4th Mar 2016 17:11
LONDON (Alliance News) - A mixed US jobs report with the familiar theme of strong job growth combined with weak wages hit stocks and the dollar Friday, but a rally in commodity prices were enough to see London equities close the day higher.
Employment in the US increased by much more than expected in February, according to a report released by the Labor Department.
The report said total non-farm employment jumped by 242,000 jobs in February easily surpassing economist estimates for an increase of about 190,000 jobs. Job growth in December and January were also upwardly revised to 271,000 and 172,000, respectively, reflecting a net upward revision of 30,000 jobs.
The Labor Department said the stronger than expected job growth reflected employment gains in health care and social assistance, retail trade, food services and drinking places, and private educational service.
The unemployment rate was unchanged from the previous month at 4.9%, holding at its lowest level since February of 2008. The unchanged reading on unemployment matched estimates.
However, the Labor Department also said average hourly employee earnings dipped 3 cents or 0.1% to USD25.35. Earnings were up by 2.2% year-over-year.
Analysts have recently been focused on wages amid ongoing uncertainty about the outlook for the Federal Reserve's monetary policy.
"Overall, it's clear that labor market conditions are still strong," said Paul Ashworth, Chief US Economist at Capital Economics. "The lack of a more marked pick-up in wage growth is the only missing element."
"But as far as the Fed is concerned, it is already seeing a clear acceleration in core price inflation, so it can't delay raising interest rates for much longer," he added. "A June rate hike is coming."
Economists at Lloyds Bank also believed the Federal Open Market Committee is likely to raise interest later this year.
"This report is another indication that markets have become too negative about the outlook for US interest rates. It does not change the likely outcome of the March FOMC meeting, as Fed policy makers have already signalled that interest rates are on hold for now while they monitor financial market developments and economic data," Lloyds said.
"Nevertheless, we still expect the Fed to raise interest rates later this year as it becomes clearer that the economy remains strong and inflationary pressures are building," the bank added.
The dollar initially rose against other major currencies, but these gains shortly receded. At the European equity market close the pound traded the dollar at USD1.4220, after recovering from an earlier low of USD1.4106 after the data. It also was higher than the USD1.4169 seen at the close on Thursday.
The euro traded the dollar at USD1.1007 at the London close, recovering from a low of USD1.0902. It too was higher than its level at the close on Thursday of USD1.0944.
US stocks opened the trading session lower after the jobs report, but by the London close were trading modestly higher. The Dow Jones Industrial Average was up 0.4%, while the S&P 500 and Nasdaq Composite were both up 0.5%.
After wobbling on the data, the FTSE 100 rallied going into the close to end up 1.1%, or 68.97 points, to 6,199.43. This meant the index closed the week up 1.7%, or 103.42 points.
The FTSE 250 closed up 1.1%, or 185.55 points, at 16,931.19, and the AIM All-Share ended up 0.8%, or 5.88 points, at 702.49.
In Europe, the French CAC 40 closed up 0.9% and the German DAX 30 ended up 0.7%.
Stocks in the UK were supported by a strong run in commodity prices, which saw gold prices leap to a 13-month high and Brent oil move considerably beyond the USD37 a barrel mark.
Brent oil hit an intraday high of USD37.79 a barrel, its highest level since early January, and was quoted at USD38.22 at the London close. This was much higher than the USD36.95 a barrel seen at the close on Thursday.
Gold meanwhile touched its highest level since early February 2015 at USD1,279.80 an ounce. The metal moved higher as the dollar sank and at the London close was quoted at USD1,272.30 an ounce versus USD1,257.30 on Thursday.
Whilst precious metal miners saw their share price increase, it was multi-commodity miners that dominated the best performers in the FTSE 100. Glencore closed at the top of the pile, up 12%, whilst Anglo American rose 11%, and BHP Billiton ended up 9.1%.
The FTSE 350 mining sector index rose 8.1%, continuing its turnaround since the beginning of the year.
In UK corporate news, WPP reported positive results for 2015 and guided for a similar year in 2016, but the advertising and marketing group pointed to wider economic concerns, saying the "Don Draperish" optimism in the advertising industry "seems misplaced".
The reference is to the bullish lead character in recently ended drama 'Mad Men', set in a fictional New York advertising agency in the 1960's.
WPP said that whilst industry and company reports generally continue to reflect a positive, optimistic attitude, client behaviour "does not reflect that state of mind", highlighting tepid gross domestic profit growth and adding that, with a lack of pricing power, clients are focused on cutting costs rather than revenue growth.
WPP shares closed down 0.7%.
Cineworld Group was the biggest faller in the FTSE 250, down 6.4% to 498.20 pence, after UBS initiated coverage of the multiplex cinema chain with a Sell rating and 490.00p price target. The Swiss bank said it is cautious on the cinema chain's roll-out, particularly in Eastern Europe, and the weaker 2016 film slate following a strong 2015.
William Hill also fell victim to a bearish UBS note, closing down 2.7%. UBS said industry consolidation creating an increasingly competitive backdrop will create a significant headwind for William Hill, as it slashed its recommendation for the bookmaker to Sell from Buy.
Friday afternoon UK retail and business lender Metro Bank priced its initial public offering, raising GBP400 million and giving it an expected market capitalisation of GBP1.6 billion. This would make it eligible for inclusion in the FTSE 250 at the next quarterly index review in June. It expects to begin trading on the London Stock Exchange's Main Market Monday.
In the AIM All-Share, SolGold ended as the best performers, up 43%. The miner said that Hole 16 at its Cascabel project in Ecuador continues to intersect intense copper and gold mineralisation to a current depth of 1,217 metres.
The company said a Hole 16 assay received from 516 metres to 764 metres showed 216 metres at 0.94 % copper and 1.26 grammes per tonne of gold from 548 metres open at depth. That included 60 metres at 2.01% copper and 3.41 grammes per tonne of gold from 704 metres.
In the economic calendar, investors will be looking ahead to China's annual parliament meeting on Saturday which is expected to focus on plans to rejuvenate economic growth. Parliament is anticipated to approve a proposal for an economic and social development blueprint for 2016 to 2020 that will guide policy at all levels of government and in state-owned enterprises.
The focus on Monday will be speeches from central bankers. The Bank of Japan's Governor Haruhiko Kuroda will make a speech at 0340 GMT and the Federal Reserve's Vice Chairman Stanley Fischer will be making a speech in Washington at 1330 GMT.
Elsewhere, German factory orders are at 0700 GMT and the Sentix investor confidence index for the eurozone is at 0930 GMT. Later in the afternoon are US labour market conditions at 1500 GMT and US consumer credit data at 2000 GMT.
The highlights in the UK corporate calendar for Monday are interim results from life science research tool supplier Abcam and full-year results from FTSE 250-listed shipping services company Clarkson.
There are also full-year results from software provider Escher Group Holdings, machine-to-machine communications company Telit Communications, HgCapital Trust and logistics services provider Pennant International Group.
By Neil Thakrar; [email protected]; @NeilThakrar1
Copyright 2016 Alliance News Limited. All Rights Reserved.
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