London close: Stocks turn weaker as US payrolls fall short
London stocks reversed their fortunes to close weaker on Friday, as investors digested a set of non-farm payroll numbers from across the pond that surprised to the downside.
The FTSE 100 ended the session down 0.1% at 7,122.32, and the FTSE 250 was off 0.17% at 22,646.08.
Sterling was in the red as well, last trading down 0.56% on the dollar at $1.3230, and weakening 0.57% against the euro to €1.1705.
“The week is ending on a sour note for equities, which remain in thrall to the potential spread of the Omicron variant, and are also sulking in the wake of a poor non-farm payrolls figure,” said IG chief market analyst Chris Beauchamp.
“Hopes of another 500,000-plus month of job creation were dashed, and while the unemployment rate dropped, a slower pace of wage increases has contributed to a general move out of risk assets.
“Growth fears are taking centre stage across markets, as a slowing recovery threatens to put more pressure on stocks after a strong year for the headline indices.”
Beauchamp said that, until the extent of the hit from Omicron became clearer, more downside in indices was likely, with intraday bounces being sold.
“For investors who had expected a steady climb in December, this will come as a rude surprise, but with the VIX still at an elevated level dramatic moves in equities remain the norm.
“This is still quite the change from earlier in the year, and is somewhat reminiscent of the volatility of early 2020, although in a much milder form for now.”
In fresh data from across the Atlantic, the US economy added fewer jobs than expected in November, indicating that hiring had already started to slow before the emergence of the Covid-19 ‘Omicron’ variant.
According to the Labor Department, non-farm payrolls increased just 210,000 month-on-month, well and truly short of estimates for a print of 573,000.
However, the unemployment rate fell sharply to 4.2% from 4.6% and the labour force participation rate increased to 61.8% last month, its highest level since March 2020.
“Rarely has a headline number been so misleading,” said IX Prime managing director Jay Mawji.
“Sure, the 210,000 new jobs created in November was a big miss - but clear-eyed market-watchers are viewing it as a distraction rather than a disappointment.”
Mawji said that digging deeper into the numbers revealed a “robust” labour market.
“The unemployment rate has fallen sharply; at 4.2% it’s back to benign territory, and within touching distance of the Federal Reserve's target.
"The fact is 1.1m more Americans are in work now compared to three months ago, and the world's biggest economy continues to generate jobs and growth that is rippling out around the world.”
Remaining stateside, the Institute of Supply Management’s non-manufacturing purchasing managers' index came in at 69.1 for November, up from 66.7 a month earlier to a fresh record high.
According to the report, economic activity in the services sector grew in November for an 18th month in a row, with the Services PMI setting its fifth time record for 2021.
Previous records were set in March, May and July.
On home shores, growth in the UK services sector eased a touch in November, but remained strong amid the fastest rise in new business intake in five months.
The IHS Markit/CIPS services purchasing managers’ index dipped to 58.5, little changed from the flash reading of 58.6 and down only a little from October's three-month high of 59.1.
A reading above 50 indicates growth, while a reading below signals contraction.
“Surging price pressures have done little to dent business and consumer spending across the UK economy, according to the latest PMI data,” said Tim Moore, economics director at IHS Markit.
“New order growth hit a five-month high in November, job creation remained strong, and backlogs of work built up due to supply issues.
“The overall speed of recovery looks to have accelerated in comparison to the third quarter of 2021, with output growth mostly driven by services as manufacturers struggle with severe shortages of raw materials and critical components.”
Visits to UK shops, meanwhile, fell in November, as bad weather kept shoppers away and Black Friday failed to boost footfall.
Retail footfall was 15.7% lower than in November 2019 and two percentage points lower than in October, the British Retail Consortium said.
High street footfall dropped 19.6% from two years earlier and at retail parks the decline was 4.1%, while the biggest drop was at shopping centres, where visits were down 35%.
“Usually in November we’d expect to see a boost to the high street due to Black Friday, which traditionally marks the start of Christmas spending,” said Andy Sumpter, a consultant at Sensormatic Solutions, which helped produce the survey.
