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FTSE 100 tumbles after non-farm payrolls disappoint

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UK stocks fell today after taking a hit from weaker than expected employment figures reported by the US Department of Labor. The FTSE 100 stood at 5,664 at midday, down 28 points (0.5 percent) from Thursday’s close.

The non-farm payrolls report showed that the US economy added only 80,000 jobs last month, which undershot expectations of around 100-120,000. The unemployment rate was unchanged at 8.2 percent.

“The labour market has clearly moved into a slower pace of expansion than was the case around the turn of the year,” said chief economist at FXPro Simon Smith.

“The one bright spot in today’s report is the better than expected average hourly earnings numbers which rose 2pct in June vs. the anticipated 1.7pct increase.

“Even here though, you have to look at the wider picture which remains one of subdued growth in earnings, with most of the past year seeing earnings lag behind inflation.”

On the positive side, the weak jobs numbers make it more likely that the Federal reserve will unleash another round of quantitative easing to stimulate the recovery, which appears to be running out of gas.

Earlier this week, International Monetary Fund (IMF) chief Christine Lagarde said the US had to “do all it can to avoid driving over what some have described as the ‘fiscal cliff’”.

Steelmaker Evraz (LON:EVR, down 4.3pct at 246.8p) was the heaviest faller in the top flight.

Investors also sold mining stocks following a decline in base metal prices.

Kazakh copper miner Kazakhmys (LON:KAZ, down 4.2pct at 726p) led the retreat, followed by Vedanta Resources (LON:VED, down 3.5pct at 911p) and Rio Tinto (LON:RIO, down 3pct at 3,062p).

Other notable fallers included retailer Marks & Spencer (LON:MKS, down 3.5pct at 317.6p), fashion house Burberry (LON:BRBY, down 3.4pct at 1,293p) and building materials group CRH (LON:CRH, down 4.1pct at 1,164p).

Meanwhile, British Airways owner IAG (LON:IAG, up 2.3pct at 159.3p) was atop the FTSE 100 leaderboard.

Water group Pennon (LON:PNN, up 1.7pct at 772p), energy group SSE (LON:SSE, up 1.6pct at 1,416p) and British Gas parent company Centrica (LON:CNA, up 1.5pct at 320.1p) also did well today.

UK corporate news

In other news, Premier Foods (LON:PFD, up 0.5pct at 88.75p) said it has sold its ethnic flour business to Westmill Foods, a subsidiary of Associated British Foods (LON:ABF, up 1pct at 1,296p) for £34 million.

The disposal is part of the Hovis and Branston pickle maker’s strategy of focusing in on its eight major power brands.

Premier chief executive Michael Clarke said: "We are continuing to deliver on our growth strategies, growing our Power Brands, divesting selected, non-core businesses and reducing costs on track with our plans. 

“The Elephant Atta brands are great brands that I'm sure will benefit from being part of Westmill Foods."

Meanwhile, life insurer Aviva (LON:AV., up 1.4pct at 288.6p) has completed the sale of 37 million shares in Dutch group Delta Lloyd at €10.75 each, raising £318 million before expenses.


The sale is part of the new strategy announced yesterday which will see the close or sale of sixteen businesses and focus mainly on the UK, in a move to revive its ailing fortunes.

Aviva had initially planned to sell up to 25 million Delta Lloyd shares but had increased the number due to strong demand.

The sale is reducing Aviva's holding in the business from 41 percent to just below 20 percent, or 34 million shares.
The transaction was several times oversubscribed at the increased size.

 


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