London close: FTSE ends off highs as sterling enjoys late rally
London stocks ended off highs on Friday as the pound enjoyed a late-session rally, but solid quarterly numbers from HSBC, strength in the mining sector and a bumper US jobs report ensured a positive close.
The FTSE 100 finished up 0.4% at 7,380.64, having hit as high as 7418.17 intraday, as the pound surged late in the day as local election results pointed to heavy losses for both Labour and the Conservatives, sparking hopes that the parties will now feel more pressure to reach a deal on Brexit.
Sterling was up 0.9% against the dollar at 1.3145 and 0.7% firmer versus the euro at 1.1746.
Traders also pointed to comments from Labour leader Jeremy Corbyn, who reportedly said there was now a "huge impetus" on every lawmaker to "get a deal done".
Earlier in the day, the pound had dipped on the back of uninspiring services data.
The IHS Markit/CIPS UK services PMI business activity index rose to 50.4 last month from March’s 32-month low of 48.9, coming in pretty much in line with expectations. However, the reading was only just above the 50 mark that separates contraction from expansion, with another fall in new work highlighting still-subdued underlying demand conditions.
Survey respondents continued to report that Brexit uncertainty and concerns about the UK economic outlook were prompting clients to postpone spending decisions.
Chris Williamson, chief business economist at IHS Markit, said: "A near-stagnant service sector in April means that all three major parts of the economy were struggling to grow in April. Although the service sector joined construction in reporting a return to growth, in both cases the expansions were only marginal. An upturn in manufacturing is meanwhile showing signs of waning, as a temporary boost from Brexit-related stockpiling faded in April.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the survey continued to suggest that "the economy has no momentum".
Across the pond, meanwhile, the latest non-farm payrolls report showed the US added 263,000 jobs in April, smashing past expectations for a 190,000 rise. The unemployment rate fell to 3.6% from 3.8%, beating expectations for it to remain unchanged and marking the lowest level since December 1969.
Average earnings growth held steady at 3.2% on the year, which was a touch below the 3.3% pencilled in by economists. On the month, earnings were up 0.2%, just shy of the 0.3% expected.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the headline payroll number was boosted by a 27K rise in the government component, some of which was likely down to hiring for the 2020 Census. However, he said the 236K jump in private payrolls is still very solid, if not quite as spectacular as the 275K ADP reading.
"Overall, this is a strong report, but payroll gains can’t continue at this pace. What can continue, though, is the downshift in unemployment, and that means more power to scarce labour and faster wage gains in due course. No immediate policy implications, but it’s not hard to imagine that a run of reports like this would eventually prompt something of a rethink at the Fed."
In UK equity markets, miners advanced, with Anglo American and Antofagasta higher amid rising metals prices.
Artificial hip and knee maker Smith & Nephew was on the front foot for the second day in a row after upgrading its revenue guidance on Thursday.
HSBC rallied after it posted a 31% jump in first-quarter pre-tax profit to $6.2bn as revenue rose 5% to $14.4bn and operating expenses fell 12% to $8.2bn.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: "HSBC’s core businesses delivered solid performances in the first quarter, putting overall numbers comfortably ahead of market expectations.
"That’s been driven by the bank’s ability to keep cost low while growing revenues, and still investing $1bn in growth initiatives - that might not be the most exciting assessment of a bank’s results you’re ever going to get, but it’s good news for HSBC’s shareholders nonetheless."
Ultra Electronics gained after saying it was seeing further positive developments in its order book and continues to trade in line with expectations.
On the downside, InterContinental Hotels was lower despite saying it made a strong start to the year, as it reported a slowdown in revenue per average room growth in the first quarter.
Shares in Intu Properties slumped as the shopping centre owner warned that like-for-like net rental income will drop between 4% and 6% this year, with the rest of 2019 expected to be "challenging" due to a higher-than-expected level of CVAs and a slowdown in new lettings as tenants delay decisions partly due to Brexit uncertainty.
Travel-related stocks EasyJet, IAG, Carnival and Wizz Air were all in the red, with traders pointing to read-across from disappointing results from Air France-KLM, which said that losses deepened in the first quarter as the airline suffered from too much capacity in the market and rising fuel costs.
Market Movers
FTSE 100 (UKX) 7,380.64 0.40%
FTSE 250 (MCX) 19,702.96 0.08%
techMARK (TASX) 3,600.20 0.65%
FTSE 100 - Risers
Smith & Nephew (SN.) 1,572.00p 3.49%
Anglo American (AAL) 1,980.00p 2.29%
Ocado Group (OCDO) 1,372.00p 1.97%
HSBC Holdings (HSBA) 680.60p 1.93%
Burberry Group (BRBY) 1,997.00p 1.73%
Scottish Mortgage Inv Trust (SMT) 530.50p 1.43%
Antofagasta (ANTO) 883.00p 1.42%
Rolls-Royce Holdings (RR.) 933.20p 1.28%
Auto Trader Group (AUTO) 577.20p 1.26%
Relx plc (REL) 1,726.00p 1.20%
FTSE 100 - Fallers
easyJet (EZJ) 1,113.00p -2.45%
International Consolidated Airlines Group SA (CDI) (IAG) 525.00p -2.05%
Hiscox Limited (DI) (HSX) 1,632.00p -1.69%
Persimmon (PSN) 2,175.02p -1.54%
Carnival (CCL) 4,018.00p -1.52%
British Land Company (BLND) 595.20p -1.29%
Direct Line Insurance Group (DLG) 320.50p -1.17%
InterContinental Hotels Group (IHG) 4,947.50p -1.01%
Sainsbury (J) (SBRY) 220.30p -0.99%
Melrose Industries (MRO) 200.30p -0.84%
FTSE 250 - Risers
Ultra Electronics Holdings (ULE) 1,655.00p 5.21%
Convatec Group (CTEC) 143.45p 5.05%
Serco Group (SRP) 128.70p 3.46%
AJ Bell (AJB) 448.00p 2.99%
FirstGroup (FGP) 114.80p 2.41%
Centamin (DI) (CEY) 91.86p 2.41%
Equiniti Group (EQN) 225.60p 2.36%
Premier Oil (PMO) 93.50p 2.25%
UDG Healthcare Public Limited Company (UDG) 682.00p 2.17%
Mediclinic International (MDC) 344.40p 2.04%
FTSE 250 - Fallers
Intu Properties (INTU) 95.18p -5.01%
Sirius Minerals (SXX) 15.77p -4.60%
IP Group (IPO) 95.30p -3.93%
Kier Group (KIE) 363.00p -3.20%
Wizz Air Holdings (WIZZ) 3,412.00p -3.18%
Clarkson (CKN) 2,470.00p -2.76%
Bank of Georgia Group (BGEO) 1,709.00p -2.62%
Morgan Advanced Materials (MGAM) 267.60p -2.62%
Card Factory (CARD) 197.50p -2.23%
Ascential (ASCL) 351.00p -2.12%