LONDON (ShareCast) - (Sharecast News) - London stocks ended the week lower on Friday as investors reacted to a fresh wave of US tariffs and disappointing economic data from the United States.
The FTSE 100 index fell 0.7% to close at 9,068.58 points, while the FTSE 250 dropped 1.2% to 21,699.34 points.

In currency markets, sterling was last up 0.39% on the dollar to trade at $1.3259, as it fell 0.85% against the euro, changing hands at €1.1472.

Russ Mould, investment director at AJ Bell, said "equity markets were flashing red" following the latest escalation in US president Donald Trump's tariff regime.

"Investors have been caught off guard, having previously hoped Trump would kick the new tariff levels down the road pending further negotiations with foreign trade partners," he commented.

"Instead, we've got new rates galore."

Mould added that while this move wasn't as shocking as Trump's April "Liberation Day" announcement, it still "soured the tone on the markets," which had already seen six consecutive days of global stock declines.

US jobs growth slows, manufacturing contracts

Economic data from the United States added to investor caution, as the Bureau of Labor Statistics reported that nonfarm payrolls increased by just 73,000 in July, far below expectations of 110,000 and down from revised figures for May and June.

The healthcare sector added 55,000 jobs, but federal employment declined again, dropping by 12,000.

Revisions showed that job growth in May and June was overstated by a combined 258,000, suggesting a weaker labour market than previously thought.

The unemployment rate held steady at 4.1%, while average hourly earnings rose 0.3% to $36.44.

Patrick Munnelly of TickMill commented that "investors are preparing for possible trade disruptions" and that the developments "reinforce hawkish rate outlooks," particularly with signs of labour market softening.

The data was expected to bolster the case for the Federal Reserve to remain cautious on monetary policy, especially amid persistent inflation pressures.

Adding to concerns, the US manufacturing sector contracted in July for the first time this year.

The S&P Global purchasing managers' index (PMI) fell to 49.8, while the ISM manufacturing index dropped to 48.0, both below the 50 mark that separates growth from contraction.

S&P's Chris Williamson highlighted that "tariff worries continued to dominate the business environment," leading to reduced orders and inventory drawdowns.

Factories also cut jobs amid concerns over rising costs and slowing demand.

Meanwhile, consumer sentiment stateside improved modestly in July, with the University of Michigan's index rising to 61.7.

However, sentiment remains far below levels seen in early 2024, and inflation expectations, though easing, are still elevated.

Survey director Joanne Hsu noted that "consumers are hardly optimistic about the trajectory of the economy".

On home shores, UK manufacturing activity improved slightly in July, with the S&P Global PMI rising to 48.0 from 47.7, but remaining in contraction for a tenth consecutive month.

Rob Dobson of S&P said the data showed "tentatively encouraging signals," but warned of continued domestic cost pressures and geopolitical uncertainty in export markets.

Job cuts in the sector also remained steep.

UK house prices meanwhile posted a monthly gain of 0.6% in July, reversing June's 0.9% fall, according to lender Nationwide.

Annual growth accelerated to 2.4%.

Nationwide chief economist Robert Gardner noted that "housing affordability has been steadily improving" and that strong income growth and falling mortgage rates were supporting market activity.

Despite global uncertainties, he said UK housing "is likely to continue to strengthen gradually in the quarters ahead".

On the continent, eurozone inflation held steady at 2.0% in July, matching the European Central Bank's target, according to Eurostat.

Core inflation remained at 2.3% for a third month.

Analysts had expected a slight dip in overall inflation, but rising food and goods prices offset slowing services inflation and a continued decline in energy prices.

Inflation remained most elevated in Estonia at 5.6%, while Cyprus recorded the lowest at 0.1%.

Pharma and Swiss tariffs weigh on London equities

Trump's tariffs had a direct impact on several London-listed stocks on Friday.

AstraZeneca dropped 1.94% and GSK fell 1.52% after the US president wrote to major pharmaceutical firms demanding "binding commitments" to lower US drug prices or face penalties.

Mould described the market's reaction as a "dose of the blues" for the healthcare sector, with broad declines reflecting investor unease about Trump's aggressive stance.

