By This Is Money Reporters
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17.35 (CLOSE): London's FTSE 100 Index closed at a near-three month high today as figures showed the US unemployment rate falling to its lowest level for four years.
The top flight closed 13 points higher at 5914.4 after the US jobs report offset earlier concerns over the UK economy following dire manufacturing figures.
Figures revealed a far better-than-expected 146,000 jobs were added in the US last month, while the rate of unemployment dropped to 7.7 per cent - its lowest level since December 2008.
Jobs boost: Unemployment in the US has fallen to its lowest level for four years, providing a welcome boost to the London market.
The top flight has also risen in recent sessions on hopes of an end-of-year deal to avert a series of automatic tax hikes and spending cuts in the US.
Trading had initially got off to a shaky start after the Office for National Statistics said UK manufacturing output fell 1.3 per cent in October, far worse than the 0.2 per cent decline that analysts had been expecting.
It fuelled fears the UK economy will contract in the fourth quarter after a rebound of 1 per cent in the previous three months helped end the longest double-dip recession since the 1950s.
In currency news, the pound weakened to 1.60 US dollars as the greenback strengthened following the US jobs report.
Sterling rose to 1.24 euros after the single currency was hit, with the German central bank slashing the country's growth forecast and speculation mounting over a European Central Bank rate cut.
In the FTSE 100 Index, sweeteners and starch manufacturer Tate & Lyle lost early session gains seen after it reduced the risk on its pension scheme by hedging 43 per cent of liabilities through the purchase of a bulk annuity policy and related transfer of assets to Legal & General. Shares later eased back by 2p to 759p.
Marks & Spencer featured on the fallers board with a decline of 4.2p to 393.6p after Goldman Sachs downgraded the retailer to sell from neutral.
The broker highlighted margin pressure on M&S and said the chain was likely to see declining returns on capital investment in the medium term. Tesco was also struggling in the top flight after a drop of 2.9p to 336.8p.
Outside the FTSE 100 Index, shares in housebuilder Berkeley jumped 5 per cent after it unveiled the first payment in a decade-long plan to return to ?1.7 billion to shareholders. The interim dividend of 15p a share came as it reported a 40.7 per cent rise in half-year profits to ?142.2 million. Shares lifted 78p to 1728p.
Fellow builder Bellway was 1p lower at 1005p, even though it said completions were set to increase by around 5 per cent in the six months to January 31, with the operating margin slightly better than the previous half year.
The biggest FTSE 100 risers were Polymetal International up 22p to 1088p, Shire ahead 36p to 1900p, Burberry 24p higher at 1305p and IMI up 18p to 1090p.
The biggest FTSE 100 fallers were International Airline Group down 3.2p to 171.2p, ITV off 1.2p to 101.8p, G4S 2.9p lower at 249.2p and Pearson down 13p to 1177p.
15:30: The FTSE is up again at 5,905.20.
Germany?s central bank has cut its growth outlook for the next two years, leaving markets reeling.
The Bundesbank slashed the forecasts for 2013 with over one per cent from its June prediction of 1.6 per cent growth, and brought it down to 0.4 per cent.
The revised predictions comes a day after the European Central Bank cut its forecast for 2013 from 0.5 per cent growth to -0.3 per cent, leaving the Eurozone in a continued recession. Read more here.
The White House and Republicans in Congress dropped hints on Thursday that they had resumed low-level private talks on breaking the stalemate over the 'fiscal cliff' but refused to divulge details
15:15
There was good news on the world's biggest economy today after US unemployment fell to a four-year low despite the impact of Superstorm Sandy.
The country added a far better-than-expected 146,000 jobs in November and the unemployment rate fell to 7.7 per cent, the lowest since December 2008. ?
The Labour Department figures confounded experts, who had predicted much weaker jobs growth due to the storm disruption.
Hiring remained steady during the storm as the jobs surge that began in July continued unabated.
The data gave Wall Street a boost in early trade, while London's FTSE 100 Index also made gains following the report.
But James Knightley, global economist at ING Bank, said the jobs cheer may not last amid fears over America's looming fiscal cliff.
He said the uncertainty over whether President Barack Obama will be able to secure a deal to avoid automatic tax increases and spending cuts on January 1 was making firms wary of hiring new staff.
?The longer it drags on, the more nervous corporates, households and financial markets will get, which has the potential to be very detrimental for activity,? he added.
