London close: Stocks jump as US jobs report pleases, pound dips
London stocks were cooking on gas on Friday, fired up by several upbeat corporate updates, as investors evaluated the latest US non-farm payrolls report and news out of US-China trade talks ahead of a long sunny weekend.
At the close, the FTSE 100 was up 0.86% at 7,567.14, while the pound was down by 0.33% versus the US dollar at 1.3530 and up 0.1% against the euro at 1.1329.
Analyst at Barclays Research said the April US jobs reinforced the idea that the risk of an "acceleration" of rate hikes in the States remained "low".
But that wasn't the end of it.
"However, we view the economic cycle as mature. Proponents of the tax cuts argued that corporate tax reform would catalyze capital expenditures and yield faster productivity and potential growth. If true, this would elongate the business cycle and reduce any undershoot in the unemployment rate. Yet, we view the composition of the April employment report as signaling that the economy needs to add employment to keep output growing above trend," Barclays's Michael Gapen said.
"While this is a favorable situation for those looking for employment, it signals to us the low-growth, low-interest rate environment remains in place. This increases our confidence that the Fed will continue to normalize its policy stance, with the attendant risk that economic activity will slow once the fiscal impulse fades and monetary policy turns restrictive."
Wall Street was trading higher following the latest jobs figures.
In the background, the latest round of negotiations between Beijing and Washington reportedly yielded very limited progress - if any.
According to China's state-owned Xinhua news agency, "some" agreements were reached in their economic and trade consultations and a work mechanism had been set up to maintain "close communications".
Nonetheless, "Both sides recognized that given that considerable differences still exist on some issues, continued hard work is required for more progress."
Indeed, according to the Journal, during the talks the US upped its demand on China to cut its bilateral trade surplus from $100bn by the end of 2020 to $200bn, alongside other demands.
However, earlier on Friday US Treasury Secretary Steve Mnuchin did say that both countries were having a "very good conversation".
In other news, strategists at Bank of America-Merrill Lynch sounded a positive note on Britain's top-flight index.
"UK large caps should instead be viewed as a barbell trade of Energy plus Quality stocks. The former are supported by improving global late-cycle indicators (e.g. rising capacity utilization and capex intentions) while the latter benefit from 'Slowdown' in leading indicators highlighted in Style Cycle report. Among major equity indices, the SMI and FTSE 100 continue to be most-preferred in this late-cycle 'Slowdown' phase," BoA-ML told clients.
Among the specific stocks mentioned by Merrill in its report were: GVC, Stanchart, National Grid, RSA and Ashtead.
On the UK corporate front, British Airways and Iberia owner IAG flew higher after it reported a 75% increase in first-quarter operating profit to €280m. Boss Willie Walsh did not provide the market with any update about a potential bid to acquire Norwegian Air, sending shares in the Scandi carrier tumbling.
Budget rival EasyJet rose as it said passenger numbers and the load factor grew in April.
But both were trumped by education publisher Pearson, which gained after saying that total underlying revenues edged up 1% in the first quarter and that it was on track to deliver its expectations for the year.
DIY retailer Kingfisher was higher as sunny weather over the British bank holiday weekend bodes well for sales of outdoor furniture and other garden equipment.
Paper and packaging group Smurfit Kappa advanced as it posted a 22% jump in first-quarter earnings and said that full-year EBITDA is expected to be "materially better" than 2017. Paper peer Mondi was also boosted.
InterContinental Hotels was in the black as it reported a 3.5% increase in global revenue per available room for the first quarter, while rival Millennium & Copthorne Hotels gave up early gains as a doubling in first-quarter pre-tax profit came alongside signs of a weakening in the London market.
On the downside, HSBC was under pressure after it reported a 4% fall in first-quarter profit as costs rose from increased investment in growth and digital banking, with the announcement of a $2bn share buyback not enough to swing investors.
On the broker note front, Dixons Carphone racked up strong gains as RBC Capital Markets reiterated its 'outperform' rating and upped its price target and estimates for the stock on expectations of a strong fourth quarter and good momentum into the new financial year.
BHP Billiton was upgraded to 'overweight' by Barclays, while Rio Tinto was cut to 'equalweight'.
Market Movers
FTSE 100 (UKX) 7,567.14 0.86%
FTSE 250 (MCX) 20,421.88 0.28%
techMARK (TASX) 3,439.21 0.52%
FTSE 100 - Risers
Pearson (PSON) 893.60p 7.66%
International Consolidated Airlines Group SA (CDI) (IAG) 678.00p 5.84%
Reckitt Benckiser Group (RB.) 5,727.00p 3.00%
BHP Billiton (BLT) 1,601.40p 2.79%
BP (BP.) 558.10p 2.61%
Sage Group (SGE) 648.00p 2.27%
Burberry Group (BRBY) 1,875.00p 2.26%
Diageo (DGE) 2,663.00p 2.17%
Mondi (MNDI) 1,935.50p 2.16%
Rio Tinto (RIO) 4,075.00p 1.88%
FTSE 100 - Fallers
Evraz (EVR) 481.60p -1.71%
Standard Life Aberdeen (SLA) 362.30p -1.47%
Berkeley Group Holdings (The) (BKG) 4,076.00p -1.14%
HSBC Holdings (HSBA) 714.40p -0.96%
Randgold Resources Ltd. (RRS) 6,050.00p -0.95%
Next (NXT) 5,144.00p -0.69%
RSA Insurance Group (RSA) 637.20p -0.44%
Smith & Nephew (SN.) 1,298.00p -0.35%
Severn Trent (SVT) 2,004.00p -0.30%
Land Securities Group (LAND) 980.00p -0.28%
FTSE 250 - Risers
Dixons Carphone (DC.) 214.20p 5.00%
Wizz Air Holdings (WIZZ) 3,396.00p 3.44%
Hochschild Mining (HOC) 219.40p 2.91%
CLS Holdings (CLI) 254.00p 2.83%
Centamin (DI) (CEY) 161.10p 2.81%
Babcock International Group (BAB) 735.20p 2.48%
Entertainment One Limited (ETO) 292.20p 2.45%
Ultra Electronics Holdings (ULE) 1,444.00p 2.41%
Caledonia Investments (CLDN) 2,765.00p 2.41%
Superdry (SDRY) 1,526.00p 2.14%
FTSE 250 - Fallers
On The Beach Group (OTB) 602.00p -2.75%
BGEO Group (BGEO) 3,316.00p -2.70%
Millennium & Copthorne Hotels (MLC) 547.00p -2.50%
Hikma Pharmaceuticals (HIK) 1,298.00p -2.33%
TalkTalk Telecom Group (TALK) 129.80p -2.26%
Marshalls (MSLH) 428.60p -2.10%
RPC Group (RPC) 772.60p -2.08%
Stagecoach Group (SGC) 152.00p -2.06%
Telecom Plus (TEP) 1,048.00p -2.06%
Card Factory (CARD) 220.60p -1.96%