The FTSE 100 extended gains on Friday after the highly anticipated US jobs report indicated the US economy was cooling, suggesting the Federal Reserve would hold off hiking rates at their next meeting.
The FTSE 100 was 0.4% higher at the time of writing as London’s leading index joined in a global equity rally.
The question of whether ‘bad news is good news’ has been swirling all week. Bad news for the US economy is good news for equities because the Federal Reserve will likely pause hiking rates.
After several softer economic releases this week, today’s Non-Farm Payroll report will increase hopes the Federal Reserve will keep rates on hold at their next meeting.
The headline 187,000 jobs added in August beat expectations, but the US jobs market showed signs of cooling as the unemployment rate rose to 3.8% from 3.5%, and average hourly earnings growth was less than expected.
This is just the news those hoping for a pause in rate hikes wanted. US bond yields fell, and US equity futures rose in the immediate reaction.
This year, perceptions of when the Federal Reserve will stop hiking and eventually cut interest rates have dictated equity trade. This shows no signs of abating in the short term.
The Federal Reserve will next meet 19th – 20th September to decide on interest rates.
FTSE 100 movers
Johnson Matthey was the FTSE 100’s top riser after Standard Industries doubled its chemical company stake to around 10%. Johnson Matthey shares were 11% higher at the time of writing.
Natural resource companies were doing a lot of the heavy lifting on Friday, with BP, Rio Tinto, Glencore, Shell and Antofagasta up in the region of 1.5%-2.6%.
After a prolonged period of disappointing Chinese economic data, hopes of another wave of stimulus helped support Asian indices overnight, spilling over into today’s session in London.
“What supported the FTSE 100, in particular, was news of more Chinese stimulus, which helped break a losing streak for China’s mainland indices and lifted UK-listed stocks with exposure to the world’s second-largest economy – most notably the miners,” said AJ Bell investment director Russ Mould.