FTSE 100 extends record highs after goldilocks Non-Farm Payroll report

The FTSE 100 surged to fresh all-time record highs on Friday as a goldilocks Non-Farm Payrolls report helped propel stocks higher.

The US jobs report for April couldn’t have been much better for equities. After a series of higher-than-expected reports in March and February, the number of jobs added in April missed expectations helping fuel the narrative of rate hikes later in 2024.

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The US added 175,000 jobs in April, substantially below the 241,000 expected – the biggest miss since 2021.

The unemployment rate unexpectedly rose to 3.9%, and average earnings rose less than expected. The scale of the softer data paints a picture of a US economy that isn’t as strong as previously thought.

“America’s overheated employment market is finally cooling down. The US added 175,000 jobs in April, well below expectations of around 241,000. Non-farm payrolls is a key data series for the Federal Reserve in its decision making process about the direction of interest rates,” said Garry White, Chief Investment Commentator at Charles Stanley.

“A weaker jobs market dampens wage pressures and makes some employees consider reining in their spending as they are concerned about future income. This is the sort of slowdown the central bank needs if it is going hit its 2% inflation target.”

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While this is bad news for ‘main street’ in the US, it’s fantastic news for equity bulls.

A softer jobs market is exactly what the Federal Reserve wants to see before cutting rates. Consistently strong jobs reports have meant the threat of inflation heating up again has been too great, so a Non Farm payroll miss will feed into the narrative that the US economy is slowing, warranting a reduction in borrowing costs.

Stocks surged higher on the news with US indices leading the charge. The developments were not lost on UK stocks and the FTSE 100 spiked higher to touch an all-time intraday record high at 8,240.

The FTSE 100’s gains were broad with 88 of the 100 constituents trading higher at the time of writing.

Ocado was the top riser, with a gain of over 4%. Ocado trades more like a US tech stock than a UK food retailer, and the hint of lower borrowing costs fired up the food distribution and technology company. The shareholders recently reported to be pressuring the company to switch its listing to the US will not be perturbed by today’s move, but the reaction shows where Ocado shares could go when rates are eventually cut.

Rightmove was among the gainers, as were housebuilders Persimmon, Barratt Developments, and Taylor Wimpey. Any signal the Federal Reserve could cut interest rates will be welcome news for the UK housing market because the Bank of England will be very close behind the Fed in cutting rates – if they do not do so beforehand.

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