Positive US jobs data fails to stir late flourish but FTSE 100 up 2.58 per cent in roller-coaster week

5th July 2013

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Stronger than anticipated US employment numbers failed to cheer the FTSE 100 on Friday as fears over the end of QE tightened. But despite a week of high volatility the blue-chip index managed to put on almost 3 per cent writes Philip Scott.

The top-flight index closed the week at 6,375.52, 46.15 points down on the day but up by 2.58 per cent during a roller-coaster week.

Figures released on Friday show that the US economy is continuing to generate jobs but not at a rate fast enough to reduce unemployment. The widely followed non-farm payroll came in better than expected with an increase of 195,000 in June.

Schroders’ chief economist Keith Wade says: “The market had been looking for a gain of 165,000. When combined with upward revisions to April and May, the net result was a level of employment some 100,000 higher than expected. Job growth was concentrated in retail, leisure and hospitality, construction and healthcare while the government and manufacturing sectors lost workers.

“While this is clearly positive, other elements of the report highlighted the challenges facing the economy with the unemployment rate remaining at 7.6 per cent as the participation rate increased.”

On Thursday the FTSE 100 closed 3 per cent better alongside other European stock markets. It rallied after the Bank of England and the European Central Bank offered reassurance over interest rates.

But the blue-chip index endured a bruising session on Wednesday, at one point losing almost 2 per cent in early trading as poor numbers from China, and the political storm in Egypt sent investors running.

In China, the headline services Purchasing Managers Index figures dropped to a nine-month low of 53.9 in June, down from May’s number of 54.3 while the sub-index for construction fell to 59.3 from 62.2 in May further escalating concern over about a slowdown.

The miners, sensitive to any slowing in the world’s second largest economy, were the week’s steepest fallers, with Glencore Xstrata off 6 per cent at 256.85p and Anglo American down 4 per cent at 1,217p.

The week’s biggest riser was outsourcing giant Serco, up 9 per cent to 674p. News emerged that the firm, which manages London’s ‘Boris bike’ scheme, had landed a large US contract rumoured to be worth some $1.25bn. Elsewhere the London Stock Exchange Group after receiving a spate of positive broker comments surged just short of 9 per cent to close at 1,456p.

The banks enjoyed a week of gains too with Barclays and HSBC, despite a downgrade from Standard & Poor’s for the former, putting on 5 per cent each to close at 291.5p and 712.5p respectively. Standard Chartered added 3 per cent to 1,470p. Fellow taxpayer-backed banks, Lloyds Banking Group and Royal Bank of Scotland added 2 per cent at 64.63p and 1 per cent to 276.7p respectively.

24 thoughts on “Positive US jobs data fails to stir late flourish but FTSE 100 up 2.58 per cent in roller-coaster week”

  1. Londoner says:

    What makes me laugh (or cry) Shaun is that a majority of voters trust the Tories more than Labour on the economy, when both have been found to be completely incompetent or devious or both.
    Of course HTB will increase house prices! Giving out loans that you never had to repay would of course do the same thing! As would de-regulating BTL.
    Our country is becoming a sad joke. When the music stops it will be carnage.

    1. Anonymous says:

      Hi Londoner

      The problem is that the more they manipulate the housing market the more forceful any bust would be. Thus they try ever harder to prevent that and repeat.

      That is not a dig at any particular party because so far governments of all hues have sung from the same hymn sheet.

  2. Patrick, London says:

    When I saw the quote below a few days ago, regarding their new proposal , I really couldn’t believe it…

    “Buyers under the age of 40 will be able to purchase at 20 per cent below the market rate to stop them being “locked out of home ownership.”

    After FFL and HTB, it beggars belief, that they’d (under the guise of ‘helping’) roll out another programme that:

    A) Exacerbates the existing problem.
    B) Reveals, and yet glosses over the clear implication that the two previous policies have failed to improve (and even worsened) the situation
    C) Admits just how bad things have got in that the age range has been pushed into the 40s*!

    Seems to be a mad rush to create an exploitable western underclass to replace the increasingly socially mobilised(and previously fully exploited) working classes, of south, south east and east Asia.**

    All to keep the rickety globalisation bandwagon rolling on whilst protecting the 0.1% (or 0.01)

    *Yes, we’re all surviving longer, and 40 is the new 30 blahblahblah…
    **Maybe that’s exactly what we deserve. :) If only the 0.1/0.01 could get dragged down as well, I wouldn’t mind that much.

    1. Anonymous says:

      Hi Patrick

      There are Orwellian undertones in the way that there is a discussion of “market (house) prices” after a concerted official effort to push them higher! As to SE Asia what is taking place in Hong Kong at the moment is intriguing to say the least don’t you think?

