London close: Stocks rise on US payrolls, China reopening reports

London stocks closed in positive territory on Friday, amid swirling rumours of an impending post-Covid reopening in China, and as nonfarm payrolls for October once again beating expectations across the pond.

The FTSE 100 ended the session up 2.03% at 7,334.84, and the FTSE 250 was ahead 1.28% at 18,341.57.

Sterling was in a mixed state, and was last up 1.17% on the dollar at $1.1291, while it weakened 0.47% against the euro to trade at €1.1392.

“Despite yesterday’s negative US finish, Asia markets bounced back strongly today on more unsubstantiated reports that the Chinese government is looking at a reopening strategy as it looks to navigate a path out of the straitjacket of its current zero-Covid policy,” said CMC Markets chief market analyst Michael Hewson.

“These reports, which still haven’t been confirmed in any official capacity, have prompted a huge relief rally in equity markets, despite concerns that any reopening is unlikely to happen in the immediate future, and the very real risk that it is merely a sucker’s rally.

“As we head into the winter months it seems highly improbable that China would be able to reopen its economy in any meaningful or sustainable way without triggering a more widespread outbreak of Covid infections.”

Notwithstanding that, Hewson quipped that investors were piling in in a “classic case of FOMO”, or the fear of missing out.

“Further reports that China is also looking at relaxing restrictions around flight suspensions which penalised airlines that brought Covid cases into the country have also boosted airlines, as well as Rolls-Royce shares.

“In their third-quarter numbers yesterday Rolls-Royce blamed lower-than-expected large engine flying hours of 65% on the various Covid disruptions causing problems with air travel in the Asia region.

“A return to normal in Asia markets would be enormously helpful for Rolls-Royce as it navigates its way back to some form of normality.”

In economic news, nonfarm payrolls in the United States continued growing more quickly than expected last month, with the Labor Department reporting a seasonally-adjusted rise in payrolls of 261,000 during October.

Economists had pencilled in a much lower rise of about 200,000.

October's increase compared to revised increases of 292,000 and 315,000 in August and September, for a combined upwards revision for those months of 31,000.

Average hourly earnings increased at a month-on-month pace of 0.4%, beating expectations for 0.3%, while the rate of unemployment rose by two-tenths of a percentage point to 3.7%, above the 3.5% reading that was previously anticipated.

On home shores, construction activity in the UK continued to grow in October, but new orders fell for the first time in more than two years.

The S&P Global/CIPS construction purchasing managers’ index (PMI) rose to 53.2 from 52.3 in September, making the highest reading since May and coming in above expectations of 50.5.

A PMI reading above 50.0 indicates expansion, while a reading below signals contraction.

Higher levels of business activity were attributed to a combination of new project starts and strong pipelines of unfinished work.

Commercial building was the best-performing category, with output growth reaching a five-month high.

Meanwhile, residential work also expanded, albeit at a softer pace than in September, but civil engineering activity fell for the fourth month in a row.

The new orders index declined to 49.4 in October from 50.1 the month before, coming in below 50.0 for the first time since May 2020 and suggesting that rising borrowing costs could be starting to impact demand.

“Construction output has staged a modest recovery after the downturn seen through much of this summer, with growth hitting a five-month high in October,” said Tim Moore, economics director at S&P Global Market Intelligence.

“However, the forward-looking survey indicators highlight that growth will be harder to achieve in the coming months as rising borrowing costs, economic uncertainty and cost constraints all had a negative influence on order books in October.

“The reduction in total new work was the first since May 2020 and this fuelled increased concerns about longer term tender opportunities.”

Elsewhere, new car registrations improved slightly in October, with total registrations rising from 106,300 in 2021 to 134,300 in 2022.

According to the Society of Motor Manufacturers and Traders (SMMT), private new car registrations totalled 62,700 in October, above the 58,400 print a year ago, but below October 2018's 69,200.

The SMMT said October's increase likely reflected "a partial recovery" in real incomes due to the government's Energy Bill Support Scheme and cost-of-living grants.

However, sales were still a "significant" 11.8% below their 2015-2019 October average.

On the political front, the government denied it was planning to scrap or delay EDF’s Sizewell C nuclear project during the afternoon.

Responding to an earlier report from the BBC, a spokesman for prime minister Rishi Sunak said negotiations with the French utility over the £20bn project are ongoing.

"We hope to get a deal over the line as soon as possible," he said.

Earlier in the day, the BBC said the plan was under review and that all options were being looked at as the government tried to cut spending.

Indeed, the chancellor Jeremy Hunt was said to be preparing a raid to slam entrepreneurs, savers and landlords with higher taxes in his autumn budget later in the month, according to unnamed sources cited by the Telegraph.

The report said Hunt was considering an increase in the headline rate of capital gains tax, taxes on dividends and slashing or removing the £2,000 tax-free dividend allowance.

Capital gains tax was expected to raise £15bn in 2022-2023, or 1.5% of all receipts, with rates currently varying from 10% to 28% depending on the type of asset and the income of the taxpayer.

Hunt was looking at raising the dividend tax rate and a cut to the tax-free dividend allowance in a £1bn-a-year tax raid on pensioners, business owners and the self-employed, the newspaper claimed.

Finally, the RMT union said earlier that three 24-hour strikes over jobs, pay and conditions, set to begin on Saturday, had been suspended.

The union said it would now enter a "period of intensive negotiations with Network Rail and the train operating companies".

