LONDON MARKET CLOSE: Stocks edge lower after blowout US jobs report

(Alliance News) - Stocks in London ended lower on Friday after the unexpectedly strong US jobs report boosted the odds of further aggressive interest rate hikes by the Federal Reserve.

According to the latest nonfarm payrolls report from the Bureau of Labor Statistics, employment rose by 528,000 in July, more than double the FXStreet-cited consensus of 250,000. In addition, the figure for June was upwardly revised to 398,000 from 372,000.

Average hourly earnings increased 5.2% year-on-year in July, unchanged from June's growth rate. June's climb was upwardly revised from 5.1%. According to the most recent consumer price index data, the US inflation rate for June was 9.1%, outpacing growth in hourly earnings.

The FTSE 100 closed down 8.32 points, or 0.1%, at 7,439.74, was lost 0.2% since last Friday.

The FTSE 250 index closed down 104.28 points, or 0.5%, at 20,051.48. The mid-cap index shed 0.8% over the course of the week.

The AIM All-Share index closed down 2.34 points, or 0.3%, at 920.38 - ending the week flat.

The Cboe UK 100 index ended down 0.3% at 741.95. The Cboe 250 lost 0.9% at 17,374.89. The Cboe Small Companies added 0.5% at 13,952.20.

In Paris the CAC 40 ended down 0.6%, while the DAX 40 in Frankfurt ended 0.7% lower.

The figures come as the Fed continues its tightening cycle and after Federal Reserve Chair Jerome Powell played down fears of a US recession, citing the nation's strong labour market.

Powell fielded several questions last week on a potential recession after the Fed enacted another chunky, but expected, 75 basis point rate hike, taking the federal funds rate to a 2.25% and 2.50% range.

Powell said the strong labour market is not congruent with the US being in a recession, despite figures showing two successive quarterly falls in gross domestic product, a technical indication of recession.

Stocks in New York were lower at the London equities close in response to the strong jobs number. The DJIA was down 0.1%, the S&P 500 index down 0.3% and the Nasdaq Composite down 0.4%.

While prolific hiring is a strong indicator of economic robustness, investors interpreted the report as likely to lead to more big moves by the Fed after the US central bank enacted two straight 75 basis point interest rate increases.

"European markets spent the morning session mostly trading sideways, as investors waited to see how today's US payrolls report for July would pan out. The initial response saw markets drift lower, and yields push higher, as markets priced the prospect of another jumbo rate hike from the Federal Reserve in September," said CMC Markets analyst Michael Hewson.

In the FTSE 100, Hargreaves Lansdown ended the best performer, up 4.9%, after the fund supermarket reported a drop in annual assets, but the firm was able to produce profit slightly ahead of guidance, thanks to the addition of 92,000 new active clients.

In the year that ended June 30, pretax profit slumped 26% to GBP269.2 million from GBP366.0 million. Revenue declined 7.6% to GBP583.0 million from GBP631.0 million.

Underlying pretax profit fell 19% to GBP297.5 million from GBP366.0 million. Company-complied consensus seen underlying profit at GBP283 million.

Over the financial year, assets under administration declined by 8.6% to GBP123.8 billion from GBP135.5 billion, "driven by market falls". HL raised its annual ordinary dividend by 3.1% to 39.7 pence from 38.5p. However, including a special payout of 12.0p for financial 2021, the total annual dividend is down 24% from 50.5p. Looking ahead, HL expects 3% ordinary dividend growth for financial 2023.

London Stock Exchange Group closed up 1.5% after the exchange operator said results in the first half of 2022 improved, with this year's interim period benefiting from an extra month of contribution from recent acquisition Refinitiv.

LSEG completed the USD27 billion acquisition of financial market data and trading infrastructure provider Refinitiv in January 2021, ending a long process after first making its interest clear back in July 2019.

LESG's total income excluding recoveries jumped by 24% year-on-year to GBP3.57 billion from GBP2.87 billion. Including recoveries, the measure was up at the same rate to GBP3.74 billion from GBP3.02 billion. Pretax profit jumped 73% to GBP803 million from GBP463 million.

The stock exchange operator said its offering benefits from market price volatility. Revenue from the Capital Markets unit alone jumped 34% year-on-year. Its largest revenue contributor, Data & Analytics, saw a top-line improvement of 26%.

LSEG lifted its interim dividend by 27% to 31.7p per share from 25.0p. It also on Friday launched a GBP750 million shares buyback, "phased over multiple tranches over 12 months".

At the other end of the large-caps, WPP ended the worst performer, down 8.9%, despite positive interim results.

WPP upped its annual outlook. It now expects organic revenue to rise between 6.0% and 7.0% for 2022. It had initially guided for a 5.5% to 6.5% rise.

Pretax profit in the first half of 2022 surged 12% to GBP562 million from GBP502 million a year earlier. Revenue increased 10% to GBP6.76 billion from GBP6.13 billion. WPP upped its payout by 20% to 15.0p from 12.5p.

"Advertising agency WPP has long been considered a bellwether for its industry. Some see if as a decent barometer for the wider economic climate too - when companies are feeling confident they will spend more on advertising and marketing, and when they are more cautious this spending will be cut back. WPP is a particularly useful indicator because of the scale and breadth of its operations," explained AJ Bell's Russ Mould.

"WPP's first-half numbers actually look fairly solid, but investors are so concerned about the economic backdrop, and what it says about WPP's prospects, they have reacted negatively. Clearly there is a belief that WPP's recent momentum, which helped it lift its annual sales outlook, can't last in the long-term," Mould added.

Next closed down 3.8% after Goldman Sachs downgraded the clothing and homewares retailer to 'neutral' from 'buy'.

The dollar was higher across the board following the blowout US jobs number. The pound was quoted at USD1.2060 at the London equities close, down from USD1.2115 at the close Thursday.

The euro stood at USD1.0165 at the European equities close, down from USD1.0220 late Thursday. Against the yen, the dollar was trading at JPY135.20, sharply higher against from JPY133.30.

Brent oil was quoted at USD96.23 a barrel at the equities close, up from USD94.65 at the close Thursday.

Gold stood at USD1,776.71 an ounce at the London equities close, lower against USD1,785.66 late Thursday.

A light economic calendar on Monday has Switzerland unemployment data at 0645 BST.

The UK corporate calendar on Monday has interim results from shipping services firm Clarkson and from recruiter PageGroup.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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