The FTSE 100 touched the highest levels of Friday’s session after another bumper US jobs report suggesting underlying health of the US economy. Reports China was considering measures to help prop up the property sector also lifted the mood on Friday.
The FTSE 100 was trading at 7,574 at the time of writing, a gain of 1.12%. The S&P 500 was around 1% higher.
Today’s rally builds on yesterday’s gains ignited by a US debt ceiling deal which means the world’s US economy will avoid a default that would plunge the global financial system into meltdown.
“As expected, the Senate swiftly approved the new debt ceiling deal in the US prompting relief in the markets with the FTSE 100 making decent progress on Friday morning,” said AJ Bell investment director Russ Mould.
“A bigger bounce might have been forthcoming had investors not already been very much factoring in an agreement, with only a modest sell-off around the crisis.
“With disaster averted for now, attention will turn to other matters which have been overshadowed by the drama in Washington.”
The other matters Mould alludes to include the health of the US economy and the next move by the Federal Reserve.
Judging by today’s jobs report, the US economy is ticking along just fine. The US added 339,000 jobs in May, beating median estimates of 195,000.
May’s jobs report is the 14th in a row that has beaten estimates suggesting the financial community is consistently over-pessimistic about growth. It strengthens the argument against a US recession predicted by some analysts.
Nonetheless, the good news for the US economy may prove to be bad news for equity investors hoping for lower borrowing costs in the short term.
With the US economy ticking along and inflation rates falling, there is no impetus or justification for the Federal Reserve to cut rates.
FTSE 100 movers
The FTSE 100’s top risers on Friday reflected a firmly risk-on mood in markets.
The highly-cyclical mining sector drove London’s leading index higher on Friday as Anglo American, Rio Tinto, Glencore, and Antofagasta stormed ahead.
If measures to stimulate the Chinese property market materialise, demand for natural resources will be supported and could translate to more robust mining earnings.
Anglo American was the FTSE 100 top riser, up 5.7% at the time of writing.
Financials joined in the rally led by Prudential who earn most of their revenue in China and Asia. Prudential was 4.75 higher.
As one would expect in a risk-on move in equities, shares with defensive attributes suffered.
BT, SSE, Vodafone and Centrica were the top fallers.