London close: Stocks mixed as US payrolls underwhelm

(Sharecast News) - London stocks ended mixed on Friday as investors weighed weaker-than-expected US jobs data against signs of resilience in the UK economy. The FTSE 100 index slipped 0.09% to close at 9,208.21 points, while the more domestically focused FTSE 250 advanced 0.47% to 21,575.54 points.

Sterling strengthened against the dollar, rising 0.78% to $1.3539, while it edged 0.11% lower against the euro to trade at €1.1519.

US hiring slows sharply, UK retail footfall continues to decline

"Equity markets were quiet at the end of the week, albeit there is still a chance for a last-minute wobble if US jobs data delivers a shock," said Russ Mould, investment director at AJ Bell.

That wobble arrived as US hiring slowed sharply in August, adding to concerns about the health of the world's largest economy.

Non-farm payrolls rose by just 22,000, far below the consensus forecast of 75,000, while June's data was revised to show a contraction of 13,000 jobs rather than growth.

July's tally was revised higher by 6,000 to 79,000.

The unemployment rate edged up to 4.3%, as expected, although the participation rate ticked higher to 62.3%.

Average hourly earnings rose 0.3% month on month.

Patrick Munnelly, market strategy partner at TickMill, noted that "US labour market data has shown consistent weakness throughout the summer.

"Downward revisions to the most recent payrolls report align with weaker JOLTS figures earlier this week, alongside slowing ADP numbers, rising Challenger job cuts, and softer survey data."

Kathleen Brooks, research director at XTB, said the broad nature of the slowdown was "likely to lead to concerns about the state of the economy" and "even more pressure on the Fed to cut rates."

Capital Economics' Bradley Saunders countered that the higher participation rate would limit calls for a 50 basis point cut in September, while Pantheon Macroeconomics' Samuel Tombs said the Fed was "more likely" to deliver a 25bp move, noting that August payrolls were often revised up.

"Constant movement regarding tariffs in recent months have been a nightmare for businesses trying to plan for their future," Mould added.

"Ongoing uncertainty has the potential to put a freeze on hiring, thereby depressing the labour market."

US Treasury yields slipped and gold rose as investors adjusted expectations.

Munnelly observed that "money markets are almost entirely pricing in a Fed rate cut, with at least two cuts projected by the year's end. The Dollar weakened against its group-of-10 peers, while gold prices increased."

On home shores, UK retail footfall continued to decline in August, falling 0.4% year on year for a fourth consecutive monthly drop, according to the British Retail Consortium.

High street activity improved, up 1.1% thanks to warm weather, but shopping centres were flat and retail park visits fell 1.1%.

Official data showed retail sales volumes rose by 0.6% in July, outstripping expectations for a 0.2% increase.

Year-on-year growth was 1.1%, helped by warm weather and the women's Euro 2025 tournament.

Clothing sales were particularly strong, jumping 2.5% on the month.

However, volumes fell 0.6% in the three months to July, weighed by weaker demand for food and household goods.

The ONS said it had corrected earlier errors in seasonal adjustments that had delayed the release, while EY Item Club's Matt Swannell warned that household spending would remain under pressure from softer earnings growth, inflation and higher borrowing costs.

UK house prices meanwhile rose for a third consecutive month in August, climbing 0.3% on the month and 2.2% year on year, to a record average of £299,331, according to Halifax.

"Housebuilders were in demand as signs of a robust property market raises hopes for stronger earnings in the sector," Mould said.

"It's not a simple green light for the sector. Interest rates arguably need to come down a lot more to convince investors that the sector has legs as mortgage affordability is still an issue for many aspiring homeowners."

On the continent, German factory orders fell by 2.9% in July, their sharpest decline in six months, led by a 38.6% plunge in transport equipment orders and a 16.8% fall in electrical equipment.

Orders for consumer goods rose 4.3%, while automotive demand increased 6.5%.

Excluding large-scale orders, overall demand was 0.7% higher, suggesting underlying resilience despite the headline weakness.

Berkeley leads housebuilders higher, Ashmore slumps

On London's equity markets, housebuilder Berkeley Group rose 3.02% as it reaffirmed full-year profit guidance, citing "stable" trading in the first four months of its financial year.

Mould said Berkeley's stability was being treated as "a win given negative comments from rival housebuilders in recent months."

Peers also advanced, with Persimmon up 2.8% and Barratt Redrow gaining 2.11%, supported further by the Halifax data.

B&M European Value Retail climbed 2.74% after stronger-than-expected UK retail sales data for July boosted sentiment in the sector.

On the downside, Ashmore Group slumped 4.38% as it reported a 3% decline in assets under management to $47.6bn, driven by $5.8bn in net outflows.

The asset manager also posted a 15% drop in pre-tax profit to £108.6m for the year ended 30 June.

Admiral Group shed 2.96% after Peel Hunt cut its rating to 'sell' from 'reduce', pointing to a weaker outlook for motor underwriting margins.

In banking, HSBC edged 0.17% higher after an upgrade to 'outperform' by BNP Paribas Exane, while NatWest fell 2.32% as the same broker downgraded the stock to 'underperform'.

Reporting by Josh White for Sharecast.com.