than the 0.2% shown in the third quarter.

The median expectations for UK inflation for the coming year was 1.9% in February compared with 2.5% in November, according to a survey from the Bank of England. This was its lowest level in more than 13 years. UK inflation had fallen to a record low 0.3% in January, dragged by falling motor fuel and food prices.

In London, gold miners suffered from the weakness of the precious metal price, with Randgold Resources ending as the worst performer in the FTSE 100, down 5.3%, followed by Fresnillo, down 5.2%.

Anglo American was down 2.5% while Rio Tinto slid 2.3% as iron ore prices fell to a fresh six-year low, according to reports.

Outside of mining, AstraZeneca closed down 1.6%. The pharmaceutical giant guided that it expects its total revenue to decline by a mid-single digit percentage at constant exchange rates in 2015, in line with previous sales revenue guidance it gave at the time of its full-year results, as it announced changes to the way it presents its revenue. AstraZeneca maintained its core earnings per share guidance.

Oil and gas service company Weir Group was the biggest gainer in the blue-chip index, up 4.3% at 1,827 pence, as several media reported speculation that it could attract a bid from a US private equity firm. The Independent said that GE Capital is being linked with making a 2,800.00 pence per share bid, though it attributed this to "starry-eyed punters".

Shares in FTSE 250-listed Thomas Cook Group flew up 25%, after Chinese investment firm Fosun International bought a 5% stake in the UK travel operator and said it plans to increase its stake to 10% by buying shares in the open market over time.

Under the deal, Thomas Cook will issue Fosun with 73.1 million new shares for GBP91.8 million, giving it a 5% stake in the business. Fosun will then buy shares in the open market to take its stake up to about 10% over time. The share issue values Thomas Cook shares at 125.58 pence.

In the corporate calendar Monday, WPP, Clarkson, HgCapital Trust, Hansteen Holdings and Mincon Group will issue full year results, while Gemfields and Abcam will release half year results.

In the economic calendar, German current account and import and export data are due at 0700 GMT. Eurozone sentix investor confidence is at 0930 GMT followed by the Eurogroup meeting in Brussels at 1530 GMT. In the US, Labor market conditions index is at 1400 GMT.

By Daniel Ruiz; danielruiz@alliancenews.com

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