London close: Shares rally as US payroll data hints at possible rate pause

(Sharecast News) - London stocks rallied to close higher on Friday after the latest monthly non-farm payrolls report in the US suggested the US Federal Reserve may be able to pause interest rate rises. The FTSE 100 finished the week up 0.51% to 7,567, while the second-tier 250 index closed up 0.59% to 18,944.

The US economy added fewer new jobs than expected last month, with official data showing non-farm payroll rose by 187,000 in July, below forecasts of an increase of 200,000.

The figure for June was also revised lower to 185,000 from 209,000, while May's number was reduced by 25,000 to 281,000, meaning fewer jobs were created in the spring than first thought, according to data from the US Bureau of Labor Statistics.

It also reported that the unemployment rate fell to 3.5%, down from 3.6% in June.

Average hourly earnings were up 0.4%, or 14 cents, higher than the 0.3% expected to $33.74, but this was offset by a slight fall in the number of hours available.

The dollar weakened after the news, pushing the pound up by half a cent to $1.277.

"The July jobs report is just one datapoint before the September FOMC meeting, but we think it offers enough evidence of cooling labor market conditions to weigh in favour of no additional rate hikes. However, an upside surprise in any of the forthcoming data on the labour market and inflation would put another rate hike back on the table," said Nancy Vanden Houten, lead US economist at Oxford Economics.

Overnight Chinese officials pledged to support economic growth in the back half of 2023.

Capita in the red during H1

In equity news, UK government contractor Capita posted a loss for the half-year, including taking a hit of up to £25m from a cyber attack on its computer systems earlier this year. The company made a loss before tax of £67.9m, compared with a profit of £0.1m due to business exits, non-core portfolio goodwill impairment and costs associated with the cyber incident. On an adjusted basis, Capita's pre-tax profit increased by £8.4m to £33.1m. Turnover rose 3% to £1.47bn.

Advertising giant WPP on Friday cut its like-for-like growth forecast for the full year due as North America revenues fell in the second quarter. The company said it now expected growth of 1.5-3%, downgraded from a previous estimate of 3-5%, driven by lower spending from technology clients. Interim profit before tax fell more than halved to £204m from £419m a year ago. "Our performance in the first half has been resilient with Q2 growth accelerating in all regions except the USA, which was impacted in the second quarter by lower spending from technology clients and some delays in technology-related projects," said chief executive Mark Read.

Flutter Entertainment gained on a positive read across after US peer DraftKings reported a solid set of Q2 numbers, as well as boosting its full year guidance.

Market Movers

FTSE 100 (UKX) 7,566.93 0.50% FTSE 250 (MCX) 18,944.23 0.59% techMARK (TASX) 4,364.85 0.31%

FTSE 100 - Risers

Rolls-Royce Holdings (RR.) 205.20p 6.76% Mondi (MNDI) 1,313.50p 5.46% St James's Place (STJ) 904.20p 3.98% Flutter Entertainment (CDI) (FLTR) 15,170.00p 3.62% Smurfit Kappa Group (CDI) (SKG) 3,240.00p 3.32% Smith (DS) (SMDS) 308.40p 2.77% Burberry Group (BRBY) 2,208.00p 2.22% M&G (MNG) 198.05p 2.06% Shell (SHEL) 2,387.00p 2.05% Melrose Industries (MRO) 527.20p 1.93%

FTSE 100 - Fallers

WPP (WPP) 814.60p -3.85% Haleon (HLN) 321.15p -1.17% Experian (EXPN) 2,847.00p -1.01% Spirax-Sarco Engineering (SPX) 10,940.00p -1.00% Compass Group (CPG) 1,997.00p -0.99% IMI (IMI) 1,575.00p -0.94% Reckitt Benckiser Group (RKT) 5,636.00p -0.77% Coca-Cola HBC AG (CDI) (CCH) 2,270.00p -0.74% Unilever (ULVR) 4,094.50p -0.66% Auto Trader Group (AUTO) 628.20p -0.63%

FTSE 250 - Risers

Digital 9 Infrastructure NPV (DGI9) 60.00p 4.71% Synthomer (SYNT) 84.20p 4.53% Molten Ventures (GROW) 260.00p 4.08% Telecom Plus (TEP) 1,680.00p 3.96% TUI AG Reg Shs (DI) (TUI) 600.50p 3.89% Babcock International Group (BAB) 388.20p 3.85% Wood Group (John) (WG.) 163.30p 3.49% Dr. Martens (DOCS) 148.90p 3.40% Spirent Communications (SPT) 158.30p 3.40% Mitchells & Butlers (MAB) 234.80p 3.35%

FTSE 250 - Fallers

Capita (CPI) 22.42p -16.47% Vanquis Banking Group 20 (VANQ) 121.60p -4.70% Morgan Advanced Materials (MGAM) 260.00p -4.24% Future (FUTR) 788.50p -2.77% Ferrexpo (FXPO) 81.90p -2.62% NCC Group (NCC) 94.10p -2.28% Serco Group (SRP) 158.00p -2.17% Abrdn Private Equity Opportunities Trust (APEO) 440.00p -2.11% Games Workshop Group (GAW) 11,230.00p -2.01% Discoverie Group (DSCV) 770.00p -1.66%