Luxury retailer Watches of Switzerland plummeted 6.79% following the announcement of a 39% tariff on Swiss exports to the US.

The Swiss franc also weakened slightly in response, as the tariff was seen as a significant blow to exporters.

Intertek Group slumped 6.68% after its interim results disappointed, while IAG fell 1.68% despite beating earnings forecasts.

Although IAG shares recently hit their highest level since February 2020, Mould noted that while the airline was "delivering non-stop good news", the broader market sell-off weighed on sentiment.

Pets at Home dropped 3.85% following a downgrade by Barclays, and IMI reversed gains to end 2.07% lower despite reiterating full-year guidance.

Rolls-Royce Holdings dipped 0.65% after surging earlier this week on an upbeat outlook.

On the upside, Melrose Industries rose 5% after posting a near one-third increase in first-half profits.

Pearson gained 6.06% after it reported higher adjusted profits and reiterated full-year guidance.

Gambling technology firm Playtech added 1.88% after upgrading its first-half earnings expectations.

Ocado Group climbed 4.69% after JPMorgan raised its price target and reiterated an 'overweight' rating, citing improved performance in its technology segment.

Investors were now looking to next week's Bank of England meeting.

Analysts expected a cautious 25 basis point rate cut, as policymakers weighed weak economic growth against lingering inflation.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 9,068.58 -0.70%
FTSE 250 (MCX) 21,699.34 -1.20%
techMARK (TASX) 5,246.08 -0.63%

FTSE 100 - Risers

Rolls-Royce Holdings (RR.) 1,065.00p 7.79%
Pearson (PSON) 1,140.00p 6.06%
Melrose Industries (MRO) 537.80p 5.00%
Unilever (ULVR) 4,531.00p 2.79%
British American Tobacco (BATS) 4,131.00p 2.25%
Fresnillo (FRES) 1,429.00p 2.07%
National Grid (NG.) 1,076.50p 1.84%
Haleon (HLN) 365.40p 1.64%
United Utilities Group (UU.) 1,140.00p 1.11%
Mondi (MNDI) 1,038.50p 1.07%

FTSE 100 - Fallers

Intertek Group (ITRK) 4,610.00p -6.68%
Weir Group (WEIR) 2,502.00p -6.15%
Rentokil Initial (RTO) 361.60p -4.72%
Babcock International Group (BAB) 997.50p -3.99%
Barclays (BARC) 356.65p -3.95%
Anglo American (AAL) 2,068.00p -3.72%
Smurfit Westrock (DI) (SWR) 3,310.00p -3.22%
NATWEST GROUP (NWG) 511.60p -2.92%
Prudential (PRU) 936.60p -2.82%
Schroders (SDR) 380.20p -2.76%

FTSE 250 - Risers

Ocado Group (OCDO) 330.70p 4.69%
Hochschild Mining (HOC) 291.20p 4.16%
Spectris (SXS) 4,078.00p 2.21%
Domino's Pizza Group (DOM) 245.20p 2.08%
Playtech (PTEC) 405.50p 1.88%
SDCL Efficiency Income Trust (SEIT) 57.70p 1.76%
Endeavour Mining (EDV) 2,340.00p 1.74%
3i Infrastructure (3IN) 353.50p 0.86%
WH Smith (SMWH) 1,043.00p 0.78%
Greggs (GRG) 1,592.00p 0.76%

FTSE 250 - Fallers

Watches of Switzerland Group (WOSG) 326.80p -6.79%
RHI Magnesita N.V. (DI) (RHIM) 2,250.00p -6.05%
Diversified Energy Company (DEC) 1,089.00p -4.39%
Carnival (CCL) 1,994.50p -4.39%
Aston Martin Lagonda Global Holdings (AML) 67.05p -4.28%
Trustpilot Group (TRST) 240.00p -4.23%
Patria Private Equity Trust (PPET) 537.00p -4.20%
Senior (SNR) 194.00p -3.96%
Travis Perkins (TPK) 523.00p -3.95%
Morgan Advanced Materials (MGAM) 223.00p -3.88%

Email this article to a friend

or share it with one of these popular networks:

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