There were also some mixed readings in today's jobs report, with the government making downward revisions to the number of jobs created in October and September, with 49,000 fewer jobs added than initially estimated.
Construction employment was also shown to have dropped 20,000 in a sign that the storm disrupted economic activity.
Senior German liaison-sales trader Anita Paluch said: ?Looking at the number presented by the US Labor Department it absolutely smashed the expectations, as US nonfarm sector added 146k new jobs, defying all the fears connected to the superstorm Sandy and its potential devastating effects on the world?s biggest economy.
?What?s a little bit more concerning is the fact that the numbers for two previous months had to be revised down. Falling unemployment rate due to people giving up the search for new work doesn?t bode well for economy either. The net impact on the Fed policy should be neutral and allow them to continue with the QE program.?
12:00
The release of a key report on the health of the US economy prevented investors from extending recent gains in the FTSE 100 Index today.
The top flight has been at a near two-month high on hopes of an end-of-year deal to avert a series of automatic tax hikes and spending cuts in the US.
But with the world's largest economy due to announce non-farm payrolls data later in the session, the FTSE 100 Index edged 8.2 points lower at 5893.2.
The jobs figure is likely to be the lowest since June, although analysts point out the result has been distorted by Superstorm Sandy in October.
Builder Bellway is 4p lower at ?10, even though it said completions were set to increase by around five per cent in the six months to January 31, with the operating margin slightly better than the previous half year.
10:30
The FTSE is down 4.75 points at 5,896.67. Alastair McCaig, market analyst at IG, said: ?A lethargic looking FTSE was down four points at 5896 by 10am, looking very much like those traders struggling to shake off the excesses of the previous night.
?Once again the magnetism of the 5900 level has proven too strong and after yesterday?s efforts to break away, the FTSE has been pulled back under. In order for the markets to make another charge it will need more support than this morning?s UK industrial and manufacturing economic data offered, along with confirmation that consumer inflation has risen from 3.2 per cent to 3.5 per cent.?
British manufacturing output fell in October at the fastest pace since June, reinforcing fears the economy will shrink again in the final three months of the year having just exited recession.
Manufacturing output dropped by 1.3 per cent on the month after a downwardly revised flat reading in September, and by 2.1 per cent on the year, the Office for National Statistics said this morning.
The wider reading of industrial output, which includes energy production and mining, also dropped in October, after oil and gas extraction posted the sharpest fall since records began in 1998.
'Very disappointing, triple dip [recession] - here we come," said Alan Clarke, economist at Scotiabank.
'Manufacturing was diabolical. Sadly, I think there is not a lot to suggest that it is temporary, survey data has been fairy downbeat.'
Both the monthly and annual manufacturing declines were the steepest since June, when extra public holidays dented production, and were far worse than predicted by economists.
10:00
The FTSE is down just 2.34 points at 5,899.08.
Head of market analysis and communications at Capital Spreads Angus Campbell said: 'There?s something about the 5900 level that the FTSE really doesn?t like as once again we see profit takers creep in around these levels this morning. Clients have managed to pick the top again although it?s hardly a mass sell off that?s got investors running for cover.'
Shares in housebuilder Berkeley rose by five per cent this morning as the company reported a rise in pretax profits of 40.7 per cent to ?142.2million.
The group also made its first payment to shareholders as part of its plan to return ?1.7billion in cash through milestone dates until September 2021, with a target total dividend of not less than ?13 per share. Read more here.
09:00
The FTSE 100 Index held its position at a two-month high today as investors awaited direction from the latest update on the US economy.
Ahead of the update, investors were happy to sit on recent gains and leave the FTSE 100 Index just three points lower at 5898.5.
Oil prices were also holding firm at 86 US dollars a barrel in New York as traders awaited the release of inflation, retail sales and factory output data from China on Sunday.
In the FTSE 100 Index, Tate & Lyle shares were more than 1 per cent higher after it reduced the risk on its pension scheme through an agreement with annuity provider Legal & General. Shares were 8.75p higher at 769.75p.
Marks & Spencer topped the fallers board with a decline of 6.8p to 391p, while Tesco was not far behind with a drop of 3.9p to 335.7p.
Outside the top flight, shares in housebuilder Berkeley jumped 5 per cent after it unveiled the first payment in a decade-long plan to return to ?1.7 billion to shareholders. The interim dividend of 15p a share came as it reported a 40.7 per cent rise in half-year profits to ?142.2 million. Shares lifted 87p to 1737p.
