MARKET COMMENT: London Stocks Close Down Amid Mixed US Jobs Report

LONDON (Alliance News) - London's Main Market indices ended lower Friday, as a mixed US jobs report added to global growth concerns raised earlier in the day by a fall in producer prices in China and a drop in German industrial output.

The FTSE 100 closed down 1.1% at 6,501.14, and the FTSE 250 ended down 0.5% at 16,010.96. The AIM All-Share, however, closed the day up 0.5% at 703.45. In its first full trading week of 2015, the FTSE 100 ended 0.7% lower, despite Thursday's strong rally.

In Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt both ended down 2.2%. At the London close, the DJIA was down 1.2%, while the S&P 500 and the Nasdaq Composite were both down 1.1%.

The US Labor Department said non-farm payroll employment increased by 252,000 jobs in December after jumping by an upwardly revised 353,000 jobs in November. Employment had been expected to climb by about 245,000 jobs. The stronger than expected job growth helped to push the unemployment rate down to 5.6% in December from 5.8% in November, its lowest level since June 2008.

However, average hourly earnings in December fell by 0.2% month-on-month, missing expectations for a 0.2% rise and compared with a revised 0.2% increase in November. Following the report, Chicago Federal Reserve President Charles Evans said the central bank should be patient on raising interest rates due to concerns about low inflation and declining US wages. Despite overall improvements in the labor market, Evans would not start raising rates from zero before 2016, he said in a televised interview on CNBC.

"[The fall in wages] is significant, as if the US economy's purported growth isn't being felt in the wallets of average Americans, then the feasibility, and wisdom, of a Federal Reserve interest rate hike comes into question," said Connor Campbell, financial analyst at Spreadex.

Producer prices in China fell in December, dropping 3.3% from a year earlier, picking up speed from a fall of 2.7% in November. Consumer prices rose 1.5% on the year in December, in line with forecasts. However, for the full year, the country's consumer price index rose 2.0%, below the central bank's 3.5% annual inflation target.

German industrial production dropped 0.1% on the month in November as energy output fell, adding to the prospect of increased stimulus measures from the European Central Bank. Trade balance figures for Germany showed a 2.1% drop in exports from Europe's largest economy in November, while imports rose 1.5%.

Oil prices remained under pressure, with Brent falling to another five-and-a-half year low towards the end of the trading session. At its lowest level of the day, it traded at USD48.712 a barrel. US benchmark West Texas Intermediate fell to a low of USD47.14 a barrel.

Housebuilders Persimmon, down 5.2%, Barratt Developments, 5.1%, and Taylor Wimpey, down 5.4% closed as the worst performers in the FTSE 100 following downgrades from Jefferies. Taylor Wimpey was cut to Hold from Buy, Barratt was cut to Underperform from Buy, and Persimmon was downgraded to Underperform from Hold.

Catlin Group, up 6.0%, closed as the biggest gainer in the FTSE 250. New York-listed XL Group and Catlin Group said they've agreed the terms of a GBP2.79 billion deal that will see XL acquire its re-insurance peer. According to a joint-statement, Catlin shareholders are set to receive 388 pence and 0.130 new XL shares, plus an expected 2014 final dividend of 22 pence in cash to be paid by Catlin. This values Catlin at about 715.3 pence per share. Catlin closed trade at 702.00p.

Laird, closed as the worst mid-cap performer, down 9.1%. The electronics company said it is confident that its expectations for the financial year 2014 remain on track. "Execution of our strategy has delivered further good progress through the year, and we remain encouraged by the outlook for Laird," Chief Executive David Lockwood said in a trading update. Liberum said Laird is likely being held back by weakness at major customer Samsung.

The economic calendar on Monday is very light with no scheduled domestic or European releases. US Labor Market Conditions Index figures for December will be at 1500 GMT.

The only scheduled corporate releases Monday will be a trading statement from Taylor Wimpey, and a third quarter interim management statement from online domestic appliance retailer AO World.

By Neil Thakrar; neilthakrar@alliancenews.com

Copyright 2015 Alliance News Limited. All Rights Reserved.