Better than expected non-farm payrolls figures send shares into negative territory for the day after bright start
One Canadian in a new job helped give the UK market its best week for more than six months, but several thousand Americans joining the workforce took some of the shine off shares.
Mark Carney, the ex-boss of Canada's central bank, made a strong impression in his first week as governor of the Bank of England, sending shares soaring and the pound plunging when he indicated on Thursday there would be no rise in interest rates for the foreseeable future. Investors had become increasing nervous about an increase in the cost of borrowing as the economy recovered, but Carney made a point of stamping on that idea.
So the FTSE 100 finished the week at 6375.52, a gain of 160 points or 2.6% since Monday morning and its best weekly performance since the first week in January.
But the index fell 46.15 points on Friday after better than expected US employment numbers - non-farm payrolls rose by 195,000 compared to expectations of a gain of 165,000 - reinforced the idea the US Federal Reserve would soon end its $85bn a month bond buying programme, removing a key support for stock markets.
The fall in sterling, which reached its lowest level for four months, was bad news for anyone planning a foreign holiday but should brings benefits to UK companies with overseas earnings. Analyst Gerard Lane at Shore Capital said the pound was still overvalued:
Sterling can (should or needs to, some would say) fall below parity with the euro and $1.30 to arrive at something close to fair value, i.e. some 20% below current levels. Sectors and stocks with UK located costs and overseas revenues would be natural beneficiaries, as would those listed entities with non-UK profits that translate these into sterling earnings and dividends.
All in all it was another volatile week for investors. The eurozone crisis reared its head again, with Portugal facing new uncertainty after two ministers resigned from the coalition government, seemingly in protest at the country's austerity measures. Meanwhile Greek politicians were locked in talks with representatives of the Troika of creditors - the International Monetary Fund, European Central Bank and European Commission - to hammer out a deal over cutbacks to meet the country's bailout targets.
On top of that came a military coup in Egypt, with violence erupting after protests against the ousting of former president Mohamed Morsi.
With renewed worries about a slowdown in China and metal prices hit by a rising dollar, mining shares came under pressure. Glencore Xstrata dropped 17.9p to 256.85p while Antofagasta fell 50.5p to 784.5p and Rio Tinto lost 121.5p to £26.36.
Elsewhere Marks & Spencer added 2.9p to 462.7p ahead of next week's trading statement following a buy note from Panmure Gordon and amid vague bid speculation.
British Land built up a 7p gain to 591.5p after making a bet on the success of London's new Crossrail system.
The east-west rail line is due to open in 2018 and ahead of that, the property group has bought the bulk of an office, shops and hotel complex in Paddington near the Crossrail station. It has paid £470m to insurance group Aviva to take over the scheme, which it expects to grow in value as the area is redeveloped.
RSA Insurance rose 1.5p to 123p after analysts at JP Morgan Cazenove issued an overweight recommendation with a 132p price target:
We remain positive on the stock following management's decision to cut the dividend. High returns and growth opportunities in the international business combined with the prospect of a gradual turnaround in UK underwriting continue to underpin valuation. The stock continues to offer an attractive yield of 5% and 11% upside potential to our target price. The main catalysts for the shares are delivering on the underwriting targets, growing the international franchise, and addressing the challenging outlook for the UK motor lines.
But Whitbread slipped 89p to £31.067 after UBS cut from buy to neutral although the bank raised its target price from £29 to £31.50. Earlier in the week the leisure group unveiled plans for new compact hotels for its Premier Inn brand.
Elsewhere Inmarsat dipped another 4.5p to 665p after falling sharply earlier in the week in the wake of a rocket explosion in Russia. The communication group was not part of the launch, but the Proton rockets used were due to send its next generation of satellites into space by the end of the year, and analysts feared Tuesday's accident could lead to delays.
A number of housebuilders reported positive updates during the week, with sales boosted by the government's Help to Buy scheme. They included Persimmon, down 10p to £12.56 on profit taking, Taylor Wimpey, 1p lower at 102.8p, and Redrow, up 7.7p at 245.6p after Jefferies and Deutsche Bank raised their price targets for the company.
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