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%.

Tekcapital’s Guident has announced the expansion of its strategic partnership with Auve Tech, an Estonian autonomous transportation company, with the launch of Auve Tech’s flagship MiCa autonomous shuttle into the US market.

Guident will integrate its Remote Monitor and Control Center solution into the MiCa shuttle to enhance the MiCa’s safety features by adding human-in-the-loop connectivity to the fixed-route transportation technology.

“With MiCa now officially ‘landed’ in the US for market entry, we are glad to join forces with Guident. Together, we are committed to enhancing the safety and efficiency of our MiCa AV shuttles with their advanced remote monitoring and control software. Based on the success in Japan and Europe, we eagerly anticipate rapid deployment of our innovative combined solution in the US and worldwide,” Johannes Mossov, Board Member at AuVe Tech OÜ.

A MiCa shuttle has been received at Guident’s headquarters and the integration process is fully underway. The new partnership and technology will be showcased at the grand opening of Guident’s new headquarters in Boca Raton, Florida, later in April.

“Since establishing our strategic partnership, we have been thrilled to collaborate with the Auve Tech team on several projects. We are particularly excited to achieve a significant milestone with Auve Tech’s entry into the US market coupled with the integration of our advanced teleoperation technology,” said Harald Braun, Executive Chairman and CEO at Guident.

The MiCa shuttle is described as ‘the world’s most compact and flexible level 4 autonomous shuttle.’ This is significant because most other companies developing Level 4 autonomous vehicle technology, including Alphabet, Volvo, and GM, have valuations in excess of a billion dollars.

Where the Auve Tech and Guident partnership breaks new ground is the established human-in-the-loop safety solution that allows a real person to take control of an autonomous vehicle should danger be detected.

A General Motors incident in which one of the company’s Cruise autonomous taxis dragged a woman after a collision in San Fransico is the perfect example of the benefits of a human-in-the-loop autonomous vehicle safety solution, such as Guident’s Remote Monitor and Control Center.

The California Department of Motor Vehicles suspended Cruise’s taxi license after the incident.

In the Cruise case, if the vehicle had access to a remote operator, they would have been able to step in and take control of the vehicle, possibly minimising the severity of the incident.

The Halifax House Price Index’s release contributed to a fall in FTSE 350 housebuilder shares on Friday after the building society said average UK house prices fell 1% in the month of March.

Taylor Wimpey dropped 1.7%, Persimmon fell 1.4%, Barratt Developments shed 1.3%, and Crest Nicholson was off by 2%.

Although March prices dropped by 1% month-on-month, average UK house prices were up 2% on the quarter.

“UK house prices grew in March on a quarterly basis, by +2.0%, with annual growth slowing to +0.3%, from 1.6% in February. Compared to last month, the price of a UK property fell -1.0% or £2,908 in cash terms, with the average property now costing £288,430,” said Kim Kinnaird, Director, Halifax Mortgages.

“That a monthly fall should occur following five consecutive months of growth is not entirely unexpected particularly in view of the reset the market has been going through since interest rates began to rise sharply in 2022. Despite this house prices have shown surprising resilience in the face of significantly higher borrowing costs.”

As Kinnaird mentioned, house prices have been steadily increasing for five months, and as seasoned investors will be fully aware, no market moves in a straight line. The blip in housing prices has spurred a bout of profit-taking in FTSE 350 housebuilders on Friday after the sector rallied as house prices bottomed out last year.

A quarterly gain is an encouraging sign for the housing market, but with mortgage rates remaining elevated and many homeowners still to move onto mortgages at the new higher rates, the UK property market may still face some pain in the coming year.

“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,” Kinnaird said.

“Financial markets have also become less optimistic about the degree and timing of Base Rate cuts, as core inflation proves stickier than generally expected. This has stalled the decline in mortgage rates that had helped to drive market activity around the turn of the year.”

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.