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European market up after US jobs miss but FTSE down / Image: Adobe

A deep sell-off for the FTSE 100 failed to draw out enough bargain-hunters to help the blue-chip index follow European peers higher on Friday, as it was held back by a stronger pound.

Sterling rose on the back of a cooler-than-expected US jobs report. The reading gave stocks a slight boost, though the FTSE 100 still closed in tepid territory.

It was a better day for the CAC 40 in Paris and DAX 40 in Frankfurt, as well as the FTSE 250 in London. A stronger pound held back the FTSE 100.

The FTSE 100 index ended 23.56 points lower, or 0.3%, at 7,256.94. The FTSE 250 closed up 87.51 points, or 0.5%, at 18,003.97, while the AIM All-Share ended up 0.85 of a point, 0.1%, at 741.71.

For the week, the FTSE 100 lost 3.7%, the FTSE 250 shed 2.2% and the AIM All-Share fell 1.6%.

The Cboe UK 100 closed down 0.3% at 723.16, the Cboe UK 250 ended down 0.1% at 15,762.63, and the Cboe Small Companies fell 0.4% at 13,498.22.

In European equities on Friday, the CAC 40 in Paris ended up 0.4%, while the DAX 40 in Frankfurt added 0.5%.

Among the worst blue-chip performers in London were drugmaker AstraZeneca lost 2.1%, while Severn Trent and United Utilities gave back 2.2% and 1.7%. Utility shares outperformed during Thursday’s sell-off. Astra has lost around 10% this week, partly down to disappointing trial data, and Thursday’s tumultuous day for equities.

A stronger pound also kept a lid on the blue-chip index, which is stacked with international earners.

Sterling was quoted at $1.2832 late Friday afternoon, jumping from $1.2690 at the London equities close on Thursday. The pound traded around its best level since June 19.

The euro traded at $1.0949, higher than $1.0858. Against the yen, the dollar was quoted at JP¥142.27, down versus JP¥144.23.

The dollar lost some momentum after the latest reading of the US labour market was cooler than expected.

According to the US Bureau of Labor Statistics, total non-farm payroll employment increased by 209,000 in June, decelerating from a revised rise of 306,000 in May.

June’s figure came below expectations. According to FXStreet-cited consensus, 225,000 jobs were expected to be added last month.

The data came a day after numbers from payroll processor ADP showed US private sector employment grew by almost half a million jobs. Employment grew by 497,000 in June, rising from 278,000 in May.

What followed was some bond market chaos. The yield on the 10-year bond spiked as high as 4.08%. The two-year Treasury yield stretched as high as 5.12% on Thursday.

The weaker jobs report took some needle off government bond yields on Friday, however. The reading is unlikely to make the Federal Reserve change course, however, due to pay growth remaining robust.

Over the past 12 months, average hourly earnings increased 4.4% in June, unchanged from a month prior. This was slightly above expectations of a 4.2% increase, according to FXStreet-cited consensus.

‘The slowing in payrolls alone might have given the Fed pause at their meeting later this month, but the overshoot in hourly earnings, and the upward revision to the May print, means that a hike now has to be our base case; it would take a zero core CPI print now to keep the Fed on hold. For the record, we think this hike will be a mistake,’ Pantheon Macroeconomics analyst Ian Shepherdson commented.

‘A Fed willing to extrapolate the recent trends and take leading indicators - as well as the lags in policy - seriously, would not hike again. This is not that Fed. But the data will overtake the hawks by the end of the summer; we would be very surprised to see a further hike in September.’

US stocks were mixed at the time of the European close. The Dow Jones Industrial Average fell 0.1%, the S&P 500 added 0.1% and the Nasdaq Composite climbed 0.3%.

In London, Coca-Cola HBC added 5.1%. After a stronger-than-expected finish to the first half of the year, the drinks bottler upgraded its earnings expectations for the full year.

The company now expects organic earnings before interest and tax growth of between 9% to 12% for 2023. Previously, Coca-Cola HBC had expected Ebit growth of up to 3% or a decline of up to 3%.

OSB Group tumbled 29% as it said it will take as much as a £180 million hit to first-half results, because customers are acting more quickly than expected to refinance their mortgages at favourable rates.

OSB, which stands for OneSavings Bank, said that as its mortgage customers reach the end of their initial fixed term, they are choosing to refinance earlier than expected and therefore spend less time on the higher reversion rate. This rate is linked to the Bank of England’s bank base rate and has been rising over the past year as the central bank hikes UK interest rates.

‘As the first half of 2023 progressed, the group observed a step change in the behaviour of Precise Mortgages owner-occupied and buy-to-let customers reaching the end of their initial fixed term,’ OSB explained.

OSB said it now expects customers to spend an average of five months on the higher reversion rate, which it said it is a reduction from its previous expectation without saying what that had been. As result of the reduced time spent at the higher rates, OSB said it will make a negative effective interest rate adjustment of £160 million to £180 million on an underlying basis against first-half results.

YouGov closed up 2.8%. It raised £51.2 million through a placing to go towards the acquisition of GfK’s consumer panel business.

GfK’s consumer panel business is focused on household purchase data, with panels across 16 European countries, consisting of over 100,000 households.

The London-based research and data analytics group said that the €315 million deal would not only extend its offering into the fast-moving consumer goods sector, but would help expand its offering to US clients.

Gold was quoted at $1,929.07 an ounce late Friday, higher than $1,909.01 on Thursday. Brent oil was trading at $77.47 a barrel, higher than $75.23.

Monday’s economic calendar as Chinese inflation data overnight. Chancellor Andrew Bailey and Bank of England Governor Andrew Bailey speak at the yearly Mansion House event, meanwhile.

The local corporate calendar has quarterly numbers from self-storage firm Big Yellow Group on Monday.

This time next week, investors will be digesting the first batch of quarterly earnings from US banking stocks, with Citigroup, JPMorgan Chase and Wells Fargo reporting before the opening bell in New York.

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Issue Date: 07 Jul 2023