7th Mar 2014 17:15
LONDON (Alliance News) - Despite the release of a stronger-than-expected US non-farm payroll number that briefly sent equities positive, UK stocks have ended lower Friday, with the FTSE 100 recording its second consecutive weekly fall, while the dollar broadly gained and the price of gold fell.
The FTSE 100 has closed down 1.1% at 6,712.67. That means the UK's leading index lost 97 points, or 1.4% this week, and is down about 0.5% on the year to date.
The FTSE 250 has closed down 0.7% at 16,599.45, and the AIM All-Share has closed down 0.2% at 895.70.
The US economy added more jobs than expected in February. The monthly non-farm payroll report said that the US economy added 175,000 jobs over the month, beating expectations of 149,000. The previous months' report was also revised higher, to 129,000 from 113,000.
While there had been concerns that the report would be heavily impacted by the winter storms, which have been blamed for a recent run of poor US economic data, some analyst have suggested that this was always an overblown concern, due to the way the number is calculated. Forex.com analyst Chris Tevere points out that employees have to be off work for their entire pay period to not be included in the report. "Employees who receive pay for any part of the pay period, even one hour, are counted in the payroll employment figures," says the analyst.
Although the headline payroll number may have been relatively unaffected by the weather, an important area of weakness was a fall in the work week, said strategists at Brown Brothers Harrimen. The average work week for all employees on private non-farm payrolls edged down to 34.2 hours, from 34.3 hours in January. This, say the strategists, is likely due to the weather.
Further less-than-positive news within the report was the headline rate of unemployment, which ticked up to 6.7% in February from 6.6% in January. Unemployment therefore remains above the 6.5% level the Federal Reserve has targeted as a trigger to start increasing historically low interest rates.
While the better than expected payroll number was initially well received, sending the FTSE 100 briefly positive, sentiment quickly turned and stocks ended much lower. This was most likely due to a fair bit of opportune profit taking, said CMC markets trader Toby Morris. "No-one wants to run too much exposure into the weekend given the potential for Ukraine to flare up again," says Morris.
Major European markets also closed lower Friday, with the CAC 40 down 1.1% and the DAX 30 down 1.9%.
US markets are also off their recent highs. After the European close, the Nasdaq Composite is down 0.7%, the S&P 500 is down 0.2% and the DJIA is close to flat.
The euro reached its highest level against the dollar in 28 months earlier in the day, topping USD1.39 for the first time since October 2011. After peaking at USD1.3915 the euro eased back as the dollar gained across the board following the US jobs report.
The euro had been given a boost from stronger than expected German industrial production numbers. Industrial production in Europe's biggest economy grew by 0.8% in January, beating economists expectations of 0.7% rise and accelerating strongly from the 0.1% rise recorded in December.
In the UK, consumers now expect prices to rise by 2.8% in the coming year, according to the latest Bank of England inflation survey. That was down from 3.6% recorded in November. The central bank also said that the two-year expectation fell to 2.8%, from 3.4%, and the five-year expectation dropped to 3.2% from 3.7%.
The near term inflation expectation is the lowest in four years and is supportive of the BoE's message that interests rates will stay low for some time to come. Even so, the bank's inflation attitudes survey showed that 40% of Britons expect interest rates to rise within the next 12 months, up from 34% in November.
The pound rose throughout the day after the survey results were released, peaking at USD1.6786. However, sterling lost ground after the US jobs report and now trades close to flat against the dollar Friday at USD1.6725.
The price of gold tumbled by USD25, or almost 2%, after the US jobs number, reaching a low of USD1,327.63 per ounce. Although the yellow has bounced off the low, it's still down over the session, currently trading at 1,338.0 per ounce. Silver is also considerably lower, down more than 2%, currently trading at USD20.973 per ounce.
Other metals also suffered Friday, with Copper suffering its worst one day fall since December 2011, with analysts citing concerns stemming from a China experiencing its first ever bond default after Chaori Solar defaulted on its corporate debt.
"While not of immediate concern, this will be duly noted by investors questioning the position of China?s over-stretched shadow banking sector," said CMC Markets analyst Jasper Lawler.
Amid a much quieter corporate calendar than of late, there have been very few stand out stock movers Friday. The late fall in precious metal prices and the China concerns sent the mining sector down the most. Anglo American was the worst performing blue chip stock, closing down 6.6%. In the FTSE 250, African Barrick Gold led the falls, closing down 6.7%.
Chinese February trade data and inflation numbers are released over the weekend, along with the final reading of Japanese fourth-quarter GDP and the Japanese Economic Watchers survey - all of which may provide direction for Asian markets before the European open.
Both the corporate and earnings calendars are light on Monday, with the eurozone Sentix investor confidence index providing some morning interest at 0930 GMT, and results scheduled only from small cap stocks Clarkson, and HgCapital Trust.
"Looking into next week, headlines breaking from Ukraine may be the key reason for market movements as the economic calendar and company earnings looks particularly thin," said Spreadex trader Sam Fox.
Good weekend.
By Jon Darby; [email protected]; @jondarby100
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