London close: FTSE falls as US jobs report lifts dollar and bond yields

London stocks finished a weak week with more Friday falls, led lower by disappointing reading on the UK construction sector and as a strong US payrolls lifted the dollar and bond yields to send stocks lower, especially miners.

The FTSE 100 fell 0.6% to 7,443.43 to lose more than 222 points of 2.9% over the week, extending losses from the second half of January to around an eight-week nadir.

Friday's falls came even though the pound slipped further, trading down 0.76% against the dollar to 1.4155 and 0.43% versus the euro at 1.1355. A weaker pound usually helps to prop up the top-flight index, as around 70% of its constituents derive most of their earnings from overseas, while a stronger dollar makes metals more expensive for holders of other currencies.

London's metals megaliths Glencore, BP, Anglo American and Antofagasta led the fallers, while rising sovereign bond yields continued to upset demand for equities.

The dollar rose after official figures showed earnings for US workers rising faster than expectations, fuelling expectations of interest rate rises to come. Average hourly earnings rose 2.9% year-on-year in January, which was faster than the 2.5% rate in December and ahead of analysts' expectations for 2.6% growth. The US added 200,000 jobs – higher than the 180,000 figure pencilled in by economists.

"The week looks set to end on a downbeat tone, with the positive surprise in today’s US jobs data doing little to help stocks amid further weakness in Treasury prices," said analyst Joshua Mahoney at IG.

"With inflation representing a core driver of monetary policy, the jump in US average earnings (2.9% from 2.5%) puts more pressure on the Fed to continue tightening as they move into the Powell era. With the recent rise in Treasury yields having a grounding in the strengthening economic picture, it comes as no surprise that we have seen another leg higher upon the release of today’s stronger than expected jobs numbers."

Data out earlier showed the UK’s construction industry was “teetering on the edge” of contraction last month amid the collapse of Carillion and as Brexit and the surrounding political uncertainty curtailed investment.

The IHS Markit/CIPS UK Construction headline PMI for January was 50.2, down from 52.2 in December and marking a four-month low. It was also well below the consensus estimate of 52.0. Residential building activity slipped into decline, while overall, total industry activity barely rose.

Pantheon Macroeconomics said the collapse of Carillion, which operates in the commercial and public sectors, could not explain why the PMI fell in January.

“Although the PMI remained slightly above the 50-mark that in theory should separate expansion from contraction, all readings below 52 have signalled declining output in practice. Housebuilding was the weakest sub-component; the housing activity index fell below 50 for the first time since August 2016. By contrast, the commercial and civil engineering balances both edged above 50,” the economists said.

In corporate news, BT shares drooped back towards a five year low as it said third quarter revenues declined 3% to £5.9bn and adjusted earnings were 2% lower to £1.8bn, reflecting investment in mobile devices and customer experience, along with higher business rates and pension costs, partly offset by cost savings.

Cobham slumped 6% after saying it has entered a conditional agreement to divest its AvComm and Wireless test and measurement businesses to Viavi Solutions for $455m in cash (around £325m).

National Grid ticked down as it said that US tax changes were “significantly positive” for its US customers and economically neutral for the company itself.

AstraZeneca climbed out of the red as investors weighed up news of a US legal dispute with Array BioPharma against its full-year results. After a good fourth quarter, total revenue was down 2% last year and core earnings per share down just 1% after the group a year ago warned of a potential fall in the mid-teens.

FTSE 250 engineering group Meggitt edged up after receiving a $26m contract to provide thermal management systems to General Dynamics Land Systems for its main battle tank, the M1 Abrams.

Provident Financial advanced as it made Malcolm Le May its permanent chief executive, with the banking veteran having last year been appointed executive chairman on temporary basis. Since its trading statement last month, it added that the doorstep lending business has made "further operational progress" and that discussions were continuing with regulators the Vanquis Bank and Moneybarn investigations.

Oil industry engineer Wood Group edged up as it said it would book a one-off full year non-cash credit as a result of recent US tax changes, while Vedanta Resources gained a little ground after it said that earnings and revenue in the third quarter rose.

Mediclinic was in the black after Barclays reinstated coverage of the stock at ‘overweight’, and also boosted NMC Health as it rated the stock a new ‘overweight’. DS Smith was boosted by an upgrade to ‘hold’ at Goodbody Stockbrokers, while Mondi was up after an upgrade to ‘buy’ at the same outfit. This in turn helped to underpin Smurfit Kappa ahead of its results next week.

Britvic was upgraded to ‘overweight’ at JPMorgan, while Capita was upgraded to ‘equalweight’ at Morgan Stanley and Auto Trader was up after an upgrade from UBS.

Royal Mail was downgraded to ‘hold’ by HSBC.

Market Movers

FTSE 100 (UKX) 7,443.43 -0.63%
FTSE 250 (MCX) 19,962.46 -1.11%
techMARK (TASX) 3,377.42 -0.42%

FTSE 100 - Risers

AstraZeneca (AZN) 5,040.00p 3.15%
Vodafone Group (VOD) 219.50p 2.38%
Smurfit Kappa Group (SKG) 2,566.00p 1.34%
Admiral Group (ADM) 1,849.00p 1.29%
Direct Line Insurance Group (DLG) 374.90p 0.94%
Scottish Mortgage Inv Trust (SMT) 456.00p 0.93%
RSA Insurance Group (RSA) 622.00p 0.75%
London Stock Exchange Group (LSE) 4,014.00p 0.48%
Micro Focus International (MCRO) 2,138.00p 0.38%
Unilever (ULVR) 4,044.00p 0.30%

FTSE 100 - Fallers

Glencore (GLEN) 382.75p -4.26%
Evraz (EVR) 364.50p -3.85%
Johnson Matthey (JMAT) 3,336.00p -2.85%
International Consolidated Airlines Group SA (CDI) (IAG) 629.60p -2.66%
Ashtead Group (AHT) 2,034.00p -2.45%
BP (BP.) 489.45p -2.40%
Anglo American (AAL) 1,650.40p -2.34%
Antofagasta (ANTO) 900.40p -2.32%
ITV (ITV) 168.85p -2.31%
Tesco (TSCO) 201.60p -2.28%

FTSE 250 - Risers

Provident Financial (PFG) 715.00p 6.72%
Aggreko (AGK) 781.60p 3.25%
TBC Bank Group (TBCG) 1,664.00p 2.59%
Capita (CPI) 162.30p 2.33%
Stobart Group Ltd. (STOB) 245.00p 1.87%
Dechra Pharmaceuticals (DPH) 2,382.00p 1.79%
Purecircle Limited (DI) (PURE) 431.50p 1.77%
RPC Group (RPC) 836.00p 1.70%
CLS Holdings (CLI) 239.50p 1.70%
Royal Mail (RMG) 504.70p 1.69%

FTSE 250 - Fallers

Cobham (COB) 117.05p -6.17%
Ferrexpo (FXPO) 279.00p -5.62%
Vedanta Resources (VED) 790.20p -5.09%
Intermediate Capital Group (ICP) 1,124.00p -4.42%
Kaz Minerals (KAZ) 797.60p -3.88%
Dunelm Group (DNLM) 625.00p -3.85%
JPMorgan Indian Investment Trust (JII) 722.00p -3.73%
AA (AA.) 127.50p -3.70%
Acacia Mining (ACA) 179.45p -3.52%
Sanne Group (SNN) 718.00p -3.49%