5th Jul 2019 17:07
(Alliance News) - Stocks in London ended lower on Friday as a stellar jobs report from the US cooled hopes that the Federal Reserve will cut interest rates at its upcoming monetary policy meeting later this month. The FTSE 100 index closed down 50.44 points, or 0.7%, at 7,553.14, ending the week up 1.7%.The FTSE 250 index closed down 142.34 points, or 0.7%, at 19,655.27, ending the week up 1.0%, and the AIM All-Share closed down 0.47 points, or 0.1%, at 916.82, ending the week down 0.2%.The Cboe UK 100 ended down 0.7% at 12,806.20, the Cboe UK 250 closed down 0.5% at 17,559.57, while the Cboe Small Companies ended up 0.1% at 11,374.24.In Paris the CAC 40 ended down 0.5%, while the DAX 30 in Frankfurt ended down 0.5%. The US economy added 224,000 jobs in June, smashing analysts' expectations for 160,000 jobs. The June number showed a strong rebound from the scant 72,000 jobs added in May, which had originally sparked fears the US economy might be losing momentum.Wage growth in June fell short of expectations, as average hourly earnings rose 0.2% for June, slower than the 0.3% economists had been expecting. The headline US unemployment rate came in at 3.7% in June. "Overall, both the three-and six-month average payroll gains now stand at respectable levels of around 170,000. That is still much stronger than the levels that have usually prompted the Fed to cut rates in the past and, although we do still expect the weakening economy to prompt the Fed to loosen policy, the first rate cut will probably be delayed until September," said analysts at Capital Economics. Federal Reserve Chair Jerome Powell testifies to Congress next week and looks set to shed light on whether the central bank feels the latest numbers justifies a rate cut that the market expects.Analysts at ING said: "Powell may repeat yet again his view that 'an ounce of prevention is worth more than a pound of cure'. We look for the Fed to go with a July interest rate cut of 25 basis points followed by a 25 basis points move in September."The market is looking for more - pricing in three rate cuts this year with a further 25 basis points cut in early 2020. However, President Trump will be well aware that pushing too hard for too long on trade risks a weaker economy and plunging asset markets, which would undoubtedly hurt his re-election chances. As such, we would expect him to strike a deal around the turn of the year, claiming the wave of market euphoria a trade deal would generate, coupled with an environment of lower interest rates, as a personal victory that supports his case for the presidency."Stocks in New York were lower at the London equities close, having reopened after being closed on Thursday for the Independence Day holiday. The DJIA, the S&P 500 index and the Nasdaq Composite were all down 0.6%."The US stock indices came under pressure due to a reduction in hopes for the Fed stimulus. Stock markets have responded to data in 'the worse, the better' trading style. Therefore, strong performance can trigger a long wave of stock indices correction, including S&P and DJIA which recently touched the important round levels at their historic highs," FXPro analysts said. The pound was quoted at USD1.2496 at the London equities close, down from USD1.2578 at the close Thursday, following the strong US jobs report. Sterling hit an intraday low of USD1.2481 versus the greenback in afternoon trade, its lowest level since January.On the London Stock Exchange, miners ended among the worst blue chip performers as iron ore prices fell after China's top mills formed a group to investigate whether non-market factors are causing the surge in prices. Anglo American closed down 2.5%, Rio Tinto down 3.8%, BHP Group down 2.8% and Antofagasta down 2.9%.Housebuilders ended in the red following mixed UK house price data in June from mortgage lender Halifax. Berkeley Group closed down 1.9%, Barratt Developments down 1.6%, Taylor Wimpey down 1.2% and Persimmon down 2.1%. On a monthly basis, house prices fell by 0.3%, while year-on-year, house prices were up 5.7%. Halifax noted that the annual figures come against a "particularly low growth rate" in June 2018. In May, house prices had risen 0.4% on a monthly basis and 5.2% annually. The euro stood at USD1.1208 at the European equities close, down from USD1.1280 late Thursday.In economic news from the continent, Germany saw a sharp decline in new manufacturing orders in May, Destatis revealed, after modest growth in April.New orders in May fell 2.2% on the previous month and 8.6% on the same month a year before.In April, orders had risen 0.4% on March but had fallen 5.3% on the same month a year before. These figures were revised in Friday's release, with May's provisional.German domestic orders rose 0.7% in May on April, but orders from abroad declined 4.3%. Euro area new orders fell 1.7%, and from elsewhere by 5.7%. Brent oil was quoted at USD64.07 a barrel at the London equities close, higher than USD63.52 late Thursday.Gold was quoted at USD1,398.78 an ounce at the London equities close, down from USD1,414.60 late Thursday, as the dollar strengthened. The economic events calendar on Monday has Germany industrial production data at 0700 BST. The UK corporate calendar on Monday has annual results from fleet tracking services and dashboard camera system provider Trakm8 Holdings. London Close is available to subscribers as an email newsletter. Contact [email protected]
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