5th Sep 2014 15:40
LONDON (Alliance News) - The major UK equity markets closed lower Friday despite getting an afternoon boost from a softer-than-expected US jobs reading and reports that a ceasefire has been agreed in eastern Ukraine.
Investors appeared unwilling to add to risk positions ahead of the weekend and the FTSE 100 saw some profit taking from the 14-year high made earlier in the week, ending the day down 0.4% at 6,853.40. The FTSE 250 closed down 0.5 at 15,918.73, while the AIM All-Share closed up 0.2% at 778.64.
Early exuberance created by the policy easing measures unveiled by the European Central Bank on Thursday appeared to have already been exhausted and a mixed European session saw the French CAC 40 close down 0.2%, while the German DAX gained 0.2%.
The US private sector added 142,000 jobs in August, according to the latest non-farm payroll report from the Federal Reserve. That's down from the 212,000 it added in July and missing expectations for a stronger figure of 225,000. The reading is the lowest for seven months, and there was also a net negative revision across the previous two readings of 28,000 jobs.
The rate of US unemployment ticked down to 6.1%, from 6.2%, as expected. Average hourly earnings increased by 0.2% month-on-month, also in-line with expectations, from a revised 0.1% rise in the previous report. The participation rate fell fractionally in August to 62.8%, from 62.9% in July.
The softer-than-expected report briefly sent US futures positive, and lifted the UK market off it's intra-day low, as investors pushed back their US interest rate rise expectations. However, following the European market close, US markets are struggling for any clear direction, with the DJIA and the S&P 500 both fractionally lower, while the Nasdaq Composite is just fractionally higher.
A more notable effect has been seen in the currency market, where the dollar has softened across the board. The euro had already been experiencing a small rebound following Thursday's heavy sell-off that followed the ECB decision, boosted in part by some strong German industrial production numbers that showed a 1.9% month-on-month rise in July, up from just 0.4% in June.
After bottoming at a near-14-month low of USD1.2917 on Thursday, the euro peaked at USD1.2988 shortly after the jobs report and ended the day at USD1.2965. The pound trades at USD1.6322 and EUR1.2585.
Equity sentiment received a small boost in late trade as the Ukrainian government and pro-Russian separatists signed a ceasefire agreement Friday, raising hopes for an end to months of fighting in the country's east. Ukrainian President Petro Poroshenko ordered troops to stop all hostilities by 1600 BST, his office said.
While the ceasefire announcement may have tempered some of the downside to stocks Friday, it has not been met with much of a cheer, suggesting investors may be taking the agreement with a pinch of salt.
BP was the best performing London blue chip, enjoying something of a rebound from the heavy sell off suffered on Thursday afternoon when a US Judge ruled that the company was guilt of "gross negligence" in the 2010 Gulf of Mexico oil spill, leaving it potentially liable for a significantly larger-than-expected fine.
After dropping about 6% before the close on Thursday, BP shares saw some buying interest Friday and gained 2.5% as investors speculated over the gravity of the ruling. At worst the oil giant could be in line for a fine of up to USD17.6 billion, but it is appealing the ruling and analysts say there are several mitigating factors that are likely to lead to a lengthy court battle before anything is finally agreed.
The mining sector accounted for much of the downside to the London market, with the FTSE 350 sector losing 1.1% as basic resources continue to come under price pressure, with iron ore reportedly reaching a five-year low. Fresnillo was the heaviest FTSE 100 fallers, losing 4.5%.
London Stock Exchange Group was a big faller, losing 2.2% amid reports that the Dubai stock exchange Borse sold 8.5 million shares, or about 3% of LSE's issued share capital.
Bank of Georgia Holdings ended as a top FTSE 250 gainer, up 3.4% after saying it will consider one-off special dividends in light of potential asset sales over the coming years, while it is also targeting initial public offerings for two of its business divisions.
Foxtons Group ended at the bottom of the mid-cap index, down 4.4% after it was reported that the private equity company that listed it last year, BC Partners, sold a further 7% stake in the company, as it continues with its exit strategy.
Looking towards next week, Monday's UK corporate calendar brings full-year updates from Dechra Pharmaceuticals and Associated British Foods.
In the economic calendar, the final reading of Japan's second quarter GDP will be released on Sunday, potentially providing direction for Asian markets and an early driver for UK investors. Domestically, the economic calendar starts quietly on Monday before the latest UK production and trade data is released on Tuesday, when a speech from Bank of England Governor Mark Carney is also scheduled.
By Jon Darby; [email protected]; @jondarby100
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