2nd Oct 2015 15:50
LONDON (Alliance News) - UK stocks clawed back gains late in trade Friday after taking a hit from a disappointing US jobs report which raised concerns about the world's leading economy.
Data from the Labor Department showed that the number of jobs added was 142,000 in September following an increase of 136,000 jobs in August, which was downwardly revised from an originally reported addition of 173,000 jobs. This fell well short of economist expectations of an increase of 203,000 jobs in September.
Meanwhile, the unemployment rate held at a seven-year low of 5.1% in September, matching economist estimates. Hourly wages were flat on-month, falling short of expectations of a 0.2% rise, but up 2.2% from a year ago. The weak job growth, coupled with slowing economic growth across the globe, made some investors push back their expectations for a Fed hike this year.
"There is nothing good that can be said about the US jobs data. It was simply dreadful. Every metric disappointed, and the August series which so often is revised higher, came in lower," said Brown Brothers Harriman's global head of currency strategy Marc Chandler.
"This will raise fresh doubts about the US economy and the ability of the Federal Reserve to raise rates, not just this month, but this year," Chandler added.
The weak jobs report saw a negative reaction in both European and US equities and the US dollar. The pound rose to a high of USD1.5237 after the data, while the euro hit a high of USD1.1318 against the greenback.
The fall in the dollar subsequently supported the price of gold which shot up to a high of USD1,141.30 an ounce. At the close, gold miner Fresnillo led the FTSE 100 gainers, up 4.8%, while peer Randgold Resources ended up 4.2%.
The FTSE 100 reclaimed substantial gains towards the close and ended the day up 1.0% at 6,129.98. It meant the blue-chip index ended the week up 0.3%. The FTSE 250, meanwhile closed up 0.2% at 16,796.08 and the AIM All-Share rose 0.3% to 729.07.
In Europe, the CAC 40 in Paris ended up 0.7% and the DAX 30 in Frankfurt closed up 0.5%.
US stocks were performing considerably worse that Europe at the London close. The Dow 30 and the S&P 500 were both down 0.6% and the Nasdaq Composite was down 0.4%.
Elsewhere on the London market, Experian closed as the worst FTSE 100 performer ending down 3.8%. The information services and credit reports company confirmed its North American unit has been subject to a data breach.
Specifically, the server handling information on behalf of client T-Mobile USA, the mobile carrier, was breached. The data includes personal information on around 15 million US consumers, including those who applied for T-Mobile post-paid services or device financing from September 1, 2013 to September 16, 2015, based on the investigation Experian has so far conducted.
Evercore ISI analyst David Togut said that although the event is a hit to Experian's superior reputation for data security, the financial impact is immaterial and will likely be covered by the company's insurance.
Elsewhere, the UK's Financial Conduct Authority said it is opening a consultation on introducing a deadline for consumers to make complaints on mis-sold payment protection insurance or lose their rights to have the claims assessed by firms or by the Financial Ombudsman Service.
Confirming recent press speculation, the City regulator said it intends to consult on a deadline which would fall two years from the date the proposed rule would come into force which, subject to the consultation, would not be before spring 2016, meaning consumers would have until at least spring 2018 to make their complaints.
Banks have already set aside close to GBP30 billion for PPI mis-selling compensation, with the state-backed Lloyds Banking Group responsible for almost half that sum. Lloyds ended up 2.1% on the day.
Legal and General Group ended as one of the best blue-chip performers, closing up 2.6%. The life insurer and investment manager said it has secured an agreement with the US arm of Dutch electronics company Royal Philips to provide retirement payments under a group annuity contract.
The contract will cover around 14,000 Philips employees in the US and will cut the company's pension obligations when the contract transfers in December. L&G said the transfer of the USD900.0 million in retiree pension obligations will be split between Legal & General America and The Prudential Insurance Co of America, with each insurer providing 50% of the total monthly benefits.
In the FTSE 250, Paragon Group of Companies said its Paragon Bank business has struck a GBP117.0 million deal to acquire Five Arrows Leasing Group from Rothschild & Co, the boutique investment bank. Five Arrows provides equipment, vehicle and construction equipment financing and provides lease servicing.
At the end of March, it had assets of GBP245.1 million on its books and for the year to that date, the company made a pretax profit of GBP10.2 million. Paragon expects the deal to complete by November and expects the deal to be earnings enhancing in its 2016 financial year. It added the acquisition will take its Paragon Bank business from break-even to profitability. The company's shares ended up 10%.
Electrocomponents, down 2.5% said revenue growth slowed in the second quarter amid continued weakness in the UK and worse conditions in the North American market. It said its group revenue growth in the second quarter to the end of September was 3.0%, slowed from the 5.0% growth in the first quarter and dragging first-half revenue growth down to 4.0%.
The company said the primary culprit for the slowdown was North America where, after a slowdown in trading activity was flagged back in July, conditions continued to weaken in August, before recovering partially in September, This meant revenue fell in the second quarter in North America by 3%, reversing the 3% growth in the first quarter to leave the first half flat.
In the economic calendar on Monday, there are Markit services and composite purchasing managers' index readings from France at 0850 BST, Germany at 0855 BST, the eurozone at 0900 BST and the US at 1445 BST. UK services PMI is at 0930 BST. Elsewhere, there are eurozone retail sales at 1000 BST, US ISM non-manufacturing PMI at 1500 BST alongside Labor Market conditions index.
In the corporate calendar, iron ore pellets producer Ferrexpo releases third quarter production results, while engineering and environmental consultancy Waterman Group reports full-year results. International Consolidated Airlines Group is expected to release September traffic statistics in the afternoon.
By Neil Thakrar; [email protected]; @NeilThakrar1
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