    2. Anonymous says:

      It really is amazing…

  3. JW says:

    Hi Shaun
    Unfortunately the guys with their hands on the levers are not ‘looking for a way out’. I thought the living standards of the average joe in the ‘west’ had about 30% to fall at the start of this process. If you factor in ‘real’ inflation rather than official numbers, we are probably about half way there. That means we have another 8/10 years of this to go at least. And even then the screws will be kept tight on.
    As there is of course no-one who actually is ‘average’, some are feeling and will feel far more of the pain than others. Crudely speaking the aspirational ‘middle’ will continue to be ground down to meet the ‘supported’ underclass. In BNW speak, there are only so many ‘betas’ you need in Europe/US when the equivalent in India etc are paid less than 50%. I note that one of the Obamacare ‘creators’ is talking openly about people over 75yrs being good citizens if they end their lives.
    Under our current economic ‘mandate’ if the global population does not plateau as previously predicted, then things will get even worse for the majority.
    The counterpoint to this, is the ability of humans to ‘invent’ and provide ‘discontinuities’ that change the flow of history. Perhaps something will ‘crop up’ , we need it. Just hope its not ‘mushroom-shaped’.

    1. Anonymous says:

      Hi JW

      Your reference to Obamacare reminds me of the bit in the film Soylent Green where Edward G Robinson commits euthanasia/suicide to his favourite music and film of a countryside which no longer exists. Actually that type of world is a danger if the world’s population continues to surge…..

      Fingers crossed for a “something wonderful” of the film 2001 A Space Odyssey as I agree we need it.

  4. Pavlaki says:

    Looking on the bright side of things, the drop in salaries in th UK will make the country a more competitive base than had they continued a real increase. That’s not much consolation to those who’s incomes drop but as you say it supports the jobs market which is very important. In the long run it may prevent the relocation of work to the east and possibly reverse the trend. It is to be hoped that this doesn’t become a wider phenomenon in the west otherwise we will see a race to the bottom develop.
    I will reserve comment on the new help to buy scheme until I see the details but the current situation for young folk is not good. Both of my children are struggling to get a mortgage and find something affordable (outside London) and many of their friends have given up hope of owning their own place for some time. I find it ironic the the banks, having thrown around 110% or more mortgages are now putting on their ‘sensible and responsible hats’ and refusing mortgages on the slightest whim.

    1. Anonymous says:

      Hi Pavlaki

      I fear that many young people will be in the situation you describe and to my mind the major issue is that house prices are simply too high. We needed a downwards adjustment but the government and Bank of England would not accept that and instead pushed them higher.

      As to a “race to the bottom” in wages do you not think that the starting pistol was fired some time ago?

      1. Noo 2 Economics says:

        This would be market interference if prices were pushed lower which I thought you disagreed with?

        Personally I think the housing market should be drastically interfered with and an indefinite price freeze imposed “until houses are significantly cheaper” (think a 3 bed semi costing 3 times average salary)

        1. Mike says:

          A price freeze imposed how? Without any increase in supply won’t that be equivalent to rationing, with only politically favoured classes benefitting?

          The MMR was a decent start. I agree about drastic interference, but I’d prefer to see: a) removal of preferential treatment of BTL, b) punitive taxes on second and empty properties, c) removal of free ride for non-dom speculative buyers, d) removal of the Right To Buy subsidy, e) cancellation of HtB with extreme prejudice, f) support for self-build, and g) changes to the MP accommodation allowance so that any capital gains or losses accrue to the Treasury, not the MP.

          That last is something I never see suggested, but I think it’s important. Whereas expenses fiddling is disreputable but basically harmless, giving most MPs a second property gives them a huge financial interest diametrically opposed to that of the people they’re supposed to be representing. The amount they trouser may be relatively trivial in the grand scheme of things, but the damage they’re doing in the process is immense.

          1. Noo 2 Economics says:

            I don’t see the rationing Mike. Rationing is currently taking place via the price mechanism of purchase price of houses albeit the politicos keep interfering with the price mechanism via ever cheaper money a la Hep to buy etc.

            If my scheme were implemented it would be thus:

            1. House prices AND LAND prices frozen until further notice subject to:

            2. Extensions made to properties where only the price paid for the extension may be added to the asking price.

            3. Rents also to be frozen in line with property prices.

            Point 2 would allow people to extend houses where they had the space to accommodate a larger family.

            The results as I see them would be a sluggish housing market and perhaps an increase in unemployment as there would only be a fraction of transactions for estate Agents and solicitors to process although this may be accompanied by extra work around rental properties.

