London close: Stocks rally amid US rate cut hopes; Millennium & Copthorne surges

London stocks ended with strong gains on Friday as a weak non-farm payrolls report boosted expectations that the Federal Reserve will cut interest rates.

The FTSE 100 closed up 1% at 7,331.94, while the pound was 0.4% firmer against the dollar at 1.2743 and 0.1% lower versus the euro at 1.1244.

Data released by the US Department of Labor earlier showed that non-farm payrolls rose by 75,000 in May, falling short of the consensus forecast for a rise of 190,000. Meanwhile, gains for the previous two months were revised down by a combined 75,000.

Average hourly earnings also missed economists' forecasts, with the year-on-year rate of increase slipping from 3.2% to 3.1%.

Despite the positive tone, Markets.com analyst Neil Wilson was wary about getting too carried away. He pointed out that "one swallow does not make a summer" and "a poor print every few months does not mean the US economy is on the cusp".

"Market odds of a June rate cut just increased for sure, but it’s hard to see how this is indicative of where the Federal Open Market Committee is yet. Markets are baking in too great a chance of a hike and this non-farm payrolls miss only increases the risk," he said.

The mood was also lifted after the US government said it was granting Chinese exporters two more weeks to get their products into the US before lifting tariffs on those items. However, the White House also said that the 5% tariffs on Mexican imports were still due to go ahead on Monday.

On home turf, the latest figures from Halifax showed that house price rose by 0.5% on the month in May, beating consensus expectations of a flat reading. The three-month average of year-over-year growth in prices rose to 5.2% from 5.0% in March, above the consensus forecast of 5%.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the data is "still misleading upbeat".

"It’s still impossible to reconcile Halifax’s data with any of the other measures of house price growth. Nationwide and Rightmove reported that house prices were up a mere 0.6% and 0.1%, respectively, in year-over-year terms in May, while the official measure increased by just 1.4% in March. The average value of house purchase mortgage approvals rose by a stronger 2.9% year-over-year in April, but it too is rising at a much slower rate than Halifax’s measure of house prices.

"We don’t have a strong view as to why Halifax’s data is giving a misleading steer, though we note it has been about twice as volatile as other measures in the past and it is seasonally adjusted using an antiquated methodology. Regardless, we still expect year-over-year growth in house prices to strengthen to about 1.5% by the end of this year, given that households’ real incomes still are rising at a solid rate, while the recent decline in interest rate expectations should reduce mortgage rates soon."

In equity markets, Millennium & Copthorne rocketed into the close after agreeing to be bought by Singapore-listed real estate company City Developments for £2.23bn.

BT Group advanced after chief executive officer Philip Jansen bought just under 1.5 million shares in the company at 202p each.

Iron ore pellet producer Ferrexpo rallied as it said group first-half underlying earnings were expected to increase "materially" due to higher prices and sales.

Games Workshop was also a high riser as it said sales and profit growth extended to the end of its financial year as it reiterated guidance for annual results. Sales for the year to 2 June will be about £254m and pre-tax profit will be at least £80m, versus profit of £74.55m a year earlier.

GlaxoSmithKline nudged up after saying that the US Food and Drug Administration has approved two new methods for self-administering its Nucala asthma treatment.

AJ Bell reversed earlier losses to end up after Invesco Asset Management sold 38 million shares - a 9.3% stake - in the business for £144.4m.

In broker note action, 888 was boosted by an upgrade to 'overweight' at JPMorgan, while Ascential was up after an initiation at 'outperform' by Macquarie.

Rio Tinto was a little weaker after a downgrade to 'underweight' at Barclays and Royal Mail was knocked lower by a downgrade to 'hold' at HSBC. Pets at Home was also on the back foot after a downgrade to 'hold' at HSBC.

Market Movers

FTSE 100 (UKX) 7,331.94 0.99%
FTSE 250 (MCX) 19,232.39 0.88%
techMARK (TASX) 3,572.95 1.14%

FTSE 100 - Risers

Smurfit Kappa Group (SKG) 2,269.00p 3.42%
British American Tobacco (BATS) 3,014.00p 3.38%
TUI AG Reg Shs (DI) (TUI) 743.20p 3.37%
BT Group (BT.A) 207.20p 2.98%
InterContinental Hotels Group (IHG) 5,198.00p 2.85%
Pearson (PSON) 799.60p 2.78%
Carnival (CCL) 3,928.00p 2.53%
Halma (HLMA) 1,892.00p 2.38%
Ashtead Group (AHT) 1,958.00p 2.14%
Mondi (MNDI) 1,680.50p 2.13%

FTSE 100 - Fallers

Marks & Spencer Group (MKS) 220.50p -1.34%
Next (NXT) 5,722.00p -0.93%
Ocado Group (OCDO) 1,113.00p -0.80%
International Consolidated Airlines Group SA (CDI) (IAG) 466.80p -0.74%
Morrison (Wm) Supermarkets (MRW) 194.50p -0.74%
Rio Tinto (RIO) 4,513.50p -0.55%
Flutter Entertainment (FLTR) 5,870.00p -0.37%
AstraZeneca (AZN) 6,030.00p -0.25%
Glencore (GLEN) 260.70p -0.21%
Barclays (BARC) 151.06p -0.12%

FTSE 250 - Risers

Millennium & Copthorne Hotels (MLC) 680.00p 36.00%
Kier Group (KIE) 155.80p 7.15%
Spectris (SXS) 2,684.00p 5.01%
Games Workshop Group (GAW) 4,654.00p 4.68%
Babcock International Group (BAB) 480.00p 4.21%
Ferrexpo (FXPO) 248.30p 3.98%
Galliford Try (GFRD) 677.50p 3.83%
Just Group (JUST) 46.24p 3.77%
Drax Group (DRX) 302.40p 3.63%
3i Infrastructure (3IN) 290.00p 3.39%

FTSE 250 - Fallers

Ted Baker (TED) 1,299.00p -5.04%
Amigo Holdings (AMGO) 258.00p -4.27%
Metro Bank (MTRO) 642.50p -4.03%
Royal Mail (RMG) 195.90p -3.73%
Go-Ahead Group (GOG) 2,006.00p -3.56%
Bakkavor Group (BAKK) 120.00p -3.23%
Woodford Patient Capital Trust (WPCT) 62.80p -2.64%
RHI Magnesita N.V. (DI) (RHIM) 4,580.00p -2.09%
Workspace Group (WKP) 867.50p -1.87%
Pets at Home Group (PETS) 176.70p -1.83%