LONDON (Reuters) - Britain’s top share index fell sharply on Friday, following the release of U.S. jobs data that suggested to some that a Federal Reserve interest rate hike in September is still a possibility.
U.S. job growth slowed in August but the unemployment rate dropped to a near 7-1/2-year low and wage growth accelerated, keeping alive prospects of a Federal Reserve interest rate hike later this month.
“The most obvious implication of today’s jobs report, which I would view as a net positive for the U.S. economy, is that it leaves a September rate hike from the Federal Reserve on the table, so that potential for higher interest rates, even in the U.S., is something that is really hitting stock markets around the world,” said Matt Weller, senior market analyst at GAIN Capital.
Some analysts pointed to a trend in recent years for sharp upward revisions to payroll figures after initial weak readings.
“The headline reading is actually weaker in reality and the underlying picture is quite a bit stronger,” said Ian Williams, strategist at Peel Hunt.
Britain’s FTSE 100 was down 151.18 points, or 2.4 percent, at 6,042.92 at the close. It gave away all of Thursday’s 1.8 percent rise, leaving the index down 3.3 percent for the week.
“(The FTSE 100) spiked just very briefly in the immediate reaction to the report ... but really everything other than that headline number was better than expected, and therefore it makes it more likely the Federal Reserve will raise interest rates in September,” added Weller.
Miners were the heaviest fallers on the FTSE 100, with the FTSE 350 mining index down 5.3 percent. Anglo American, Glencore and Antofagasta were down 7.8 percent, 6 percent and 5.3 percent respectively.
The sector is sensitive to concerns over global growth and has been hit by recent worries about the Chinese economy. The sector is set for its weakest quarterly performance since 2011.
Fashion retailer Next fell 3.1 percent after Exane BNP Paribas cut its rating on the stock to “underperform” from “neutral”, slashing its target price by 4 percent.
Electronics retailer Dixons Carphone also suffered from a downgrade from Exane BNP Paribas, falling 4.3 percent.
Other retail stocks came under pressure after UK data showing August was the worst month for retail sales since the global financial crisis of 2008.
Editing by Hugh Lawson and Kevin Liffey