            The final part of the answer is one I havent heard any one mention -the UK is overcrowded and a sensible immigration policy has to be implemented in conjunction with a sensible means tested child benefit policy in addition to a law that in the future the state will only pay for the firstborn in a family, thereafter you have to pay for the rest of your kids (said law to be applicable to births after a future date)

            Over time you can then shrink the population to a manageable amount, there will no longer be a housing shortage and then hopefully my admittedlty Draconian scheme in relation to housing could be abolished.

    2. Noo 2 Economics says:

      “Looking on the bright side of things, the drop in salaries in th UK will
      make the country a more competitive base than had they continued a real
      increase”

      I’m not sure it will Pavlaki as unfortunately productivity has been busy falling too since 2007 so we may be no more competitive than we were in 2007.

      1. Noo 2 Economics says:

        …I meant productivity per capita, not aggregate goods and services produced in case you get the wrong end of what I’m saying.

  5. forbin says:

    Hello Shaun

    naw , the real question is this one you touched on

    “How are we getting economic growth with wage growth so weak?”

    How’s the tax take going ? down isnt it ?

    doesnt take much to work out the Gerry Mandered figures are just that….

    lets see what the unicorn poo and fairy dust GDP figures are like tomorrow – George Orwell eat your heart out , you aint got nuffin on these guys !

    Forbin

    1. Anonymous says:

      Hi Forbin

      As you can imagine I am keen to see the new “improved” GDP numbers and will be tapping my foot ahead of the 9:30am release. Mind you there are already calls for it to be further “improved”.

      http://blog.import.io/post/how-much-does-prostitution-contribute-to-the-uk-economy?utm_source=andrewfogg&utm_medium=post&utm_campaign=prostitution&utm_content=buffer0d302&utm_medium=social&utm_source=facebook.com&utm_campaign=buffer

      1. Noo 2 Economics says:

        Hi Shaun and following that link and then another one to the ONS yields this- http://www.ons.gov.uk/ons/publications/re-reference-tables.html?edition=tcm%3A77-360136 which if opened demonstrates inflation in personal services of 20.2% from 2004 – 2009 which is rather higher than official inflation figures which leads to the question -Did they remember to adjust all the inflation figures accordingly?????

  6. Eric says:

    Hi Shaun,

    I wouldn’t be surprised to hear an empty grey suit talk about “debt forgiveness” as a possible way of helping people stay in their unaffordable houses. Sounds crazy? Maybe; but so are most of the post-crunch policies.

    Someone tell me it will never ever happen; no way; no how.

    1. Anonymous says:

      Hi Eric

      Please do not give them ideas………

    2. Anonymous says:

      It will happen. The amounts are, well, non-trivial, but it will happen. In fact it is happening because interest rates are so low they amount to a hefty subsidy. Forgiveness will come in time, when the problem is less prominent in the minds of those who have to pay. Say after the election – or before if Cameron is desperate! How about a top slice of everyone’s mortgage that still has at least 15 years to run. Perhaps 25% off? Sounds ideal to me.

  7. zummerzetman says:

    As I have mentioned before, wage austerity is not going to be a temporary phase. In the same way that final salary pensions aren’t coming back for the average employee, wages are not going to start surging forward either. The hard bit is getting people to accept the lower expectation in the first place. Once done there’s no turning back.

    We have had our day unless we win the race to become a technically advanced innovative economy – oh sorry that’s not going to happen with loans to SMEs on the decline! Never mind there’s always an economy to be built on increasing house prices…………how does that work again?

  8. Peter Walsh says:

    The trouble with houses centres around a difference in perspective.
    They – the politicians and vested interests – want us to be able to borrow more, through various and increasingly desperate, half-baked schemes.
    Those of us trying to buy would just like prices to come down.
    Stop printing, raise the rates, crash the banks, take the pain and move on.

    It’s really time for the central banks and the politicos to stop meddling with the market. I don’t hear many voices arguing against this.

    1. Anonymous says:

      There has been a sea change amongst the worst of the worst – Daily Telegraph commentators. Three years ago anyone who mentioned houses being too high were greedy/lazy/communist – you name it.

      Today there are far more tuned into reality. All but a few unemployed BTL nutjobs on DT Disqus understand that rising house prices have ruined the UK.

      Make no mistake the worm has turned on sentiment, and all the media propaganda in the world can’t shift it back.

  9. Anonymous says:

    Hi Chris

    It is intriguing isn’t it? They are more than happy to lend to individuals on an unsecured basis but seem to be not very keen on lending to businesses particularly smaller ones. Perhaps the interest-rates on the unsecured lending are attractive for the banks (not the borrowers….)

    The new “improved” FLS was supposed to have dealt with the issue of the extra risk capital which is needed for business lending.

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