LONDON MARKETS: FTSE 100 Trims Gains After U.S. Jobs Disappointment But Stays On Record Course

Oil companies fall as crude prices slide more than 2%

U.K. stocks trimmed gains on Friday after U.S. jobs growth fell short of expectations, but the benchmark index stayed on course to close at an all-time high.

The FTSE 100 Index rose 0.1% to 7,554.82, on track to take out the previous record close of 7,547.63 set on May 26.

Earlier in the day, the index traded as high as 7,598.99, but was pulled back along with the wider European and American stock markets after U.S. nonfarm data missed forecasts a wide mark. The report showed 138,000 jobs were added to the economy in May, far below the consensus forecast of 185,000. The unemployment rate, however, fell to 4.3% from 4.4%, the lowest since 2001.

"The U.S. recovery is not gaining steam, but instead is just plugging along. While the overall numbers were positive, key pieces of the report missed expectations and confirmed the U.S. economy is not gaining momentum but instead may be stuck in a rut," said Chris Gaffney, president of World Markets at EverBank, in a note.

Stock markets in Europe are highly sensitive to growth in the U.S. as the country is a major consumer of European products and generally a driver of global growth.

The dollar pared back after the report, but not enough to turn negative against the pound. Sterling traded at $1.2860, down from $1.2881 late Thursday in New York. A weaker pound tends to boost the FTSE 100 as about 75% of revenues for those listed companies come from overseas.

Sterling has slipped in recent days as opinion polls ahead of the June 8 general election in the U.K. point to a much tighter race than anyone had expected. A survey out earlier this week showed Theresa May's Conservative Party's lead over Labour had narrowed to three points, down from 20 points about a month ago.

Read:5 things to know about the U.K.'s general election next week (http://www.marketwatch.com/story/5-things-to-know-about-the-uk-general-election-next-week-2017-06-01)

And see:The U.K. election -- the nightmare, best and most likely scenarios for stocks (http://www.marketwatch.com/story/uk-election-the-nightmare-best-case-and-most-likely-scenarios-for-stocks-worldwide-2017-06-01)

Stock movers: Energy companies declined, as oil prices lost more than 2% (http://www.marketwatch.com/story/oil-prices-stay-weak-as-investors-return-to-worries-over-rising-production-2017-06-02) after President Trump's withdrawal from the Paris climate agreement fueled speculation U.S. producers will start pumping more.

The bearish take on this is "that Trump will make it easier to increase production because he does not care about environmental issues related to the shale industry" said Torbjorn Kjus, chief oil analyst at DNB Bank.

"He only wants to create jobs. So this scrapping of the Paris agreement is probably taken as it will provide more oil production. It should also provide more oil demand, but that factor is probably overlooked today," he added.

Shares of BP PLC (BP.LN) (BP.LN) fell 1%, and Royal Dutch Shell PLC (RDSB.LN)(RDSB.LN) gave up 0.6%.

Economic data: The U.K construction purchasing managers' index for May came in stronger than expected, showing a rise rather than the drop expected. The PMI posted 56, up from 53.1 in April and above the 52.7 forecast. A reading above 50 signals expansion.

"U.K. construction companies experienced a sharp rebound in business activity during May, helped by the fastest upturn in residential work since the end of 2015," said IHS Markit/CIPS, which released the report.

(END) Dow Jones Newswires

June 02, 2017 10:15 ET (14:15 GMT)