The FTSE 100 declined on Tuesday as markets braced for US economic data with the potential to shift expectations of when the Federal Reserve will first cut rates.
A weak session in US stocks overnight spilt over into the European session, with the FTSE 100 trading down 0.7% at the time of writing.
“The FTSE 100 slipped at the open after weakness on Wall Street last night. The markets are a touch nervous ahead of US jobs figures this week which could either reinforce or undermine the narrative that interest rates have peaked and rate cuts are on the way,” said AJ Bell investment director Russ Mould.
“Signs the labour market is heating up again would put any hopes of a Santa rally into the end of the year under threat.”
After the Federal Reserve suggested they were done with rate hikes at their last meeting, investors have quickly priced in interest rate cuts as early as March next year. This positioning sent US stocks sharply higher.
Friday’s Non-Farm Payrolls will set the tone for trade going into the end of the year. Before then, markets will digest other measures of the US employment market, including ADP jobs data and JOLTS.
China outlook
The FTSE 100 was again hit by developments in the Chinese economy on Tuesday. Credit rating agency Moodys cut China’s outlook to negative, sending waves through Asian stocks and the FTSE 100’s China-focused stocks.
Anglo American was one the biggest fallers for a second straight session, down 3.3%. Antofagasta slid 2%.
Ashtead was at the bottom of the leaderboard after profit flatlined in the second quarter, despite the plant hire company achieving record sales.
“Equipment rental business Ashtead has an enviable track record of earnings and dividend growth going back more than a decade and it has posted record results yet again today,” said Russ Mould.
“The catch is that earnings were flat in the second quarter, underlining why the company recently moved to warn on profit. Some of the reasons for this warning – notably the writers’ strike which affected demand on film and TV sets – seemed genuinely one-off in nature but there will be concerns about how robust America’s construction and infrastructure markets are right now.”
Ashtead shares were down 3.7%.
Barclays was also among the fallers on the news Qatar was mulling the sale of half of their holdings in the bank.
BT was the top gainer after JP Morgan analysts increased their price target to 290p from 280p. BT traded at 128p on Tuesday.