London close: Stocks join global slide on fears of US recession

(Sharecast News) - London stocks closed in negative territory on Friday as investors reacted to a weaker-than-expected non-farm payrolls report from the United States, indicating a sharp slowdown in hiring last month.

The FTSE 100 fell 1.31%, ending the day at 8,174.71 points, while the FTSE 250 experienced an even steeper decline, dropping 2.95% to close at 20,826.35 points.

In currency markets, sterling was last up 0.75% on the dollar to trade at $1.2835, but it slipped 0.36% against the euro, changing hands at €1.1762.

"In the space of barely two days markets have gone from looking forward to a Fed rate cut in a growing economy to fretting about an impending recession," said IG chief market analyst Chris Beauchamp.

"Today's huge payrolls miss and the surge in the US unemployment rate has sparked a fresh flight from risk assets already reeling from some poor earnings reports and concerns about a wider conflict in the Middle East.

"Investors are now hoping for a 50 basis point rate cut in September, but worry that even this will be too little, too late to stave off a US recession."

Beauchamp noted that the Nasdaq 100 had shed 1,000 points from its post-FOMC highs this week, though it was "only just" at a two-month low, underscoring how strong the year's rally had been.

"Next week, the torrent of headline events slows to a trickle, but geopolitical risk remains high on the agenda due to a likely response by Iran against Israel."

US payrolls post big miss, UK retail footfall drops further

In economic news, the US labour market showed signs of weakening as non-farm payrolls increased by only 114,000 in July, well below the expected 175,000.

The slowdown in hiring raised concerns about potential "policy mistakes" by the Federal Reserve and fears of a "growth scare".

Revisions to previous months' data also showed a combined reduction of 29,000 jobs.

The unemployment rate rose to 4.3%, up from 4.1%, partly due to a slight increase in the labour force participation rate.

While hiring in the goods-producing sector improved, adding 25,000 jobs, the services sector saw a significant slowdown, with payrolls growing by just 72,000 compared to 125,000 in June.

Public sector hiring also dropped sharply.

Despite the overall slowdown, the three-month moving average of payroll gains edged up slightly from 168,000 to 170,000.

"The sharp slowdown in payrolls in July and sharper rise in the unemployment rate makes a September interest rate cut inevitable and will increase speculation that the Fed will kick off its loosening cycle with a 50 basis point cut, or even an intra-meeting move," said Stephen Brown, deputy chief North America economist at Capital Economics.

"It's worth noting that the Sahm Rule has not actually been triggered yet."

On home shores, retail footfall across the UK declined last month, continuing a downward trend amid ongoing economic uncertainty during the election period.

Data from the British Retail Consortium showed a 3.3% year-on-year drop in July, a deeper fall than June's 2.3% decrease.

Despite the overall decline, high streets bucked the trend with a surprising 2.7% increase in footfall compared to last year, marking a significant recovery from the 3.1% drop in June.

In contrast, retail parks and shopping centres continued to struggle, with footfall down 0.8% and 3.9%, respectively.

All UK nations saw reduced footfall, with England experiencing the largest decline at 3.4%.

"Footfall declined for the twelfth consecutive month, failing to maintain the buoyancy seen in 2022-2023," said BRC chief executive officer Helen Dickinson.

"As summer got into full swing, many people have chosen to increase their spending on holidays and leisure activities rather than shopping.

"Election week also saw particularly weak footfall, as political electioneering peaked, creating uncertainty for many consumers."

NCC Group surges, tech trusts in the doldrums on Intel concerns

On London's equity markets, International Consolidated Airlines Group (IAG) ascended 4.66% by the close.

The parent company of British Airways and Iberia benefited from investor optimism after announcing plans to resume dividend payments, reporting a rise in first-half profits, and halting its pursuit of Air Europa.

GSK also saw a positive uptick, rising by 2.39% following news that the US Food and Drug Administration approved its Jemperli treatment for use in combination with chemotherapy and as a standalone treatment for adult patients with primary advanced or recurrent endometrial cancer.

NCC Group experienced a large gain, with its shares soaring 8.14%.

The cybersecurity firm's stock climbed after it announced the sale of its non-core Fox Crypto business for around €77m (£65.4m).

On the downside, Capita's shares plummeted by 12.45%, despite the company reporting a swing to a £60m profit in the first half, compared to a loss of £67.9m in the same period last year.

The company also maintained its full-year expectations.

Allianz Technology Trust dropped 6.83% as tech stocks globally were hit hard following Intel's announcement to suspend dividend payments and cut 15% of its workforce.

Similarly, Polar Capital Technology Trust fell by 6.11%.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,174.71 -1.31% FTSE 250 (MCX) 20,826.35 -2.95% techMARK (TASX) 4,784.16 -0.83%

FTSE 100 - Risers

International Consolidated Airlines Group SA (CDI) (IAG) 167.45p 4.66% Haleon (HLN) 367.80p 2.74% United Utilities Group (UU.) 1,060.00p 2.52% Severn Trent (SVT) 2,653.00p 2.47% GSK (GSK) 1,562.50p 2.39% National Grid (NG.) 997.00p 1.73% SSE (SSE) 1,908.00p 1.65% Unilever (ULVR) 4,846.00p 1.34% Reckitt Benckiser Group (RKT) 4,150.00p 1.27% AstraZeneca (AZN) 12,610.00p 0.78%

FTSE 100 - Fallers

Intermediate Capital Group (ICG) 1,964.00p -7.13% Diploma (DPLM) 4,074.00p -6.99% Melrose Industries (MRO) 480.10p -6.78% JD Sports Fashion (JD.) 123.75p -6.57% Barclays (BARC) 209.10p -6.19% CRH (CDI) (CRH) 6,052.00p -6.00% 3i Group (III) 2,914.00p -5.76% Mondi (MNDI) 1,456.00p -5.55% Pershing Square Holdings Ltd NPV (PSH) 3,560.00p -5.48% Ashtead Group (AHT) 5,162.00p -5.42%

FTSE 250 - Risers

NCC Group (NCC) 156.80p 8.14% Assura (AGR) 42.32p 1.78% Endeavour Mining (EDV) 1,674.00p 0.90% Balanced Commercial Property Trust Limited (BCPT) 87.00p 0.69% Safestore Holdings (SAFE) 823.00p 0.55% Hargreaves Lansdown (HL.) 1,100.00p 0.41% Tritax Big Box Reit (BBOX) 166.20p 0.24% Grainger (GRI) 243.00p 0.21% Pennon Group (PNN) 636.00p 0.16% Empiric Student Property (ESP) 97.40p 0.10%

FTSE 250 - Fallers

Carnival (CCL) 1,060.50p -8.54% TI Fluid Systems (TIFS) 120.00p -7.55% CMC Markets (CMCX) 306.50p -7.40% Baillie Gifford Japan Trust (BGFD) 697.00p -7.18% Allianz Technology Trust (ATT) 347.50p -6.83% North Atlantic Smaller Companies Inv Trust (NAS) 4,100.00p -6.82% Auction Technology Group (ATG) 468.50p -6.77% HGCapital Trust (HGT) 511.00p -6.75% IP Group (IPO) 40.30p -6.35% Polar Capital Technology Trust (PCT) 2,920.00p -6.11%