London close: Stocks hold onto gains despite cable spike on poor US payrolls

Fri 01 Sep 2017

LONDON (SHARECAST) - (ShareCast News) - London stocks held on to slight gains over Friday from strong Chinese and UK manufacturing data, before disappointing US payrolls data sent the pound spiking higher.

The FTSE 100 ended the first day of September up 0.11% to 7,438.50, while the pound was up 0.65% against the euro to 1.0928 and up 0.27% against the dollar at 1.2965 after US jobs growth was shown to have slowed a tad last month.

US non-farm payrolls data came in at 156,000 versus forecasts for an increase of 180,000, alongside wage gains that again fell short of estimates, amid a sharp decline in service sector hiring.

Significantly, average hourly earnings were just a touch higher, rising by 0.1% on the month for an unchanged year-on-year reading of 2.5%.

Capital Economics' chief US economist, Paul Ashworth, commented: "With the survey evidence still strong and third-quarter economic growth on course for another decent gain after the second, there is no reason to believe that the modest drop-off in employment growth is the start of a more serious downturn. Nevertheless, since the September figures could be affected by Hurricane Harvey, the Fed might be waiting until the October data are released in early November before confirming that the labour market remains in good health."

Gold also hit another new nine-month high on the back of the disappointing US jobs figures. Said analyst David Madden at CMC Capital: "The all-round poor report has set the Federal Reserve back from tightening monetary policy. Even before the figures were released, traders were factoring in a low probability of an interest rate hike in December, and now it has further diminished."

Meanwhile, oil prices gushed lower as the storm that was Hurricane Harvey paralysed more than a quarter of the US refining industry. West Texas Intermediate was down 1.2% earlier but recovered to $47.10 a barrel and Brent crude was off 0.3% at $52.72.

Data released earlier showed UK manufacturing activity last month surprisingly strengthened to its second best level in three years as output, new orders and rates of hiring all improved.

Markit's purchasing managers' index for August rose to 56.9 from the 55.1 a month before and above the 55.0 consensus expected by analysts.

Production rose at the steepest pace in seven months, the survey compiler said, underpinned by faster intakes of new work received, while rates of expansion in both were among the best since mid-2014.

With all manufacturing sectors benefiting, the domestic market was said to be the prime source of new contract wins, though new export business remained "robust" but not quite at July's near-record high.

The broad strength of the survey added weight to economist Andrew Wishart at Capital Economics' view that the sector will put a disappointing first half to the year behind it.

On the basis of past form, he said the output balance was consistent with quarterly growth of about 1.0% in the sector, also noting that the input prices balance reversed some its previous decline reflecting the recent slide in the pound.

Yet earlier, the Caixin survey of Chinese manufacturing came in above expectations, with the August reading of 51.6 better than the anticipated drop to 50.9 from 51.1 in July. This is a private survey, and is deemed to be more impartial than the official figures from Beijing.

Miners including Antofagasta, Glencore and Anglo American led the blue cap rally.

In corporate news, Indivior lost more than a third of its value as it said there was a "material" risk to revenue after a US court ruled that a generic version of its Suboxone film to treat opioid addiction by Dr Reddy's does not infringe any of the London-listed company's patents. Indivior, which generated around 80% of revenue last year from Suboxone - is set to appeal the decision.

Digital property and household-related services owner ZPG rose after announcing the acquisition of Ravensworth, the "UK's leading provider" of on-demand print and creative marketing services to estate and letting agents, for an undisclosed sum.

Rio Tinto was in the black after confirming the completion of the sale of its wholly-owned subsidiary Coal & Allied Industries Limited to Yancoal Australia.

Micro Focus completed its merger with HPE Software on Friday, returned capital and consolidated its shares.

Greene King was hit by a downgrade to 'reduce' at HSBC, while JD Wetherspoon fell after a downgrade to 'hold' by the same outfit and Dixons Carphone was dragged lower by a cut to 'hold' at Investec.

Market Movers

FTSE 100 (UKX) 7,438.50 0.11%
FTSE 250 (MCX) 19,786.18 -0.09%
techMARK (TASX) 3,427.08 0.25%

FTSE 100 - Risers

Ashtead Group (AHT) 1,705.00p 2.53%
Shire Plc (SHP) 3,925.50p 2.40%
Antofagasta (ANTO) 1,058.00p 2.22%
Glencore (GLEN) 367.00p 2.09%
TUI AG Reg Shs (DI) (TUI) 1,334.00p 1.99%
Standard Life Aberdeen (SLA) 437.00p 1.72%
Paddy Power Betfair (PPB) 6,910.00p 1.39%
DCC (DCC) 7,140.00p 1.35%
Anglo American (AAL) 1,420.00p 1.25%
GKN (GKN) 323.20p 1.22%

FTSE 100 - Fallers

Micro Focus International (MCRO) 2,264.00p -7.74%
Convatec Group (CTEC) 280.20p -2.54%
BT Group (BT.A) 288.50p -1.40%
Land Securities Group (LAND) 996.50p -1.39%
Kingfisher (KGF) 295.40p -1.27%
Provident Financial (PFG) 872.00p -1.25%
ITV (ITV) 156.70p -1.20%
Hammerson (HMSO) 555.00p -1.07%
British Land Company (BLND) 605.00p -1.06%
Persimmon (PSN) 2,636.00p -0.86%

FTSE 250 - Risers

Sophos Group (SOPH) 532.50p 5.86%
Dunelm Group (DNLM) 616.50p 5.47%
Ferrexpo (FXPO) 315.00p 5.25%
Polypipe Group (PLP) 411.30p 4.12%
Daejan Holdings (DJAN) 6,160.00p 4.12%
Kaz Minerals (KAZ) 869.50p 3.45%
Vedanta Resources (VED) 877.50p 2.93%
Syncona Limited NPV (SYNC) 167.50p 2.93%
ZPG Plc (ZPG) 362.50p 2.84%
Pets at Home Group (PETS) 187.30p 2.80%

FTSE 250 - Fallers

Indivior (INDV) 267.60p -35.77%
Evraz (EVR) 315.30p -5.94%
TBC Bank Group (TBCG) 1,618.00p -4.03%
Greene King (GNK) 663.00p -3.84%
Carillion (CLLN) 42.42p -3.83%
CLS Holdings (CLI) 214.00p -3.69%
Petrofac Ltd. (PFC) 403.80p -3.49%
Tullow Oil (TLW) 151.20p -3.14%
Electra Private Equity (ELTA) 1,646.00p -2.93%
Restaurant Group (RTN) 337.30p -2.66%
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