The FTSE 100 was trading deep in red going into the weekend as concerns about interest rates sapped demand for equities.
Firmer oil prices increased interest rate tensions overnight, culminating in a softer start to European trade on Friday. Rates concerns were heightened after a blowout Non-Farm Payrolls pushed market expectations of the first US rate cut out to September from July.
Headline Non-Farm Payrolls increased by 303,000 versus expectations of 214,000. The number of jobs created is excellent news for the US economy but bad news for equity markets longing for a rate cut. The Unemployment rate fell to 3.8%, as expected.
US bond yields soared, and equities fell immediately after a headline jobs report that exceeded all Wall Street economist estimates.
Payrolls number was higher than the highest Wall Street estimate pic.twitter.com/pTMKTQ5fK1
— zerohedge (@zerohedge) April 5, 2024
The FTSE 100 started the session firmly lower and traded sideways, deep in the red, until the US Non-Farm Payroll release at 1.30pm.
“Storm clouds circled equity markets as investors started to fret about when interest rates would be cut given heightened inflationary pressures from oil hitting $90 a barrel and negative comments from a key figure,” said Russ Mould, investment director at AJ Bell before the jobs report was released.
The US jobs report did little to provide London’s leading index with any reprieve, and the FTSE 100 was trading down 0.8% at the time of writing.
The declines were broad, with only 4 of the FTSE 100’s constituents trading positively. Ocado was the top faller, down 7%, as the threat of higher interest rates hit technology sentiment.
Shell was one of the risers, adding just 0.5% as oil rose above $90 a barrel.
Housebuilders and UK property prices
The FTSE 100’s housebuilders were under pressure as UK property prices fell 1% in March from February. After five months of monthly gains, Halifax data showed a slowdown as mortgage rates remained elevated. Investors may be concerned that the UK housing market is not entirely out of the woods, with little indications of interest rate cuts in the immediate future.
“Affordability constraints continue to be a challenge for prospective buyers, while existing homeowners on cheaper fixed-term deals are yet to feel the full effect of higher interest rates. This means the housing market is still to fully adjust, with sellers likely to be pricing their properties accordingly,” said Kim Kinnaird, Director, Halifax Mortgages.
Persimmon fell 1.3%, and Taylor Wimpey was off by 1.5%.
