The FTSE 100 was on a firmer footing on Thursday as stronger commodity stocks helped propel the index higher ahead of tomorrow’s Non-Farm Payrolls report.
Anglo American was the FTSE 100’s top gainer, with a gain of 3.3% as the broader FTSE 100 index added 0.45% to 7,972. Antofagasta and Fresnillo were also among the top risers as commodity prices continued to march higher.
“The FTSE 100 ticked higher on Thursday as US markets enjoyed a better session overnight,” said AJ Bell investment director Russ Mould.
“Miners were in demand as commodities prices continued to surge – an inflationary development which might provoke some nervousness about the fate of long-awaited interest rate cuts.”
Elsewhere, Entain enjoyed a 3% gain after announcing another senior management change – the Chairman will step down as the company continues to seek a new permanent CEO.
Suggestions that interest rates could stay higher for longer helped support the FTSE 100’s banks, with a good showing from Barclays, Standard Chartered, and NatWest.
Non-Farm Payrolls & Interest Rates
As the session progresses, attention will shift to tomorrow’s Non-Farm Payrolls and the ramifications for interest rates. Comments by the Federal Reserve Chair on the timing of rate cuts yesterday will heighten anticipation.
“Federal Reserve chair Jerome Powell warned yesterday of a risk of having to delay cuts thanks to stubborn inflationary pressures, although there was enough to reassure investors that a rate cut is coming at some point this year,” Russ Mould said.
Tomorrow’s data may see a return of ‘good news is bad news’ for global equities. If the jobs number comes in much better than expected, it will dash hopes of an interest rate cut soon and sour investor sentiment.
The Federal Reserve will be increasingly aware of the US economy’s resilience and stubbornly higher inflation. Strong Non-Farm Payrolls will support the view that the US can withstand higher rates, reducing the need to cut them.
Given the elevated levels of global equities, this scenario will be a concern for traders. Even the FTSE 100 has flirted with record highs in the recent melt-up.
Powell’s comments yesterday suggesting they will continue to digest data could act to exacerbate any market moves in reaction to the jobs report – a repricing to reflect rate cuts much later in the year could be sharp.
“Jerome Powell once again said that there was no rush to cut interest rates, although he did signal a cut would be coming this year, but that this is wholly dependent on economic progress,” said Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown.
We have seen risk aversion ahead of tomorrow’s number in equities earlier in the week. Should the jobs report be weaker than expected, one would expect stocks to pop higher at 1.30pm tomorrow.