Even though the strikes were called off, RMT said the current dispute remained "very much live", adding that the union was continuing its re-ballot of members to secure a fresh mandate for action, with the result due on 15 November.

On the continent, eurozone business activity contracted in October as the cost-of-living crisis hit demand according to fresh data.

The S&P Global composite PMI for the 19-country single-currency bloc fell to a 23-month low of 47.3 in October from September's 48.1.

German factory orders meanwhile fell a lot more than expected in September, adding to concerns it is entering a recession.

According to the federal Destatis statistics office, factory orders declined by 4% on the previous month following a 2% drop in August, missing expectations for a 0.5% fall.

On the year, orders were down 10.8% in September following a 3.8% decline the month before and versus expectations for an 8.8% fall.

On London’s equity markets, miners were among the gainers as copper prices rose, with Anglo American up 11.13%, Rio Tinto Group ahead 7.81%, Glencore rising 2.5%, and Antofagasta 6.86% firmer.

The sector was boosted by further speculation that China could relax its Covid restrictions, leading Asia-focused insurer Prudential 8.97% higher, and Anglo-Asian banks HSBC and Standard Chartered ahead a respective 6.18% and 3.97%.

“The Hang Seng in Hong Kong has rallied by more than 5% overnight with the Hang Seng property and tech indices surged by more than 10% at one stage,” said Victoria Scholar, head of investment at Interactive Investor.

“The Hang Seng logged its best weekly gain since November 2011 amid speculation that some of China’s strict Covid rules that have sharply weighed on its economy could be set to ease in the coming months.

“So far, the speculation is only based on social media rumours with China’s foreign ministry commenting that it is not aware of the issue.”

Also lifting sentiment was a report suggesting that China was working on plans to scrap a system that penalises airlines for bringing virus cases into the country.

Bloomberg cited people familiar with the matter as saying that the State Council, which oversees China’s bureaucracy, recently asked government agencies including the civil aviation regulator to prepare for ending the so-called circuit-breaker mechanism.

Elsewhere, Morgan Advanced Materials surged 15.84% after it lifted its profit and revenue guidance as sales for the first nine months of the year rose 10.5%.

Promotional materials specialist 4imprint racked up gains of 5.31% after it upgraded its 2022 revenue guidance to around $1.1bn, from a previous $1bn, saying that profit was set to be at the top end of market expectations.

On the downside, grocery giant J Sainsbury was knocked 1.37% lower by a downgrade to ‘neutral’ at Exane.

Reporting by Josh White for Sharecast.com. Additional reporting by Michele Maatouk, Frank Presenti, Iain Gilbert and Alexander Bueso.

Market Movers

FTSE 100 (UKX) 7,334.84 2.03%
FTSE 250 (MCX) 18,341.57 1.28%
techMARK (TASX) 4,283.37 0.70%

FTSE 100 - Risers

Anglo American (AAL) 2,951.50p 11.13%
Prudential (PRU) 913.60p 8.97%
Endeavour Mining (EDV) 1,575.00p 7.73%
Fresnillo (FRES) 755.80p 7.69%
Rio Tinto (RIO) 5,030.00p 7.59%
Antofagasta (ANTO) 1,262.00p 6.86%
Rolls-Royce Holdings (RR.) 85.11p 6.18%
HSBC Holdings (HSBA) 490.00p 5.80%
JD Sports Fashion (JD.) 104.05p 5.63%
Burberry Group (BRBY) 1,933.50p 4.77%

FTSE 100 - Fallers

BAE Systems (BA.) 798.80p -2.99%
Pearson (PSON) 951.20p -2.00%
BT Group (BT.A) 114.10p -1.98%
Sainsbury (J) (SBRY) 208.70p -1.37%
Ocado Group (OCDO) 634.00p -0.78%
Relx plc (REL) 2,308.00p -0.30%
RS Group (RS1) 882.50p -0.28%
GSK (GSK) 1,445.60p -0.17%
Aveva Group (AVV) 3,140.00p -0.16%
Reckitt Benckiser Group (RKT) 5,738.00p -0.14%

FTSE 250 - Risers

Morgan Advanced Materials (MGAM) 281.50p 15.84%
Synthomer (SYNT) 123.60p 8.90%
Ferrexpo (FXPO) 112.70p 8.37%
Mitchells & Butlers (MAB) 136.30p 7.07%
Tullow Oil (TLW) 48.56p 6.17%
BlackRock World Mining Trust (BRWM) 643.00p 5.93%
Aston Martin Lagonda Global Holdings (AML) 110.85p 5.57%
Hochschild Mining (HOC) 54.30p 5.44%
Bodycote (BOY) 537.00p 5.40%
4Imprint Group (FOUR) 3,765.00p 5.31%

FTSE 250 - Fallers

Hikma Pharmaceuticals (HIK) 1,247.00p -3.82%
Bellevue Healthcare Trust (Red) (BBH) 157.60p -3.43%
Jlen Environmental Assets Group Limited NPV (JLEN) 118.80p -3.41%
Auction Technology Group (ATG) 800.00p -3.26%
GCP Infrastructure Investments Ltd (GCP) 92.20p -2.95%
Helios Towers (HTWS) 110.10p -2.91%
VinaCapital Vietnam Opportunity Fund Ltd. (VOF) 414.50p -2.70%
Vietnam Enterprise Investments (DI) (VEIL) 545.00p -2.68%
NextEnergy Solar Fund Limited Red (NESF) 103.40p -2.27%
Chemring Group (CHG) 304.00p -2.25%