The FTSE 100 gained on Monday after investors used the weekend to reflect on the economic outlook and evidently concluded that last week’s soft jobs report didn’t warrant selling to the extent that was witnessed after the last jobs report in early August.
“The FTSE 100 got off to a strong start on Monday, helped by strength in the resources space as oil prices bounced from their recent lows,” said AJ Bell investment director Russ Mould.
“The index had endured some weakness last Friday as US non-farm payrolls came in below expectations. The outcome seemed to cause the market concern that the US economy is headed for a hard landing after all, as the Federal Reserve readies its first interest rate cut of the current cycle.
After two years of inflation and monetary policy dominating the macro narrative, growth is firmly at the forefront of investor thinking.
Investors were able to take high inflation and rising interest rates in their stride because, despite persistent predictions to the contrary, growth remained robust over the past two years.
Job creation in the US was strong, and the economy ticked along very nicely. However, this looks set to change, and the potential implications for company earnings have sparked a wave of concern through markets.
The doomsayers will highlight slowing job creation and historical correlations with growth rates, while the more optimistic market participant will look to the Federal Reserve, Bank of England, ECB, and current interest rates and conclude major central banks have plenty of space to ease policy and support their respective economies.
These are the factors markets will tussle over in the coming weeks.
Entain
In London, Entain led the FTSE 100 higher with a 5% gain after the betting company alluded to improving trading conditions in the second half of the year as the new CEO takes charge.
“Gavin Isaacs has only been chief executive of gambling group Entain for a week and he’s already managed to issue a trading update that’s put a rocket underneath the share price,” Russ Mould said.
“Trading has been good in recent months, helping to restore market confidence in the company’s ability to bounce back after a patchy few years.
“Isaacs will certainly welcome a more positive backdrop as there was a big risk he was wading immediately into quicksand on the first day of the job, having to fight hard to stop the business sinking further into the ground.
Burberry was the top faller, shedding 5%, as it was confirmed that the luxury label will exit the FTSE 100 effective 23rd September. Barclays analysts added to the group’s woes by cutting Burberry to underweight with a new price target of 540p.
Burberry now trades at the lowest levels since 2009 amid a broad decline in luxury fashion brands globally.