The FTSE 100 gained on Monday as investors positioned for the Federal Reserve to pause hiking rates at their next meeting after last week’s jobs report indicated that the US employment market was slowing.
The FTSE 100 was 0.4% higher at 7,494 at the time of writing in a broad rally spearheaded by cyclical stocks. US markets were closed for the Labor Day holiday on Monday.
“Investors are growing warm to the idea that the Federal Reserve might not rush to raise interest rates again at its next meeting. An increase in unemployment for August and lower than expected wage growth suggest the Fed may sit on its hands and make no change to rates,” said Russ Mould, investment director at AJ Bell.
“Judging by the messages from US corporates regarding a slowdown in trading, it does feel like we could be at a turning point for monetary policy. Nonetheless, it is impossible to say for certain what the Fed will do, given these are only data points from a brief period of time.
“Any sign that interest rates might have peaked is good news, in theory, as it implies consumers and businesses may now have seen the worst when it comes to pressures from an appreciating cost of borrowing. However, existing pressures from current rate levels are still troublesome. One must also consider that any lack of further rate rises might be down to a weakening economy, so it is not a simple ‘no rate hikes = better times’ scenario.”
Improving news coming out of China helped propel mining shares higher after authorities took additional steps to help stimulate the struggling property market.
“Sentiment across Asian markets improved after the weekend vote by creditors in favour of restructuring a bond repayment by troubled Chinese property developer Country Garden,” said Russ Mould.
“Chinese authorities also lowered downpayment requirements for first and second-time home buyers, thereby providing yet another stimulus initiative to drive greater economic growth.”
UK housebuilders gained as investors dared to think a pause in US rates could be a precursor to the Bank of England keeping rates around current levels.
Persimmon was up 0.6%, and Taylor Wimpey added 0.4%.