LONDON (ShareCast) - After a relatively quiet start to the trading session, markets sunk sharply into the red on Friday afternoon after the US economy added far fewer jobs than forecast in July.

Non-farm payrolls increased by just 162,000 last month, lower than the downwardly revised 188,000 increase in June and much worse than the consensus forecast of 185,000. While the unemployment rate dropped more than predicted from 7.6% to 7.4%, this was partly due to a combination of employment growth and a small decline in the labour force.

What this now means for the monetary policy outlook is uncertain, especially given the Federal Reserve’s dovish comments on Wednesday when it said it would continue with quantitative easing in order to "support a stronger economic recovery". Meanwhile, data earlier in the week had pointed to a recovery that was gathering momentum: jobless claims fell to a five-year low; US manufacturing activity rose to a two-year high; and economic growth accelerated strongly in the second quarter.

“For policymakers, this probably marks a release that rules nothing in or out,” said economist Peter Newland from Barclays. “The August employment report, and the data flow between now and then, will likely prove decisive for the policy outlook.”

The FTSE 100 closed down 34 points at 6,648 today, though finished well off its intraday low of around 6,630 reached immediately after the data was released.

Senior Market Analyst Michael Hewson from CMC Markets said that the disappointing US data fed into a sharp sell-off on European markets, “but given the gains seen this week some profit-taking into the close would likely have occurred in any case”.

Even an impressive reading of construction activity in the UK failed to lift sentiment this morning; the UK construction purchasing managers' index surged from 51.0 to 57.0 in July, well ahead of the expected increase to 51.5.

FTSE 100: William Hill and RBS disappoint with H1 figures; Smiths Group drops

Shares in William Hill sank sharply on Friday morning as investors gave a cool reaction to the High Street bookie's first-half results, in which pre-tax profits came in flat year-on-year. The firm also didn't give an update on current trading, though analysts at Canaccord Genuity said that July will have been more challenging on gross win margins (though this is a "small" month).

Royal Bank of Scotland was also a heavy faller after missing profit forecasts in the first half. The bank reported a clean profit before tax before non-recurring items of £676m for the second quarter, down from £747m in the first three months and well below the consensus forecast of £880m. RBS also confirmed reports that Ross McEwan would take over as Chief Executive Officer from Stephen Hester. Sector peer Barclays, which reported its own results on Tuesday, was also trading lower today.

Technology firm Smiths Group dropped sharply before the close after a late announcement said that it had rebuffed a preliminary approach for its medical division after being unable to agree on “acceptable terms”.

Mining stocks were out of favour as metal prices weakened: Fresnillo, Randgold and Antofagasta were all in the red. Vedanta Resources was also lower after suffering a shareholder revolt over its pay at its annual meeting on Thursday.

Leading the upside was airline IAG after a high-flying second quarter which beat forecasts by a mile. The company reported an operating profit of €245m in the three months to June 30th, up from a loss of €4.0m the year before and well ahead of the €163m consensus estimate.

Drinks can maker Rexam wasn't far behind after upping its interim dividend by 14% despite profits being held back by high aluminium and labour costs in the first half.

Engineering firm Weir was also higher after Berenberg upgraded the stock from ‘hold’ to ‘buy’.

FTSE 250: Inchcape, Vesuvius, Man Group and Inmarsat impress

Record interim profits and a share buyback at car dealer Inchcape impressed investors today with the stock finishing firmly higher. First-half numbers from engineer Vesuvius, hedge fund manager Man Group and satellite operator Inmarsat were also welcomed by the market.

Heading the other way was wireless technology firm CSR after UBS downgraded the stock on valuation grounds, cutting its rating from 'neutral' to 'sell'.


FTSE 100 - Risers
International Consolidated Airlines Group SA (CDI) (IAG) 317.00p +6.70%
Rexam (REX) 515.00p +1.78%
Weir Group (WEIR) 2,239.00p +1.63%
Smith & Nephew (SN.) 800.00p +1.59%
Persimmon (PSN) 1,260.00p +1.45%
CRH (CRH) 1,425.00p +1.42%
easyJet (EZJ) 1,448.00p +1.19%
Amec (AMEC) 1,090.00p +1.02%
Eurasian Natural Resources Corp. (ENRC) 224.70p +0.94%
Marks & Spencer Group (MKS) 488.80p +0.76%

FTSE 100 - Fallers
William Hill (WMH) 458.50p -7.28%
Smiths Group (SMIN) 1,320.00p -5.51%
Randgold Resources Ltd. (RRS) 4,717.00p -4.01%
Fresnillo (FRES) 1,041.00p -3.97%
Petrofac Ltd. (PFC) 1,290.00p -3.73%
Aggreko (AGK) 1,587.00p -3.41%
Royal Bank of Scotland Group (RBS) 322.50p -3.30%
Barclays (BARC) 285.45p -1.94%
Anglo American (AAL) 1,457.00p -1.75%
Reckitt Benckiser Group (RB.) 4,635.00p -1.74%

FTSE 250 - Risers
Inchcape (INCH) 645.00p +9.88%
Man Group (EMG) 91.50p +9.52%
Vesuvius (VSVS) 480.00p +9.09%
RPS Group (RPS) 245.10p +6.57%
Inmarsat (ISAT) 720.00p +6.51%
Spirent Communications (SPT) 155.00p +5.51%
Anite (AIE) 134.00p +5.43%
Laird (LRD) 204.00p +5.15%
Cobham (COB) 306.00p +4.83%
AZ Electronic Materials SA (DI) (AZEM) 324.70p +4.74%

FTSE 250 - Fallers
CSR (CSR) 536.50p -5.55%
Unite Group (UTG) 388.40p -3.62%
Grainger (GRI) 181.40p -3.25%
Kazakhmys (KAZ) 262.50p -3.21%
St. Modwen Properties (SMP) 323.20p -2.94%
Imagination Technologies Group (IMG) 239.50p -2.88%
Great Portland Estates (GPOR) 558.50p -2.87%
Workspace Group (WKP) 463.00p -2.53%
NB Global Floating Rate Income Fund Ltd GBP (NBLS) 105.90p -2.40%
African Barrick Gold (ABG) 115.90p -2.36%

BC

Email this article to a friend

or share it with one of these popular networks:

• DIGG
• FACEBOOK
• STUMBLEUPON
• MIXX
• YAHOO BUZZ
• DELICIOUS
• REDDIT
• NEWSVINE