London Markets: U.K. stocks rise after U.S. jobs boost but lag behind European peers

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U.K. stocks climbed on Thursday as strong U.S. jobs data ensured the global wave of optimism continued.

The FTSE 100 UKX, +1.21% was up 1.5% into the afternoon as the index looked set to put an end to a two-day losing streak. The more domestically-exposed FTSE 250 MCX, +1.37% was 1.5% higher. Both indexes made modest gains earlier in the day but were pushed higher after the U.S. economy added 4.8 million jobs in June, according to the latest data, beating estimates of around 3 million. The unemployment rate fell from 13.3% in May to 11.1%.

The U.K.’s benchmark index failed to experience the gains of its European rivals, however, as packaging supplier DS Smith SMDS, -7.37% fell 9%, dragging it lower. In comparison, the German DAX DAX, +2.38% rose 2.2% and the French CAC PX1, +2.17% climbed 2%, as investors were buoyed by vaccine hopes. Pfizer PFE, +3.18% and BioNTech BNTX, -3.89% announced positive trial results for a potential coronavirus vaccine, kicking off the optimism on Wednesday, which continued into Thursday and was bolstered by the U.S. jobs report.

AJ Bell investment director Russ Mould said strength in financials, telecommunications and consumer cyclicals, as well as an appetite for risk, led the FTSE 100 higher.

“A higher appetite for risk saw investors bid up shares in many companies with considerable uncertainty over their current earnings strength, including engineer Rolls-Royce RR, +2.59%, British Airways owner International Consolidated Airlines IAG, +7.02% and media group WPP WPP, +1.60%.

Investors seemed happy to ignore rising coronavirus cases around the world, and in the U.K. a second spike in the city of Leicester. The U.S. reported a record daily increase of 50,000 infections on Wednesday.

Stocks to watch

DS Smith stock tumbled more than 9%, despite strong lockdown demand in e-commerce helping the packaging supplier to boost full-year profit by 5%. However, sales to industrial customers have fallen and the company canceled its final dividend payment.

Associated British Foods ABF, +5.52% (ABF) stocks surged 5.4% as the conglomerate said its Primark stores had reopened and that recent sales trends were “reassuring and encouraging.” Sales in the third quarter fell 39% to £2.6 billion ($3.3 billion) but strong performance in ABF’s grocery and ingredients business offset a 75% fall in retail.

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