LONDON MARKET CLOSE: Equities rally after shocking US jobs undershoot

(Alliance News) - Stocks got an afternoon boost from Friday's sharply disappointing US jobs print for April, helping to soothe recent worries over sooner-than-expected monetary policy tightening.

Also helping London indices were travel stocks, which rose in anticipation of the release of England's travel green list later on Friday.

The FTSE 100 index closed up 53.54 points, or 0.8%, at 7,129.71. The FTSE 250 ended up 283.92 points, or 1.3%, at 22,775.28, and the AIM All-Share closed up 0.8%, or 9.91 points, at 1,262.60.

The Cboe UK 100 ended up 0.9% at 710.04, the Cboe UK 250 closed up 1.3% at 20,452.58, and the Cboe Small Companies ended up 1.3% at 15,030.34.

In European equities on Friday, the CAC 40 in Paris ended up 0.5%, while the DAX 30 in Frankfurt rose 1.3%.

"Today's 'huge miss' on the headline NFP figure, and the downgrade to last month's blowout figure, contributed to a general relaxation of nerves regarding any changes to Fed policy. Risk assets took off, the dollar fell, and gold built on its strong rally in yesterday's session," said Chris Beauchamp, chief market analyst at IG.

The US economy added 266,000 new jobs in April, slowing sharply from a downwardly revised 770,000 rise in March.

The latest figure was well below market consensus, cited by FXStreet, of 978,000, though many forecasts were for 1 million jobs or more being added. March's figure was first reported as 916,000.

The US unemployment rate was 6.1% in April, up from 6.0% in March. The jobless rate also missed the market forecast, which was for 5.8%.

In a week that saw jitters after Janet Yellen, current US Treasury secretary and former head of the Federal Reserve, spoke of rising interest rates to stop the economy overheating, Friday's nonfarm miss prompted a sigh of relief from markets.

IG's Beauchamp said: "Stocks have been in search of a catalyst to resume their move higher, and it looks like today's number has provided the spark. It will certainly take the pressure off the Fed to discuss any changes in policy, at least for another month."

Stocks in New York were firmly in the green at the London equities close, with the Dow Jones up 0.5%, the S&P 500 index up 0.8%, and the Nasdaq Composite soaring 1.3%.

While equities rallied, the US dollar fell in the wake of the data.

The pound was quoted at USD1.3995 at the London equities close Friday, leaping from USD1.3876 at the close on Thursday.

The euro jumped to USD1.2156 at the European equities close Friday, against USD1.2053 at the same time on Thursday.

Against the yen, the dollar was trading at JPY108.52, falling from JPY109.09 late Thursday.

Gold climbed further as the dollar weakened. The precious metal was quoted at USD1,834.71 an ounce at the London equities close Friday against USD1,813.85 at the close on Thursday.

Gold was not the only metal to rally at the end of the week.

"The basic resource sector has led the gains with copper and iron ore prices hitting record highs, with Anglo American and Glencore leading the way," said Michael Hewson, chief market analyst at CMC Markets.

Anglo American was the second best performer in the FTSE 100 on Friday, closing up 3.6%, while Glencore rose 3.4%.

Brent oil fared less well on Friday, quoted at USD68.20 a barrel at the London equities close from USD68.39 late Thursday.

Back in London, Barclays shares closed up 2.5% after Sherborne Investors Management, the investment vehicle of activist Edward Bramson, sold its entire 6.0% stake in the lender.

It ends a three-year battle between Sherborne and the London-based bank, during which the activist tried to force cutbacks and oust Chief Executive Jes Staley. Sherborne had called for Staley to be removed in April 2020 over his links to Jeffrey Epstein.

Based on the bank's market capitalisation on Friday, at around GBP30.8 billion, the stake is worth around GBP1.8 billion. Barclays on Friday confirmed that Sherborne disposed its stake on Tuesday.

International Consolidated Airlines rose 3.0% after posting a narrowed loss for the first quarter, though it still topped EUR1 billion amid continued disruption in the air travel industry.

The British Airways parent company recorded a quarterly EUR1.22 billion pretax loss, narrowed by 35% from EUR1.88 billion in the first quarter of 2020, while total revenue dropped 79% to EUR968 million from EUR4.59 billion.

InterContinental Hotels Group nudged up 1.4% as the hotels operator said trading continued to improve during the first quarter of 2021 and it is seeing a strong performance in openings and signings.

For the three month to March 31, revenue per available room, a key metric in the hotel industry - was down 51% from 2019 and down 34% versus 2020. IHG noted there was a notable pick-up in demand in March, particularly in the US and China, which continued into April.

Key for both IAG and IHG is the unveiling of England's travel green list later on Friday.

Holidaymakers will finally discover which destinations they can visit this summer without quarantining, with Portugal, Iceland and Malta among those expected to be on the travel green list. Gibraltar and Israel could also make the cut when the list is published on Friday following weeks of speculation.

Quarantine and coronavirus testing requirements for people arriving in England once foreign holidays are permitted from May 17 will be based on a new traffic light system, with destinations placed on green, amber and red lists.

People arriving from a green location will not need to quarantine on their return and will have to take one post-arrival test. Those returning from an amber list country must self-isolate for at least five days and take two tests. The red list requires an 11-night stay in a quarantine hotel at a cost of GBP1,750 for solo travellers.

Jet engine maker Rolls-Royce closed 3.2% higher on Friday, while budget airline easyJet rose 5.6% and Anglo-German tour operator Tui rose 4.0%.

In the FTSE 250, Birmingham-based property developer St Modwen Properties surged 20% after receiving a potential takeover offer worth GBP1.2 billion from US alternative asset investment firm Blackstone Group.

Blackstone has offered to acquire St Modwen for 542 pence per share in cash per share, reflecting a 21% premium to the company's closing price of 448p on Thursday, and a 24% premium to its net tangible assets per share of 437.7p as at November 30 last year.

Meggitt rose 8.3% following a report that US-based aircraft parts maker Woodward could be looking to buy its London-listed peer. Woodward is working with an investment bank as it mulls a potential acquisition, and Coventry, England-based Meggitt is a possible target, Reuters reported, citing an article in Dealreporter.

At the bottom of the index was Syncona, falling 6.1% after portfolio company Gyroscope Therapeutics postponed plans for its initial public offering in New York.

"In light of market conditions, we have decided to postpone our planned initial public offering," said Chief Executive Khurem Farooq.

Only on Tuesday, Syncona said Gyroscope had filed with the US Securities & Exchange Commission for a potential IPO. Gyroscope Therapeutics is a clinical-stage gene therapy company based in Stevenage, England, specialising on treating eye diseases. Syncona, an investor in healthcare companies, has a 54% stake in Gyroscope following a USD42 million investment in March.

Monday's UK corporate calendar has full-year results from Provident Financial and half-year results from Victrex.

The economic calendar on Monday has UK Halifax house prices at 0830 BST and eurozone Sentix investor confidence at 0930 BST.

By Lucy Heming; lucyheming@alliancenews.com

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