FTSE 100 slides as US payrolls dent Fed rate cut hopes

Britain's FTSE 100 fell on Friday as stronger-than-expected US employment data tempered hopes of an aggressive interest rate cut by the Federal Reserve and as heavyweight miners fell due to weakness in China's iron ore futures.

The FTSE 100 shed 0.7% on its worst day in more than a month, as a drop in homebuilder shares following a weak trading update from building supplier SIG also weighed.

The FTSE 250 gave up 0.7%, with sterling sinking to a six-month low, as the US payrolls compounded pressure from weak domestic economic data and recent dovish signals from the Bank of England.

US non-farm payrolls increased by 224,000 jobs last month, more than the 160,000 jobs forecast by economists, and led markets to rein in expectations of a hefty, 50 basis point rate cut this month.

"What these numbers tells us is that the pricing that a July rate cut is a done deal is anything but," said CMC Markets analyst Michael Hewson, adding that the European Central Bank's policy decision would now come into focus.

"If the ECB cuts rates on July 25, it could give cover for the Fed to do the same the week after, even if the data doesn't fully support it."

An index of miners suffered its biggest one-day fall in almost seven months, after China's leading steel companies formed a group to probe whether "non-market factors" were causing a record surge in iron ore prices.

SIG tumbled nearly 5% as it posted lower like-for-like sales for the first half of the year and flagged a "marked deterioration" in UK construction activity this year.

The dour outlook weighed on the shares of homebuilders. Persimmon, which had in the previous session forecast a drop in revenue as it slowed new home releases, fell 2.4%. Peers Taylor Wimpey and Barratt also skidded.

Housebuilders, considered among stocks that most closely track the state of the UK economy, were also pressured after a survey showed British businesses had turned gloomier about the economy amid persisting Brexit worries.

Small-cap aviation servicing company John Menzies plummeted 10% to a more than 3-year low after it warned of lower annual profit, mainly due to weak cargo volumes and flight schedule reductions.

Speciality chemicals maker Victrex lost 7% and electrical engineering firm Spectris retreated 5.8%, after the stocks were slapped with rating downgrades.