London cityscape panorama
Strong US jobs growth squashed hopes of imminent interest rate cuts from the Fed / Image source: Adobe

Stocks prices in London fell into the red on Friday, as unexpectedly high US jobs growth squashed hopes of interest rate cuts by the Federal Reserve sooner rather than later.

The FTSE 100 index closed 64.73 points, 0.8%, at 7,911.16. The FTSE 250 ended down 147.25 points, 0.7%, at 19,725.94, and the AIM All-Share closed down 2.53 points, or 0.3%, at 740.05.

The Cboe UK 100 ended down 0.9% at 790.22, the Cboe UK 250 closed down 0.9% at 17,145.88, and the Cboe Small Companies ended down 0.5% at 14,676.15.

US hiring smashed expectations in March, picking up pace from February, figures showed.

According to the Bureau of Labor Statistics, nonfarm payroll employment rose by 303,000 in March higher than the FXStreet-cited consensus of 200,000.

The figure for February was revised down by 5,000, from 275,000 to 270,000 while January’s total was adjusted upwards by 27,000, from 229,000 to 256,000. This means employment in January and February combined was 22,000 higher than previously reported.

In March, job gains occurred in health care, government, and construction, the BLS said.

In March, average hourly earnings for all employees on private nonfarm payrolls increased by 0.3% to $34.69. Over the past 12 months, average hourly earnings have increased by 4.1%, in line with expectations.

The unemployment rate in March at 3.8% edged down from 3.9% in February.

‘With next week’s inflation likely to remain hot, the prospect of a June rate cut from the Fed looks slim. Nonetheless, with business surveys universally pointing to weakness over the next three-to-six months we do expect to see more evidence of cooling by the summer,’ said ING analyst James Knightley.

Confidence in three rate cuts from the Federal Reserve this year, beginning in June, is being tested by a string of recent data indicating the US economy remains in rude health, while bank officials have done little to soothe concerns.

Minneapolis Fed chief Neel Kashkari said Thursday that there was a chance of no reductions this year, calling inflation figures in January and February ‘a little bit concerning’ and adding that he wanted to see more positive data.

His Philadelphia counterpart Patrick Harker warned prices were still rising too sharply and that ‘we’re not where we need to be’, while Richmond boss Thomas Barkin called it ‘smart’ to take time to get a clearer idea about the path for inflation.

On Wednesday, the chair of the Federal Reserve Jerome Powell told a conference in California that the current risks to the US economy were ‘two-sided,’ with negative consequences for the economy if policymakers moved to cut rates too fast or too slow.

Stocks in New York were higher at the London equities close, with the DJIA up 0.6%, the S&P 500 index up 0.9%, and the Nasdaq Composite up 1.0%.

The pound was quoted at $1.2621 at the London equities close on Friday in London, down from $1.2667 late Thursday. The euro fell to $1.0831 from $1.0865. Against the yen, the dollar fell to JP¥151.54 from JP¥151.67.

The UK construction sector returned to growth in March, ending a six-month period of decline, figures showed.

The S&P Global UK construction PMI rose to 50.2 in March from 49.7 in February, above the FXStreet market consensus of 50.0 points.

Any reading above 50.0 indicates an overall expansion of construction output. Although signalling only a fractional rise in business activity, the index was at its highest level since August 2023.

Annual growth in UK house prices slowed last month, and they went back into decline on a monthly basis, numbers from mortgage lender Halifax showed.

UK house price growth ebbed to 0.3% year-on-year in March, Halifax said, from a 1.6% hike in February.

Prices fell 1.0% in March from February, having risen 0.3% in February from January. It was the first monthly fall since September, while the annual reading was the tamest since November.

In European equities on Friday, the CAC 40 in Paris lost 1.2%, while the DAX 40 in Frankfurt declined 1.3%.

The eurozone construction sector remained firmly in contraction territory in March as activity fell sharply again according to latest figures from S&P Global.

The Hamburg Commercial Bank eurozone construction PMI total activity index eased to 42.4 points in March, down from 42.9 points in February and still below the 50.0 no-change mark separating growth from contraction.

S&P Global said the decrease in output continued to be driven by substantial contractions in housing activity, which was once again the worst-performing of the three monitored segments.

A barrel of Brent oil fetched $91.31 at the London equities close on Friday, up from $89.13 on Thursday.

Israeli Prime Minister Benjamin Netanyahu has threatened consequences in the event of an Iranian attack on his country.

‘Iran has been acting against us for years, both directly and through its proxies; that is why Israel is taking action against Iran and its proxies, defensively and offensively,’ Netanyahu said at the start of a meeting of the Israeli security cabinet on Thursday evening, his office announced.

‘We will know how to defend ourselves and we will act according to the simple principle: Whoever harms us or plans to harm us, we will harm them,’ Netanyahu said.

The Israeli government and its ally the US are concerned that Iran is preparing for an imminent attack, the news portal Axios quoted US and Israeli officials as saying.

In London’s FTSE 100, Shell rose 0.6%, after the oil major cautioned results from its Integrated Gas division in the first-quarter are expected to be ‘significantly lower’ than in the fourth, and said it expects write-offs worth $600 million in its Upstream arm.

The London-based firm expects Integrated Gas adjusted earnings before tax and depreciation between $1.2 billion and $1.6 billion.

‘Trading & optimisation results are expected to be strong, but significantly lower than an exceptional Q4,’ it commented.

In Upstream, Shell warned of $600 million in exploration well write-offs, largely in Albania. It expects adjusted earnings before tax and depreciation between $2.7 billion and $3.1 billion.

Elsewhere, in Chemicals & Products, ‘trading & optimisation is expected to be significantly higher’ than a quarter earlier. For this division, Shell predicts adjusted earnings before tax and depreciation between $0.8 billion and $1.0 billion.

Elsewhere in London, AIM-listed Steppe Cement fell 17%. The Kazakhstan-focused cement producer said it sold KZT3.78 billion, around $8.4 million worth of cement in the first-quarter, down 23% from a year prior.

‘Steppe Cement’s market share decreased to 11.5% in the first quarter of 2024 compared with 12.7% in the first quarter of 2023,’ it added.

‘Transportation costs have increased significantly and shipments to the southern region of Kazakhstan result in low margins. The cement market in winter is comparatively small in the northern regions of Kazakhstan compared with the summer season, and therefore the company, which has been operating at full efficiency over the quarter, has chosen to build up clinker inventory in preparation of the summer season, rather than make sales at depressed prices.’

The company also announced a proposed capital return of 1.5 pence per share, through a capital reduction. The proposal is subject to shareholder approval at an April 26 extraordinary general meeting.

Gold was quoted at $2,325.89 an ounce on Friday at the London equities close, up from $2,292.67 late Thursday.

In Monday’s UK corporate calendar, Ferrexpo releases a trading statement.

The economic calendar for next week has consumer and producer price inflation data for the US out on Wednesday and Thursday respectively, while inflation figures for China and the latest European Central Bank interest rate decision are also out on Thursday. On Friday, German CPI is out, alongside UK gross domestic product data.

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Issue Date: 05 Apr 2024