FTSE 100 dips in risk-off trade ahead of Non-Farm Payrolls and Federal Reserve speech

The FTSE 100 fell on Tuesday as investors held off bullish bets ahead of a raft of central bank action and major economic data later this week.

Trading on Tuesday had a distinct risk-off tone. It was as if the traders were double-checking their work from yesterday when markets bid up equities.

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The optimism surrounding the UK election seems to be fading as the reality of immediate uncertainty hits home. The relief rally about the far right in France not winning a majority has been replaced with concerns about a hung parliament. 

The FTSE 100 was down 0.55% at the time of writing, and the French CAC 40 dropped 0.9%.

Higher US bond yields were also thrown into the mix on Tuesday and markets reacted by selling stocks. The timing of the first US rate cut is becoming increasingly uncertain with some commentators suggesting the Fed won’t cut until 2025. Higher bond yields are rarely good for shares and European stocks fell across the board on Tuesday.

Non Farm Payrolls set for release on Friday will provide the next material insight into the US economy and the Fed’s likely next move. 

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“Without a positive contribution from the big oil producers, the FTSE 100 would have experienced an even worse day than it already has done. Falling 0.5% in early trading to 8,128, most sectors were in the red apart from oil and gas, with BP and Shell rising on the market thanks to oil prices extending yesterday’s rally to trade at their highest level since April,” said Russ Mould, investment director at AJ Bell.

“Investors are eagerly awaiting new US jobs data and a speech from Federal Reserve chair Jerome Powell, two events which could provide the all-important clues on how the central bank might act with monetary policy.”

Yesterday’s rally in the housebuilders continued with positive housing data providing a reason for investors to be optimistic. Persimmon and Taylor were among the few gainers, as were oil majors Shell and BP.

Beazley experienced heavy selling after a switch in divisional management, with shares down 5%. The insurance group was the FTSE 100’s top faller.

Sainsbury’s shares slid 1.7% as investors digested recent trading figures. Although the supermarket enjoyed higher sales in the first quarter, the pace of growth declined substantially.

“Sainsbury’s has the same nagging feeling as the England football team – it eventually scores a goal but you know it could do a lot better,” Russ Mould explained.

“On the one hand, the food business is trucking along nicely and the grocer is winning market share. On the other hand, non-food items across clothing and general merchandise including Argos aren’t resonating with its customer base.

“Sainsbury’s has a food-first strategy so it might argue that as long as the core part of the business is doing fine, the rest will eventually catch up. However, the non-food operations have been letting the side down for a long time and causing unwelcome distractions for management when they could be doing even more to capitalise on the new-found strength in food.”

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