The FTSE 100 surged higher on Friday amid a spike in oil prices and a broad recovery from yesterday’s induced wobble in UK-focused shares.
London’s leading index was 1% at the time of writing, shortly after the release of the October Non-Farm Payrolls report revealing the US economy only added 12,000 jobs last month compared to estimates of 100,000.
Oil prices were one of the main drivers of trade on Friday amid a sharp jump in oil prices as tensions around the Middle East returned after Iran threatened further retaliation against Israel. BP and Shell were both higher by 1%.
“It’s been buoyed by energy stocks boosted by the higher oil price and a significant win for consumer goods giant Reckitt Benckiser in a case over its baby formula,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
“However, an element of wariness is set to remain. Worries continue to swirl about the UK Budget stoking inflation and adding to the debt burden, geo-political tensions in the Middle East have risen sharply and a highly fractious US Presidential election is coming up next week.”
The weak Non Farm Payroll report helped provide support for stocks ahead of the election next week with the slow pace of job creation almost nailing on a rate cut by the Federal Reserve next week.
“A 25bp cut next week remains on the cards, with further such cuts likely at every subsequent meeting, until the fed funds rate reaches a neutral level, around 3%, next summer,” said Michael Brown Senior Research Strategist at Pepperstone.
Although events overseas will be on traders’ minds, UK equities were driven by domestic occurrences on Friday. Corporate updates and recovery from yesterday’s budget-induced sell-off helped to drive the FTSE 100’s outperformance of other major equity indices.
Reckitt Benckiser was the top performer, with an 8% jump after a favourable court ruling regarding baby formula in the US.
“Reckitt Benckiser has shot to the top of the FTSE 100 leaderboard, with shares up sharply in early trade after it was cleared of liability in case over its pre-term infant formula, made by its US subsidiary Mead Johnson, by a state court in Missouri,” Susannah Streeter explained.
“The trial investigated if Reckitt and another manufacturer Abbott knew about disease risks linked with this type of formula. Investors are clearly relieved the manufacturers have been cleared by this court, but other trials are pending, and the companies were found liable in other cases. The companies’ overall liability was estimated at up to $2.5 billion.”