The FTSE 100 was on the up on Thursday amid rising hopes of an interest rate cut by the Bank of England. Diploma was the top riser after boosting full-year guidance.
There was high drama going into yesterday’s close after a White House official said Trump was on the verge of sacking Fed Chair Powell, only for Trump himself to deny it minutes later.
The FTSE 100 sank into the close yesterday in line with a decline in US stocks before futures rebounded sharply on Trump’s denial, leading to a higher open for the index this morning.
UK stocks were also boosted by poor jobs data, which raised hopes that the Bank of England would act to steady the UK economic ship. The UK is losing jobs at a rate that cannot be left unchecked by the central bank, and interest setters will be under pressure to step in and ease monetary policy.
“The UK labour market has seen a net loss of 178,000 jobs over the past year, in stark contrast to the previous year when there was a gain of 260,000 jobs,” said Seemanti Ghosh, Principal Economist at the Institute for Employment Studies.
“The labour market continues to weaken with the unemployment rate ticking up to 4.7%, a further 75,000 drop in payrolled employees on quarter and vacancies falling for the 36th consecutive period.”
The poor state of the UK jobs market makes an interest rate cut at the BoE’s next meeting a near certainty. Investors, businesses and households will hope it’s followed by more cuts later this year.
Sterling weakened slightly against the dollar in the immediate reaction to the jobs number, providing support for the FTSE 100.
“Having seen a rapid retreat from the briefly attained 9,000 mark earlier this week, the FTSE 100 made steady progress on Thursday to put this milestone level back within reach,” says AJ Bell investment analyst Dan Coatsworth.
“Financial stocks were among the gainers, while specialist distributor Diploma led the way as it lifted its full-year target for organic growth.”
Diploma surged over 7% to all-time highs after upgrading its full-year outlook. Lloyds gained 2.5% and NatWest added 1.3%.
Easyjet was the FTSE 100’s biggest casualty despite the group announcing respectable profit expansion. Investors are evidently concerned about the outlook, as higher oil prices erode margins, and the success of the key summer trading period depending on late bookings.
“easyJet’s underlying pre-tax profits flew 21% higher in the third quarter to £286 billion, boosted by strong demand and the timing of the Easter break,” said Derren Nathan, head of equity research, Hargreaves Lansdown.
“But the no-frills airline is running up against some turbulence. The price of jet fuel shot up following military action against Iran, and it’s proving to be stickier than crude oil prices. Meanwhile, the widespread disruption over French airspace due to an air traffic control strike is also weighing on the outlook. These are factors outside of the group’s control, but with the trend towards later booking patterns holding firm, passengers look to be holding out for last-minute bargains. That adds an extra degree of uncertainty around the peak travel period, which falls in the group’s final quarter.”