Non-farm payroll in US beats consensus prompting late Friday recovery though FTSE down nearly 3 per cent on the week

7th June 2013

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Markets geared up on Friday for the latest figures on the US labour market, a key indicator of its economic recovery and an indication of how much longer quantitative easing could last writes Philip Scott.

The US added a 175,000 jobs to the US payroll figures in May, ahead of the 165,000 consensus forecast. Paul Dales, senior US economist at Capital Economics, said: “We do not think it will be long before they return to gains of around 180,000 a month. If that is the case by the time the Fed meets in September, then it will probably trim the pace of its monthly asset purchases.”

Nancy Curtin, chief investment officer at Close Brothers Asset Management, added: “These job creation figures fly in the face of signs of slowing growth in the US economy in the past few weeks – and particularly weak manufacturing numbers from the ISM. More jobs were added to the economy in May than in the previous month.

“However, with unemployment also edging upwards, this will temper the Fed’s eagerness to taper QE.  The mixed news may turn out to be a blessing for investors as it highlights that the economy is not yet robust enough to stand on its own two feet, therefore underpinning the performance of US equities in the longer-term.”

Markets reacted positively to the news. The UK’s blue-chip FTSE 100 index rose by some 75.88 points on the day, finishing at 6,411.99. But following the recent volatility, over the week it is down by almost 3%.

Platinum and chemical specialist Johnson Matthey was the week’s big riser, up 6% to 2,704p. The recovery in the US truck sector provided a welcome fillip to the world’s biggest supplier of catalytic convertors, of which platinum is a key component.

Other big increases over the week were automobile parts firm GKN, up and 3% to 309p, and miner Eurasian Natural Resources, 2% better at 245.2p. Telecommunications giant BT Group, upgraded to a ‘buy’ by stockbroker The Share Centre put on 4% to 312.8p. Sheridan Admans, investment research manager at brokerage, said: “BT offers investors an attractive yield and expects to grow dividends by 10-15% per annum over the next three years.”

On Thursday both the Bank of England and European Central Bank announced to markets that they were keeping their current stimulus measures on hold. Banks endured falls on the day. Over the week, HSBC is down 2% at 708p, while Royal Bank of Scotland lost 3% to 327.4p. Standard Chartered and Barclays both loosened by 4% to close at 1473.5p and 307.8p respectively. Lloyds edged ahead albeit by just 0.34% to 62.32p.

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