Gains for mining shares on Friday helped push up the broader U.K. equity market, while a weaker pound following the release of the U.S. monthly jobs report provided a boost the export-dependent FTSE 100.
Air carriers International Consolidated Airlines Group SA and EasyJet PLC gained following business updates, but shares of banking heavyweight HSBC PLC declined.
How markets are moving
The U.K.’s FTSE 100 index UKX, +0.86% jumped 0.9% to close at 7,567.14, also ending 0.9% higher for the week. That means the London benchmark now has risen for six weeks straight, something it hadn’t achieved since January.
The pound GBPUSD, -0.3021% traded at $1.3530 after hitting an intraday low of $1.3487 in the wake of U.S. jobs data. Sterling bought $1.3573 late Thursday in New York, and is down roughly 1.8% this week against the greenback. That continues a recent slide driven by disappointing British economic data and a strengthening dollar.
What’s driving the market
Blue-chips extended gains in afternoon trade, getting a lift as the pound continued to struggled. Sterling fell to its lowest versus the dollar since Jan. 11, FactSet data showed, as the dollar strengthened on back of U.S. jobs figures for April. The jobs report overall suggested the Federal Reserve should remain on track to deliver two, if not three, additional interest-rate increases this year. Pound weakness helps the FTSE 100 index, as many of its components draw revenue in foreign currencies.
U.S. wage growth was flat, with the 12-month increase in pay steady at 2.6%. But the world’s economy generated a solid 164,000 jobs, with the shortfall in expectations cushioned by upward revisions for March. The unemployment rate slipped to a 17-year low of 3.9%.
Stocks in the U.K. and Europe SXXP, +0.63% advanced ahead of the jobs report, as investors appeared to latch onto upbeat comments about trade talks between the U.S. and China. U.S. Treasury Secretary Steven Mnuchin early Friday said the talks were going well, according to media reports.
A Chinese government statement released Friday afternoon described the talks as “frank, efficient and constructive.” Still, “significant disagreements over certain issues” remained, according to the statement. Worries about heightened trade tensions between the world’s two largest economies have rattled financial markets throughout this year.
The U.S. delegation presented Chinese officials with a lengthy list of demands aimed at reducing the trade imbalance between the world’s two biggest economies, The Wall Street Journal reported.
Also injecting some cheer Friday was Caixin data, which showed China’s services sector grew at a faster pace in April.
Mining stocks, which can be sensitive to developments in China, were higher Friday. China is a big buyer of industrial and precious metals. The basic materials group has a nearly 9% weighting on the FTSE 100, and miners have a roughly 88% weighting in that sector, according to FactSet data.
Stocks in focus
Among miners, BHP Billiton PLC BLT, +2.79% BHP, +1.30% rose 2.8%, Fresnillo PLC FRES, +0.96% picked up 1% and Antofagasta PLC ANTO, +1.26% added on 1.3%.
Pearson PLC PSON, +7.66% rallied 7.7%, topping the FTSE 100, after the educational materials publisher confirmed its 2018 earnings guidance and posted a 3% increase in underlying revenue in North America, the company’s largest market.
IAG shares IAG, +5.84% ICAGY, +4.78% climbed 5.8%. The parent company of British Airways and Vueling said its first-quarter adjusted operating profit rose by 75%.
HSBC Holdings PLC HSBA, -0.96% HSBC, -1.73% lost 1% after the Asia-focused lender posted a rise in operating costs in the first quarter. HSBC said it plans to buy back another $2 billion in shares. UBS analysts said they expected $4 billion in buybacks this year.
EasyJet EZJ, +1.74% shares ended up 1.7%. The budget airline said its load factor, or the percentage of a plane filled with passengers, rose to 93.4% in April, from 92.9% the previous year.
Among so-called dollar earners, consumer products maker Reckitt Benckiser Group PLC RB., +3.00% climbed 3% and luxury goods maker Burberry Group PLC BRBY, +2.26% BURBY, +1.77% moved up 2.3%.
What strategists are saying
“This was not a bad [U.S. jobs] report, but it wasn’t an exciting report either; it was just slightly off what the market was expecting. The bottom line is that it is not going to alter the Fed’s intentions for hiking across the rest of the year, with the next rate rise expected in June,” said Fiona Cincotta, senior market analyst at City Index, in a note.
“Despite the odds of a more aggressive Fed easing investors were still jumping into the dollar on Friday afternoon, pushing the greenback to a fresh four-month high,” she added. Sterling “has dived almost 900 points in just three weeks as central bank policy diverges. Pound traders will now look to the Bank of England (meeting) next week for further clues,” said Cincotta.