September’s Non-Farm Payrolls provided a hawkish twist on Friday as investors accessed the health of the US jobs market and the impact on the trajectory of interest rate hikes.
The FTSE 100 had been tentatively higher before the jobs number a turned negative shortly after the release, but outperformed US and European stocks.
US jobs data revealed 263,000 increase in jobs in September versus economist estimates of 255,000 and a prior number of 315,000.
The Non Farm Payrolls will present the Fed with a major headache as they are forced to choose between supporting a slowing jobs market and combating soaring inflation.
Early indications are markets feel the jobs data will not be enough to cause a Fed ‘pivot’ away from interest hikes in the short-term. There are expectations the Fed will hike 75 bps at their next meeting.
Price action in the dollar drove the initial reaction as GBP/USD dipping to 1.1123. The stronger dollar in the run up to the data has taken cable down from 1.1500 just three trading sessions ago.
The jobs reading all but confirmed additional rate hikes and equity markets reacted by immediately selling equities. US futures extended declines with the NASDAQ down 1.2% and S&P 500 off 0.5%.
The weaker pound provide some support for the FTSE 100 as it outperformed US and European indices, slipping 0.3% to 6,970 at the time of wiring.
A close above 7,000 would have been a major psychological boost to investors in UK equities in the short-term.
The FTSE 100 has rebounded from the worst levels since the government’s mini-budget, but is still about 5% down from recent highs. Defensive names and a leading towards UK banks benefitting from higher rates has supported the index, as have overseas earners enjoying a weaker pound.