“Those who have bought early in a bid to avoid crowds and minimise risks of supply chain disruption have shopped even earlier this year, contributing to October’s boost and November’s lull.
“We still expect to see those ‘last minute’ shoppers hitting the high streets in December.”
In equity markets, BP rose 1.26% after an upgrade to ‘buy’ from ‘hold’ at Deutsche Bank, while Rotork was lifted 1.38% by an upgrade to ‘overweight’ from ‘neutral’ at JPMorgan.
Petropavlovsk was in the black by 1.53% after it said the UK’s High Court had rejected a bid by its major shareholder JSC Uzhuralzoloto Group of Companies to stop the sale of a stake in iron ore subsidiary IRC.
3i Group rose 0.61% following a report it is considering the sale of French natural health products manufacturer Havea Group, which could be valued at about €1.1bn.
Home improvement retailer Wickes Group jumped 11.26% after lifting its full-year profit guidance to “no less than £83m”, as it continued to perform well in the fourth quarter.
Housebuilders Crest Nicholson and Bellway were also on the front foot, rising 2.06% and 1.63%, respectively.
“Housebuilders have been buoyed today by this morning’s comments from Bank of England external Monetary Policy Committee member Michael Saunders who appeared to soften his position on an interest rate increase later this month,” said CMC Markets analyst Michael Hewson.
On the downside, online supermarket Ocado - which has benefited from lockdowns and restrictions - slid 3.18% by the close.
Miners were also in the red as metals prices fell, with BHP down 2.74%, Anglo American off 2.96%, Rio Tinto losing 3.02% and Antofagasta 2.7% weaker.
FTSE 100 - Risers
Kingfisher (KGF) 331.00p 2.51%
Pearson (PSON) 589.00p 2.22%
Berkeley Group Holdings (The) (BKG) 4,549.00p 2.02%
DCC (CDI) (DCC) 5,738.00p 1.77%
Abrdn (ABDN) 233.90p 1.70%
B&M European Value Retail S.A. (DI) (BME) 639.00p 1.69%
National Grid (NG.) 1,002.40p 1.68%
SSE (SSE) 1,607.50p 1.45%
British American Tobacco (BATS) 2,583.50p 1.37%
M&G (MNG) 192.10p 1.37%
FTSE 100 - Fallers
Ocado Group (OCDO) 1,626.50p -3.18%
Rio Tinto (RIO) 4,578.50p -3.02%
Anglo American (AAL) 2,717.00p -2.96%
Scottish Mortgage Inv Trust (SMT) 1,389.50p -2.78%
BHP Group (BHP) 2,041.50p -2.74%
Antofagasta (ANTO) 1,355.50p -2.34%
Darktrace (DARK) 428.00p -1.61%
Entain (ENT) 1,641.00p -1.44%
SEGRO (SGRO) 1,379.50p -1.36%
Melrose Industries (MRO) 143.10p -1.03%
FTSE 250 - Risers
Vivo Energy (VVO) 135.60p 3.20%
AJ Bell (AJB) 371.00p 2.71%
TBC Bank Group (TBCG) 1,594.00p 2.56%
Coats Group (COA) 64.60p 2.37%
Investec (INVP) 388.30p 2.32%
JPMorgan Japanese Inv Trust (JFJ) 675.00p 2.27%
Crest Nicholson Holdings (CRST) 336.80p 2.06%
Baltic Classifieds Group (BCG) 216.00p 1.89%
Pantheon International (PIN) 328.00p 1.87%
OSB Group (OSB) 513.00p 1.79%
FTSE 250 - Fallers
Wood Group (John) (WG.) 183.40p -6.43%
Future (FUTR) 3,296.00p -5.56%
Discoverie Group (DSCV) 983.00p -4.56%
Molten Ventures (GROW) 884.00p -3.39%
Oxford Biomedica (OXB) 1,260.00p -3.37%
Aston Martin Lagonda Global Holdings (AML) 1,368.00p -3.08%
Network International Holdings (NETW) 270.90p -2.73%
Babcock International Group (BAB) 295.10p -2.70%
Airtel Africa (AAF) 123.20p -2.69%
Dechra Pharmaceuticals (DPH) 4,898.00p -2.62%