The FTSE 100 was lower heading into the weekend after the US jobs report missed expectations, almost confirming a rate cut by the Federal Reserve later this month.
One thing is certain: the US economy is slowing. But the slowdown is showing signs of a soft landing—just what equity markets want. However, the 1.4% drop in the S&P 500 today and 0.8% decline in the FTSE 100 indicate that investors are concerned about the growth outlook.
The reduction of borrowing costs later this month is likely to provide the support the economy needs to avoid a recession. It’s very unlikely we will see mass job losses that could harm company earnings materially. Yet, a slowing economy will not be favourable for company outlooks in the next round of earning season.
“All eyes are on the US this afternoon, where August data for non-farm payrolls has revealed 142,000 new jobs were added last month. Unemployment dropped, however, from 4.3% to 4.2%,” said Emma Wall, head of investment analysis and research, Hargreaves Lansdown.
“This mixed data has had a mixed reaction from markets. Bond market yields dropped slightly in anticipation of a potential rate cut from the Federal Reserve, who may see this data as a sign of economic weakness.”
One would expect heightened volatility throughout the rest of the US session, and many will fear the selling will spill into Monday’s European open.
When futures open on Sunday evening, traders will be watching closely for any signs of the sell-off that rocked the equity market globally at the beginning of August.
Most FTSE 100 components were in the red on Friday, although there was some strength in defensive sectors. Airtel Africa, bounced after heavy selling yesterday and was the top riser with a gain of 1.3%.
After topping the FTSE 100 leaderboard yesterday, homebuilder Vistry dropped 5% on Friday to the bottom of the leaderboard, despite JP Morgan raising their price target for the stock.