FTSE 100 rallies despite jobs blow

A shock slowdown in US jobs growth and a double dose of economic setbacks in the UK failed to halt the progress of London's blue-chip shares.

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The FTSE 100 Index rose 48.6 points to 6739.9

The FTSE 100 Index rose 48.6 points to 6739.9 in the last session of the first full week of new year trading.

Shares climbed in spite of a disappointing gain of just 74,000 US jobs in December, sharply below the average of 214,000 seen in the previous four months, and the lowest number in three years.

Meanwhile, official figures showing a slump in Britain's construction industry in November along with a flat performance for manufacturing also failed to have a negative effect on equities in the City.

Traders appeared to have been reassured by the possibility that the US data was distorted by poor weather during the period while the recovery of the UK remains on track, despite the recent slowdown in growth.

In addition, potential weakness in America could serve to lessen the likelihood of tapering of the US Federal Reserve's monetary support for the world's biggest economy, and add to the need for interest rates to remain low for longer.

In Europe, Germany's Dax and France's Cac 40 were also on the front foot but Wall Street traders failed to see the positives as the Dow Jones Industrial Average was in the red at the close in London.

On currency markets, sterling slipped by a cent against the single currency to 1.21 euros on the weak UK economic data, while it held firm against the greenback at 1.65 US dollars with America's currency held back by the weak jobs report.

In London's top flight, Tesco was a big faller as sentiment towards the supermarket giant remained weak following its poor festive sales figures.

It disappointed the City on Thursday with a 2.4% drop in UK like-for-like sales on a year ago, though chief executive Philip Clarke insisted the company's £1 billion turnaround plan was on track. Shares fell another 2.6p to 321.8p in the latest session.

Tullow Oil surged nearly 8% to the top of the FTSE 100 risers' board amid speculation that the exploration firm could be a bid target for Norway's Statoil. The stock was 64.5p higher at 909.5p.

Elsewhere in the oil sector, BP recovered from a downgrade by Exane BNP Paribas to stand 1.7p higher at 497p. Its big rival Royal Dutch Shell was upgraded by the broker and climbed by nearly 2% or 43.5p to 2308p.

A City upgrade also benefited emergency repair firm Homeserve as its shares jumped 9% or 23.5p to 282.5p in the FTSE 250 Index.

Meanwhile, shareholders in Cineworld welcomed a deal that will see it spread its wings into Europe with a deal to buy Warsaw-listed Cinema City, creating a merged group with 1,852 screens across Europe. Shares jumped 13%, or 51.5p to 443.5p.

The biggest FTSE 100 risers were Tullow Oil, up 64.5p to 909.5p, Persimmon up 80p to 1354p, Royal Mail up 22p to 583p and Burberry up 52p to 1473p.

The biggest FTSE 100 fallers were Lloyds Banking Group down 2.2p to 83p, ARM Holdings down 25.5p to 972p, Sainsbury's down 5.4p to 346p and Royal Bank of Scotland down 3.3p to 356.9p.