London close: Stocks firmer after massive US payrolls miss
London stocks closed well into positive territory on Friday, with the top-flight index hitting new post-pandemic highs, as investors sifted through a US payrolls report that missed expectations by a country mile.
The FTSE 100 ended the session up 0.76% at 7,129.71, and the FTSE 250 was ahead 1.26% at 22,775.28.
Sterling was in a mixed state, last trading 0.71% higher on the dollar at $1.3988, while iot weakened 0.06% against the euro at €1.1506.
“It’s been another solid day for markets in Europe with the DAX and FTSE 100 leading the way, after the latest China trade numbers and some decent earnings reports bolstered confidence over the economic outlook,” said CMC Markets analyst Michael Hewson.
“Today’s US payrolls report threw an enormous monkey wrench into this narrative after a huge miss to the headline expectation, as the US economy added 266,000 jobs in April, well below the consensus of one million that was predicted.
“If ever a market was complacent about a recovery story, then this afternoon’s number was a pretty good showcase for such a narrative.”
Hewson said the wider question was now how everyone called it so wrong, adding that the answer might be in the recent stimulus payments delivered to Americans in March.
“The simple answer could be that a lot of Americans may be content to delay their return to employment until their benefits money starts to run low.
“The increase in the participation rate to 61.7% and the rise in the unemployment rate to 6.1% would appear to support that narrative.”
Fresh data out from across the pond showed America's labour market as generating the fewest jobs ever relative to economists' forecasts in April.
The Department of Labor reported non-farm payrolls grew by just 266,000 in April, possibly due in part to the large increase in entitlement spending in the wake of the pandemic.
Other reasons put forward by economists for the shortfall in hiring were Americans' fear of returning to work, some people's inability to return to work given that schools remained closed, and the fact that some companies at least had gone under.
Economists had pencilled in a gain of 950,000.
Last month's shortfall in hiring came alongside a downward revision to the March reading from 916,000 to 770,000.
“Today's data have just made it much easier to argue that the re-upping of enhanced unemployment benefits by $300 per week in the March relief bill has crimped labor supply,” said Pantheon Macroeconomics chief economist Ian Shepherdson.
“The benefits are due to expire in September, but perhaps people think jobs will be just as easy to find then as they are now, so why take a job today?”
Shepherdson pointed out that studies in 2020 found little evidence of that effect, however, even though the benefit then was $600 per week.
“It’s also possible that Covid fear is keeping some people out of the labor force, but that should fade over time.”
On home shores, a survey showed construction output rose strongly in April as Covid-19 restrictions eased but costs increased at the fastest pace for at least 24 years.
The IHS Markit/CIPS UK construction purchasing managers' index recorded a score of 61.6 in April, broadly in line with a six-year peak established in March.
A reading of 50 or more indicates growth.
Commercial work was the best-performing category in April as the economy reopened and clients' confidence grew.
Housebuilding rose strongly but at a weaker rate than in March but civil engineering had its fastest pace of recovery since September 2014 as work on big infrastructure projects continued.
In equity markets the major miners shone, with Anglo American up 3.55%, Glencore ahead 3.35%, and Rio Tinto 0.9% firmer.
“A monster commodity rally continues as the global economy heats up, and massive but messy rotation out of the tech/growth/momentum plays into more cyclical/value parts of the market,” said Neil Wilson, chief market analyst at Markets.com.
“Copper rallied to an all-time high, aluminium is extending gains, palm oil [is at a] 13-year high, [and] iron ore and steel [are] at all-time highs.
“There is yet room to run higher in the commodity space.”
Elsewhere, deal news was helping lift the mood, with St Modwen Properties surging 20% after US private equity firm Blackstone made a possible cash offer for the group at 542p a share.
Meggitt jumped 8.28% following a report that US-based Woodward could be looking to buy the London-listed aerospace engineer.
According to Dealreporter, Woodward is working with an investment bank as it considers potential deals and Meggitt is in the frame.
Engine maker Rolls-Royce was ahead 3.23% and GKN owner Melrose Industries rose 1.64% on the news, with Melrose also underpinned by an upgrade to 'buy' at Numis.
Wickes Group gained 3.89% as Citi initiated coverage of the shares at ‘buy’ following the demerger from Travis Perkins.
FTSE 100 - Risers
Ocado Group (OCDO) 1,975.00p 3.95%
Anglo American (AAL) 3,381.50p 3.55%
Glencore (GLEN) 322.75p 3.35%
Compass Group (CPG) 1,625.00p 3.27%
Rolls-Royce Holdings (RR.) 106.74p 3.23%
International Consolidated Airlines Group SA (CDI) (IAG) 213.20p 3.00%
Intermediate Capital Group (ICP) 2,125.00p 2.66%
Barclays (BARC) 181.56p 2.51%
Auto Trader Group (AUTO) 573.80p 2.46%
Avast (AVST) 463.30p 2.41%
FTSE 100 - Fallers
Antofagasta (ANTO) 1,874.00p -2.65%
BT Group (BT.A) 169.60p -0.93%
HSBC Holdings (HSBA) 451.20p -0.87%
DCC (CDI) (DCC) 6,178.00p -0.87%
Unilever (ULVR) 4,273.00p -0.73%
Standard Chartered (STAN) 515.40p -0.65%
St James's Place (STJ) 1,385.00p -0.65%
M&G (MNG) 217.50p -0.50%
BP (BP.) 313.55p -0.30%
National Grid (NG.) 931.40p -0.22%
FTSE 250 - Risers
St. Modwen Properties (SMP) 537.00p 20.00%
Meggitt (MGGT) 498.10p 8.28%
Hill & Smith Holdings (HILS) 1,578.00p 8.23%
Frasers Group (FRAS) 579.00p 6.63%
easyJet (EZJ) 1,095.00p 5.64%
SSP Group (SSPG) 336.00p 5.56%
Pagegroup (PAGE) 596.00p 5.48%
Network International Holdings (NETW) 408.20p 4.96%
Trainline (TRN) 439.60p 4.67%
Provident Financial (PFG) 258.20p 4.53%
FTSE 250 - Fallers
Syncona Limited NPV (SYNC) 222.00p -6.12%
John Laing Group (JLG) 364.00p -4.16%
Morgan Advanced Materials (MGAM) 332.50p -3.90%
Aston Martin Lagonda Global Holdings (AML) 1,856.50p -1.82%
Oxford Biomedica (OXB) 1,024.00p -1.73%
Rank Group (RNK) 188.40p -1.57%
Sanne Group (SNN) 636.00p -1.41%
UK Commercial Property Reit Limited (UKCM) 77.80p -1.39%
Crest Nicholson Holdings (CRST) 418.20p -1.04%
Synthomer (SYNT) 515.50p -0.87%