London close: Shares drop as pound pops higher again

London stocks fell for the fourth day in a row on Friday as the pound rallied, with investors jittery as they eyed global trade developments and the release of the latest non-farm payrolls report.

The FTSE 100 finished down 41.26 points or 0.56% to 7,277.70, finishing below the 7,300 level for the first time in nearly five months, as the pound spiked on comments from the EU's chief Brexit negotiator, Michel Barnier.

Transcripts from earlier in the week published by the UK parliament showed that Barnier was open to the possibility of discussing a new customs arrangement for the Irish border. The pound climbed 0.6% against the euro to 1.1174 and was up similarly against the dollar before giving up the gains as the greenback was boosted by the US jobs report.

August's non-farm payrolls report was strong, with 201,000 jobs added versus the anticipated 198,000, while the July report was revised lower to 147,000 from 157,000. The key trigger to lift the dollar was average earnings on a yearly basis were 2.9%, up from 2.7% the previous month and the highest growth since 2009.

This kept the Federal Reserve on track for two more hikes this year, several economists said.

Said Barclays: "We expect rate hikes in September and December and believe FOMC participants will see the wage data as providing evidence that much, if not all, of existing slack in labor markets has been removed."

Per Capital Economics: "With activity booming and core PCE inflation having risen to the 2% target, the continued strength of the labour market keeps the Fed firmly on track to raise interest rates twice more this year, starting with a 25bp hike at the FOMC meeting in two weeks’ time."

Trade was very much in focus as the deadline arrived for the conclusion of public consultation on the White House's threatened tariffs on another $200bn worth of Chinese goods, which was thought would be the trigger for President Trump to confirm the new tariffs. But White House economic adviser Larry Kudlow said officials would evaluate the comments before any decision was made.

"The president himself, we will evaluate the comments and we will make a decision regarding the $200bn,” Kudlow said on Bloomberg TV. “We’ll make a decision on the volume, on the rate, on the timing, I don’t want to get ahead of that curve, it’s out there."

US talks with Canada were also ongoing, as Canada’s foreign affairs minister Chrystia Freeland booked in for another few nights in Washington to try and thrash out a Nafta deal.

Closer to home, a survey by Halifax out earlier showed that house prices in the UK rose 3.7% in the three months to August compared to the same period a year ago, up from a 3.3% increase the month before but below analysts’ expectations for growth of 3.9%.

On the month, house prices were 0.1% higher, topping expectations of a 0.3% decline following a 1.2% drop in July.

The number of first-time buyers was up around 3% in the first six months of 2018 to 175,500. This marks the sixth increase over a comparable period in the last seven years and the third consecutive year that first-time buyer numbers have topped 150,000.

Halifax managing director Russell Galley said: "While the pace of employment growth has recently slowed, a low unemployment rate and a gradual pickup in wage growth are helping to support household finances. This has been accompanied by interest rates still remaining at a historically low rate and a stable, yet constrained, supply of new homes onto the market further supporting house prices."

Among individual companies, Primark owner Associated British Foods was under the cosh after accountancy and business advisory firm BDO's monthly High Street Sales Tracker showed that like-for-like sales declined 2.7% in August compared to a year earlier, marking the worst August drop for three years. Next was also lower.

Miners were in the red as copper prices fell, with Antofagasta, Glencore and Anglo American beating a retreat.

International Consolidated Airlines Group was the worst performer after British Airways announced that the payment card information of at least 380,000 customers had been compromised in a data theft.

Drug giant AstraZeneca finished flat even after saying that it and Amgen have been granted a breakthrough therapy label for their drug to treat a type of severe asthma by the US Food and Drug Administration.

Playtech edged higher as it sold around 11.4m shares in Plus500 - its entire stake - at 1,550p per share, realising gross proceeds of approximately £176m that will be used for general corporate purposes and debt reduction. Plus500 shares slumped.

Healthcare company BTG gained after saying it was paying up to $130m in cash to buy Ireland-based Novate, which specialises in the prevention of pulmonary embolism (PE) in patients at high risk of venous thromboembolic events

Going the other way, Greene King frothed up as it said positive momentum in its Pub Company unit continued through the summer with like-for-like sales up 2.8% for the first 18 weeks of the year, ahead of the market, which was up 1.2%. Peer JD Wetherspoon was lifted by the news.

Smith & Nephew was the top gainer on the FTSE 100 as Morgan Stanley said in a note that it sees "significant upside potential" but awaits catalysts before making a more positive call on the equalweight-rated stock.

Emerging markets focused asset manager Ashmore rallied after it reported steady full-year pre-tax profit and record net inflows, as it said it was in the process of establishing an office in Ireland ahead of Brexit.

In broker note action, Shire was cut to ‘hold’ by Berenberg, while DCC was initiated at ‘outperform’ by RBC Capital Markets and Burberry was downgraded to ‘neutral’ at Goldman Sachs.

Market Movers

FTSE 100 (UKX) 7,277.70 -0.56%
FTSE 250 (MCX) 20,209.61 -0.36%
techMARK (TASX) 3,442.68 0.26%

FTSE 100 - Risers

Smith & Nephew (SN.) 1,384.00p 2.18%
Sage Group (SGE) 581.60p 2.00%
WPP (WPP) 1,165.00p 1.79%
BAE Systems (BA.) 620.00p 1.64%
DCC (DCC) 6,845.00p 1.63%
NMC Health (NMC) 3,690.00p 1.43%
BT Group (BT.A) 222.90p 1.13%
Vodafone Group (VOD) 165.26p 0.77%
Just Eat (JE.) 704.00p 0.69%
Sky (SKY) 1,550.00p 0.52%

FTSE 100 - Fallers

Antofagasta (ANTO) 744.20p -4.15%
Fresnillo (FRES) 833.80p -3.36%
Glencore (GLEN) 295.95p -2.68%
CRH (CRH) 2,476.00p -2.68%
Ashtead Group (AHT) 2,258.00p -2.63%
GVC Holdings (GVC) 1,065.00p -2.47%
Randgold Resources Ltd. (RRS) 4,769.00p -2.45%
Ocado Group (OCDO) 977.60p -2.08%
St James's Place (STJ) 1,101.00p -2.00%
Lloyds Banking Group (LLOY) 58.71p -1.95%

FTSE 250 - Risers

Greene King (GNK) 510.60p 7.49%
Convatec Group (CTEC) 225.00p 5.93%
Kier Group (KIE) 948.00p 5.22%
Sophos Group (SOPH) 510.00p 3.51%
Wetherspoon (J.D.) (JDW) 1,243.00p 3.33%
Ascential (ASCL) 434.60p 2.50%
Greggs (GRG) 1,047.00p 2.43%
Rank Group (RNK) 174.60p 2.22%
Aveva Group (AVV) 2,666.00p 2.07%
McCarthy & Stone (MCS) 117.40p 1.91%

FTSE 250 - Fallers

Hochschild Mining (HOC) 161.55p -4.51%
Go-Ahead Group (GOG) 1,752.00p -4.26%
Hunting (HTG) 748.00p -4.04%
Just Group (JUST) 84.50p -3.92%
Contour Global (GLO) 209.40p -3.86%
Superdry (SDRY) 1,135.00p -3.65%
Kaz Minerals (KAZ) 440.50p -3.61%
Sirius Minerals (SXX) 26.32p -3.59%
Metro Bank (MTRO) 2,680.00p -3.53%
TalkTalk Telecom Group (TALK) 127.50p -3.41%