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FTSE at 10-mth closing high as U.S. jobs reassure

Published 08/07/2009, 12:11 PM
Updated 08/07/2009, 12:15 PM
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* FTSE 100 up 0.9 percent, hits fresh intraday high for '09

* U.S. employers cut 247,000 jobs; fewer than expected

* RBS top blue-chip faller after H1 results

By Harpreet Bhal

LONDON, Aug 7 (Reuters) - Britain's top share index hit a 10-month closing high on Friday after U.S. employers shed far fewer jobs than expected, driving fresh optimism that the economy may be on the path to recovery.

The FTSE 100 closed up 0.9 percent, or 41.03 points, at 4,731.56, after data showed U.S. non-farm payrolls dropped by 247,000 in July against a fall of 320,000 estimated by analysts polled by Reuters, while unemployment slowed.

The index gained strength from oil majors, as crude prices climbed to six-week high above $72 a barrel following the reassuring U.S employment data.

BG Group, BP and Royal Dutch Shell, rose between 1 and 2.1 percent.

The index closed at its highest level since Oct. 7 last year, having reached an intra-day high of 4,743.62. Gains on Friday surpassed an earlier high for 2009 at 4,710.23 hit earlier in the week.

Tim Whitehead, head of portfolio services at Redmayne-Bentley, said although the non-farm payrolls numbers helped push equities higher, the market could see some profit taking over the next few weeks as momentum slows.

The index is up 2.7 percent on the week, marking the fourth straight week of gains, and has rebounded close to 37 percent since hitting an all-time low in March.

"The best we could hope for in the UK is a consolidation around the 4,500 level on the FTSE 100. I would be quite happy with that given the pace of the market recovery over the past three to four months," he said.

"We don't see a tremendous amount of short term upside from where we are now. The non-farm payrolls was one positive statistic but we need more evidence of recovery both here and in the United States before the markets can make further progress."

Mobile phone group Vodafone was firmer, up 2.8 percent, in line with its European peers, while drugmakers AstraZeneca, GlaxoSmithKline and Shire rose between 2.3 and 2.6 percent.

Support services firm Serco Group was the top gainer, raising 3.8 percent.

RBS' CAUTIOUS OUTLOOK

Royal Bank of Scotland fell 12.1 percent after the lender posted a 1 billion pound loss in the first half of the year, and warned of "poor" results to come.

Lloyds Banking Group was another faller, down 2.6 percent, while HSBC, Standard Chartered and Barclays advanced between 0.7 and 3.1 percent.

UK banks have signalled this week the worst was over for bad loans and hinted a recovery could be around the corner, but that optimistic view was at odds with RBS' cautious outlook.

"You've got two major banks, Lloyds and RBS, with two incredibly contrasting views, something that you don't often see," said Angus Campbell, head of sales at Capital Spreads.

"(We had) Lloyds saying on Wednesday their impairments have peaked (and) RBS saying if they're lucky, things will peak in 2010. That's an uncertainty for the markets," he said.

In economics news, British factory gate prices fell at their sharpest rate in almost eight years in July and input price inflation fell to its lowest in almost 23 years, suggesting consumer price inflation will ease rapidly, official data showed.

Mining stocks were also lower, with Eurasian Natural Resources Anglo American, Rio Tinto, Lonmin and Xstrata shedding 0.7-3.5 percent. (Additional reporting by Tricia Wright; Editing by David Cowell)

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