The FTSE 100 dipped slightly on Friday as the index consolidated after a recent rally and held steady above the 8,700 level.

London’s leading was trading down 0.1% at 8,711 at the time of writing after hitting fresh record highs yesterday.

US Non-Farm Payrolls, widely considered the single most important data on the economic calendar, was, of course, the main event on Friday, and the reading for January gave investors reason to be optimistic, even though Non-Farm Payrolls missed expectations.

The headline jobs added figure came in at 143,000 compared to estimates of 175,000. Although the miss of expectations will be a disappointment, there is underlying strength in the US labour market.

The FTSE 100 was happy to settle into sideways trade in early trade and showed little sign of movement in either direction shortly after the US jobs numbers.

It’s been a record-breaking week for London’s leading index as investors jumped into UK-centric stocks on the back of a 0.25% interest rate cut by the Bank of England.

However, the initial enthusiasm around the possibility of further rate cuts was dampened by the slashing of UK growth forecasts for 2025. That said, investors seemed content with easier monetary policy and the hopes of additional rate cuts – especially as it meant the pound could remain depressed against the dollar in the near term and provide support for London’s overseas earners. 

Legal & General shares had a positive reaction to news of the disposal of its US protection unit in a deal worth £1.8bn. Shares were 3% higher at the time of writing and took the top spot on the FTSE 100 leaderboard.

“Financial services provider Legal & General has sharpened its US facing strategy today divesting its protection business to long-standing partner Meji Yasuda, with whom it has also agreed a partnership to target the lucrative US Pension Risk Transfer market. Meji Yasuda intends to take a 5% stake in the company. Investors liked the vote of confidence with the shares rising in early trading,” said Derren Nathan, head of equity research, Hargreaves Lansdown.

Housebuilders were among the fallers as investors fretted about the outlook for the UK economy. It will be fascinating to see how the highly interest rate-sensitive sector balances the tailwind of lower interest rates and the threat of a slowdown in the early months of 2025.

Mondi was the top faller as investors booked profits after a monster rally since the middle of January.

Amazon shares slipped after the technology giant reported weaker-than-expected sales guidance that overshadowed a Q4 revenue and EPS beat.

Amazon’s Q4 revenue came in at $187.8bn vs $187.3bn expected and Q4 EPS rose to $1.86 vs $1.49 expected. A phenomenal quarter for the company that also enjoyed cloud revenue in line with estimates.

However, as is always the way with company earnings, investors were more concerned with what comes next. And this wasn’t as encouraging.

Amazon shares fell 4% in the US premarket after the group said it expected Q1 2025 sales to be $151bn – short of estimates between $155bn-$158bn.

“Amazon delivered a knockout quarter, but a touch of softness in first quarter guidance has sent shares into a bit of a post-earnings wobble,” said Matt Britzman, senior equity researcher, Hargreaves Lansdown.

“Amazon hasn’t missed earnings expectations since all the way back in 2022 and today was no different with a big beat on the bottom line. Some of the softness in first-quarter guidance looks to be a result of the stronger US dollar and the lapping of a leap year, so it wouldn’t be a surprise to see shares rebound once markets digest the moving parts.”

The FTSE 100 soared on Thursday as the Bank of England cut interest rates and signalled further rate cuts in the near-term, helping propel the index to fresh record highs.

London’s leading index stormed higher in early trade as investors front-run the decision to cut rates by 0.25% and extended gains after the release. The FTSE 100 was trading at 8,750 at the time of writing and was likely to remain choppy as the session progressed.

The cyclical sectors were among the top risers, with miners surging higher alongside financials. Overseas revenue earners were also among those companies gaining as the inverse relationship between the FTSE 100 and the pound kicked in.

“A weaker pound against the US dollar benefits companies which earn some or all of their money in the American currency, hence why we saw miners, gambling group Entain, construction rental firm Ashtead and ratcatcher Rentokil get a boost,” said Russ Mould, investment director at AJ Bell.

The Bank of England has fired up equity bulls by signalling to the market they can expect additional rate cuts before long.

In a signal of what the Bank of England may do in the future, seven of the nine MPC voting members voted for a 0.25% cut, while two voted for a 0.5% cut.

The country is on the verge of stagflation and must choose between controlling inflation and supporting the economy. 

The BoE’s core mandate is to keep inflation at its target rate of 2%. However, they are also responsible for price stability, which is threatened by the economic outlook.

A risk for the Bank of England is that by not cutting rates now, growth will suffer, and they may end up with the problem of inflation below 2% down the road as the economy slows further and jobs are lost.

This would have consequences for financial markets, leading to volatility in equity and bond markets. 

“Looking longer term, there is still work to be done to find the ‘neutral’ level for rates where the UK economy can deliver price stability,” said Brad Holland, director of investment strategy at Nutmeg.

“As a result, the committee remains in monitoring mode, assessing the impact of rate cuts on growth and how recent measures taken in the Autumn Budget could impact inflation.”

The bank’s job has been made that much harder by the government’s economic policies that are threatening to slow the pace of hiring when the changes to national insurance come into play.

In effect, today’s decision to cut rates by 0.25% is a move to bail out Rachel Reeves. 

Nonetheless, it is a welcome move for the UK economy, which should help spur activity.

Housebuilding shares soared after the interest rate cut announcement and joined the ranks of the already well-bid miners and overseas earners. Taylor Wimpey jumped 3%, and Persimmon added 2.5%.