FTSE spikes in afternoon trading on US December employment boost

BRITAIN’S FTSE rallied in the afternoon yesterday, as encouraging economic data out of the United States provided the momentum to lift the index to fresh 17-month highs.

The FTSE 100 had edged lower in morning trade, but added 0.3 per cent in 15 minutes after the release of data showing that US private-sector employers added 215,000 jobs in December, well above economists’ expectations.

“The FTSE 100 spent most of the morning relatively flat with investors possibly awaiting the [US data], which traditionally is used as a barometer for the all-important non-farm payrolls that are due for release tomorrow,” Lee Armitage, Senior Trader at Accendo Markets, said, adding that the expectation-beating results helped markets across the board.

“The FTSE took a lead from this and moved back into the blue.”

London’s blue-chip index closed up 19.97 points, or 0.3 per cent, at 6,047.34, having hit its highest level since July 2011 on Wednesday after a deal in the United States to avoid a series of tax hikes and spending cuts that threatened economic recovery, known as the “fiscal cliff”.

Oil and Gas stocks gained 1.3 per cent, and energy added the most points to the index, contributing 13 points to gains.

“The big move for the UK is the Oil and Gas sector is rallying, which is a much bigger sector for the UK than for Europe,” Henry Lancaster, senior investment analyst at Coutts, said, adding that they were attractive on valuation grounds.

“Oil stocks look cheap and out of favour, so it’s something we think could run on.”

The heavyweighting of energy in the FTSE helped it to outperform European peers, Lancaster said, with the Spanish IBEX and the French CAC both losing 0.3 per cent.

He added that the bigger gains in European indices yesterday meant that over the two days since the “fiscal cliff” deal was struck, there was little difference between returns in the UK and on European bourses.

Switzerland’s SMI benchmark surged 2.9 per cent, catching up with the European market rally after a national holiday.

The UK’s strong start to 2013 has seen it begin to reverse some of last year’s underperformance, where it gained only six per cent compared to 30 per cent on the DAX. This combined with a weak domestic economy that is seen as at risk of a triple-dip recession.

However, high-street retailers were given a welcome boost by a strong festive trading update from Next, which led blue-chip gainers and suggest that domestic consumption was strong over the Christmas period.

The fashion firm rose 2.7 per cent after it met fourth-quarter sales forecasts and lifted annual profit guidance, giving a boost to the retailers in a strong start to the festive trading update season.

Next’s earnings quality score rose to 100 from 95 after its previous filing in June, which suggests the composition of earnings in the recent past is robust enough for its growth rate to be sustainable, according to Thomson Reuters Starmine data.

Imagination Technologies, the chip designer whose technology is used in Apple’s iPad, saw shares lift 10 per cent to 439.7p on positive sentiment ahead of its appearance at the consumer electronics show in Las Vegas. The company’s chief executive, Iran-born Hossein Yassaie, received a knighthood in the new year’s honours list.

Meanwhile horticulture firm William Sinclair slumped to a pre-tax loss of £400,000 in the year to September, down from a profit of £3.18m the year before. The garden product producer cited bad weather.