08:00
The FTSE 100 has opened marginally higher as caution over growth in Europe and U.S. jobs data prevented the index punching through fresh two-month highs.
London's blue chip index was up 6 points, or 0.1 per cent at 5,907.42, having closed at its highest level since mid October in the previous session.
?(Thursday's) move puts the index in a position to rally further if investors decide to bite the bullet and buy strength,? James Hyerczyk, an analyst at Autochartist, said.
?Based on the strong close, it looks as if sentiment is still to the upside; however a break back under 5,852.90 will signal that momentum has shifted back to the downside,? he said.
The index was struggling for momentum early on after Germany's Bundesbank cut its growth outlook for next year and ahead of November U.S. jobs data, which is expected to be weaker than October's, hit by Superstorm Sandy.
Rebecca O'Keeffe, head of investment at Interactive Investor, said: '"Persistent uncertainty" is not something the market wanted to hear, but Mario Draghi wasn't pulling any punches when it came to his statement about prospects for the eurozone as he cut growth forecasts and discussed the current downside risks.
'Sovereign debt issues in the euro area and fiscal policy decisions in the United States are both potential obstacles in the way of a sustained recovery.'
PREVIEW:
The FTSE 100 index is expected to open 12 to 16 points higher, or as much as 0.2 per cent this morning, according to financial bookmakers.
It closed up 9.34 points at 5,901.42 yesterday, hitting a two-month high fuelled by risk-sensitive stocks, but lagged European peers as wary investors met resistance around previous year highs.
London copper is steady this morning and was set to close the week little changed as traders focused on the progress of talks in the United States to avert a looming fiscal crisis, as well as the November jobs report.
The White House and Republicans in Congress dropped hints on Thursday that they had resumed low-level private talks on breaking the stalemate over the 'fiscal cliff' but refused to divulge details.
?The outcome of the 'fiscal cliff' issue will have a decisive impact on the equity market. It's really a close call whether they will manage an agreement this year or it might get postponed to the next year,? Tammo Greetfeld, equity strategist at UniCredit in Munich.
?If the stalemate continues in early 2013, then it would be negative for the equity market.?
On the macro economic front investors will be hoping for a turnaround in fortunes for Britain's industrial sector as October's output figures are due to be released at 0930 GMT, following after they fell more sharply than expected in September.
The big data though will be out in the United States at 1330 GMT, where all eyes will be on the latest batch of U.S. non farm payrolls where investors will looking for signs of a recovery in the employment sector.
Superstorm Sandy is likely put a dent in U.S. employment growth with payrolls data expected to show an addition of 93,000 jobs in November, compared with October's gain of 171,000. The unemployment rate is seen holding steady at 7.9 per cent.
In Germany , Bundesbank cut its growth outlook for next year on Friday as the eurozone debt crisis takes its toll on the bloc's largest economy, but added that the country would return to its growth path soon.
The Bundesbank now expects Germany's economy to grow 0.7 per cent this year, down from an earlier forecast of 1.0 per cent, and 0.4 per cent next year, down from a June forecast of 1.6 per cent.
Stocks to watch today
BG GROUP : The energy firm is exploring selling more assets linked to it $20 billion natural gas development in Australia, in yet another move to unlock capital that would help finance its spending commitments, according to the Financial Times.
TATE & LYLE : The British sweeteners and starches maker announces pension scheme agrees ?347 million partial pensioner buy-in, which effectively covers around 30 per cent of the scheme`s total liabilities and it sees no material impact on group`s cash flows or adjusted earnings as a result of the partial buy-in.
BELLWAY : The British housebuilder says it is well placed to deliver growth.
BERKLEY GROUP BKGH.L : The housebuilder says first-half pretax profit rose 40.7 per cent to ?142.2 million and it is on track to return ?568 million in cash to shareholders by no later than 30 Sept. 2015.
JAMES HALSTEAD : The British flooring maker says it is on track to beat last year's first-half profit and it will consider the payment of another special dividend.
FRONTIER MINING : The miner says its CEO has quit after his appointment as the Economic Policy Advisor to the Prime Minister of Kazakhstan.
PHOTO-ME INT'L The photobooths and instant service equipment group reports first half pretax profit rose 17.4 per cent despite a 7.1 per cent decline in revenues and it remains confident of good progress over the year.
BELGRAVIUM TECHNOLOGIES : The suppliers of mobile data computing solutions and managed services warns sales and profit levels for the year are likely to be below market expectations.
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