1st Apr 2016 16:13
LONDON (Alliance News) - The FTSE 100 closed the week in positive territory, even though it ended lower Friday after a strong set of economic data from the US wasn't enough to get London's blue-chip index out of the red.
The FTSE 100 fell 0.5%, or 28.85 points, on Friday to 6,146.05, ending the week up 0.7%. In Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt ended down 1.4% and 1.7%.
"It looks like the data from the US has fallen firmly into the 'Goldilocks' category again," said IG senior market analyst Chris Beauchamp. "When combined with Federal Reserve Chair Janet Yellen's speech earlier in the week, the overall tone is supportive of equities". A "Goldilocks economy" is one that is not so hot as to provoke an interest rate hike, but not so cold to hurt company profits.
Stocks in New York were brightly green at the London close, with the DJIA up 0.3%, the S&P 500 up 0.2% and the Nasdaq Composite up 0.5%.
A report from the US Labor Department said non-farm payroll employment climbed by 215,000 jobs in March after jumping by an upwardly revised 245,000 in February. Economists had expected an increase of about 210,000 jobs. Job growth in the retail, construction and health care sectors was partly offset by job losses in the manufacturing and mining sectors.
The report also showed that average hourly employee earnings climbed 0.3% to USD25.43 in March after dipping by 0.1% to a revised USD25.36 in February. Despite the monthly rebound, the annual rate of wage growth was unchanged from the previous month's revised reading of 2.3%.
However, the unemployment rate inched up to 5.0% in March from 4.9% in February. The unemployment rate had been expected to remain unchanged, at around pre-financial crisis levels.
The jobs report was "a surprising outcome for those who had sold the dollar in advance of the report on the back of Yellen's dovish remarks from earlier in the week," said FOREX.com analyst Fawad Razaqzada.
Yellen seemed to pour cold water over the prospects of an April US interest hike on Tuesday, when she said it is "appropriate for the central bank to proceed cautiously in adjusting monetary policy given the risks to the economic outlook".
The dollar rose against the euro and the pound, with the single currency quoted at USD1.1365 at the London equities close, compared with USD1.1388 at the close Thursday. Meanwhile, sterling was at USD1.4173 at the close, having stood at USD1.4399 on Thursday.
The dollar found further support later in the session on strong US manufacturing data. A report from the Institute for Supply Management showed that activity in the sector expanded at a faster-than-expected rate in March, after reporting contractions for five straight months. The ISM said its Purchasing Managers Index climbed to 51.8 in March from 49.5 in February, with a reading above 50 indicating growth. Economists had expected a score of 50.5.
Similarly, Markit's US manufacturing PMI came in at 51.5 in March, as consensus expected, and slightly higher than the 51.4 from February.
Meanwhile, data from the University of Michigan showed an upward revision to 91.0 in its US consumer sentiment index for March, compared to the preliminary reading of 90.0. This was in line with economist estimates but was still down from the final February reading of 91.7.
The better-than-expected US manufacturing data put further pressure on the pound, after the British currency was hit earlier in the day by a weak manufacturing UK PMI reading.
The UK Markit/Chartered Institute of Procurement & Supply manufacturing PMI rose to 51.0 in March from February's 34-month low of 50.8. Economists had expected the index to climb to 51.2. Output growth remained unchanged from February's seven-month low, while new orders increased on the back of improved domestic demand.
Markit also released manufacturing PMIs from Germany, which came in at 50.7, higher than the 50.4 reading in February, with economists expecting an unchanged score. The same from France was unchanged, as expected, at 49.6. The overall eurozone's manufacturing PMI came in at 51.6, above February's 51.4. Economists expected it to remain unchanged.
As the greenback strengthened, dollar-denominated commodities headed south, with gold quoted at USD1,211.90 at the close versus USD1,236.00 on Thursday. Brent oil was also lower, standing at USD38.59 a barrel at the close, compared to USD40.73 a barrel on Thursday.
The oil price was also hit by the news that Saudi Arabia will only freeze crude production if Iran and others follow suit. Bloomberg reported that the kingdom's deputy crown prince Mohammed bin Salman signalled in an interview that if any country raises output, Saudi Arabia will also boost sales.
Oil producers are scheduled to meet in Doha this month to complete an accord capping output. Iran is expected to the attend the talks but has ruled out limiting oil supply as it aims to regain market share after sanctions were lifted in January.
In UK corporate news, J Sainsbury agreed to acquire Home Retail Group, ending its long-running pursuit of the Argos owner. The supermarket chain will pay 55.00 pence per share in cash, plus 0.321 of a Sainsbury's share to acquire Home Retail, valuing the company at GBP1.2 billion. Including the GBP200.0 million capital return Home Retail shareholders already stood to get from the sale of the Homebase DIY and garden centre business, the deal values Home Retail at GBP1.4 billion.
Sainsbury's said the deal values Home Retail at a premium of around 74% to its closing price on January 4, the day prior to Sainsbury's disclosing its offer. Upon completion, Home Retail shareholders will hold about 12% of Sainsbury's share capital.
Sainsbury's shares ended down 0.1%, while mid-cap Home Retail ended up 0.1%.
Blue-chip pay television group Sky is set to sell its headquarters and studio in west London for GBP545.0 million, The Daily Telegraph reported. Sky has instructed agents at BNP Paribas Real Estate to find a buyer for the site in Osterley, which Sky will then rent back under an anticipated 30-year deal. Much of Sky's news and sports programmes are produced at the site, in addition to it being the location of its main office.
Sky shares were down 1.8%.
Plumbing and heating goods supplier Wolseley ended up 1.0% after Societe Generale started coverage of the stock with a Buy rating.
The FTSE 250 ended down 0.5%, or 82.44 points, at 16,843.68. The AIM All-Share rose by 0.1%, or 0.82 points, at 711.60.
Mid-cap Polypipe Group rose 1.8%. Deutsche Bank said the improving repair, maintenance and improvement market may "provide scope for future upside surprise" for the company, and reiterated a Buy rating on the pipes manufacturer.
Car distributor Inchcape ended down 3.7% after Berenberg downgraded its rating on the stock to Hold from Buy. The German bank raised concerns about Inchcape's exposure in the UK to scandal-hit Volkswagen, as well as to currency translation issues in Australia and a slowdown in consumer and business confidence in Hong Kong.
Also hit by a broker downgrade was PZ Cussons, down 3.0%, after Goldman Sachs cut the personal care products group to Neutral from Buy.
On the Main Market, Arrow Global rose 5.6%. The debt buyer and manager said it has agreed terms to acquired consumer debt purchasing and collections business InVesting BV for around GBP78.5 million. Arrow will pay the consideration in cash from existing cash resources and a new GBP50.0 million financing facility.
In the UK corporate calendar Monday, Christie Group and Belvoir Lettings release full-year results, while ITE Group and Macau Property Opportunities Fund issue trading statements.
In the economic calendar, UK's Construction PMI is due at 0930 BST. Eurozone's unemployment rate and producer price index are both due at 1000 BST. In the US, the ISM New York index is due at 1445 BST, while US labor market conditions and factory orders are both expected at 1500 BST.
The Shanghai market will be closed Monday due to the Ching Ming Festival celebrations.
By Daniel Ruiz; [email protected]
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