The FTSE 100’s was higher in choppy trade after the release of Non-Farm Payrolls on Friday with the index once more flirting with all-time highs.
After a week punctuated by the views of central bankers, the US jobs report revealed a strong US economy that may lead to a rethink of monetary policy plans outlined earlier this week.
The US economy added a whopping 517,000 jobs in January, smashing estimates of 188,000.
US equity futures sank in the immediate reaction as investors amended their positioning after dovish comments from the Fed on Wednesday.
Such as strong gain in jobs would suggest the economy is taking higher interest rates in their stride, and may keep inflation higher for longer than predicted just two days ago. This would diminish the need to slow rate hikes.
The FTSE 100 retreated from highs of 7,860 to trade at 7,849, up 0.3% on the day, in the wake of the jobs number. Equity trade after the US jobs numbers is particularly volatile so expect the FTSE 100 to remain choppy for the rest of the session.
Although the jobs update will cause central bankers a headache, it does display strength in the world’s largest economy which will ultimately support company earnings. The major question will now be whether markets fixate on monetary policy, or look to economic growth, when positioning for the rest of 2023.
FTSE 100 retailers
Following the Bank of Englands upbeat revisions to UK inflation and growth forecasts yesterday, the FTSE 100’s retail companies were again among the top risers. Lower inflation rates and better economic growth will ease pressures on consumers and act as a tailwind for retail earnings.
The index was also supported by a weaker pound helping support the FTSE 100’s oversea’s earners.
“Also supporting the index was weakness in the pound as currency traders bet that we are close to the peak for UK interest rates after yesterday’s meeting in Threadneedle Street. The fact the Monetary Policy Committee was split on the decision to bump rates to 4% felt instructive,” said AJ Bell investment director Russ Mould.
GBP/USD fell further after the jobs number and provided support for names such as AstraZeneca, Reckitt Benckiser and Diageo.