On Friday, steady yet slow buying activity was observed in London’s leading index ahead of Fed Chair Powell’s much-anticipated speech at the Jackson Hole Symposium.

The FTSE 100 remained steady as the Fed Chair delivered his speech, proclaiming the ‘time has come for policy to adjust’ confirming the Federal Reserve is about to start cutting interest.

“The Fed finally pivoted away from its role as staunch inflation fighter back to its default position as facilitator of economic growth,” said George Lagarias, chief economist at Forvis Mazars.

“Mr Powell’s remarks on rising unemployment left no question as to the Fed’s intention to cut rates this year.”

The Jackson Hole Symposium is one of the biggest events on the financial calendar because it has the potential to move markets. It doesn’t always live up to expectations, but 2024’s instalment certainly did.

London’s tepid response on Friday was an outlier. The S&P 500 soared over 1% as Powell delivered his speech and was closing in on all-time record highs. US bond yields were sinking, and gold was breaking to fresh highs.

*FED'S POWELL: 'THE TIME HAS COME FOR POLICY TO ADJUST'
*POWELL: WE DON'T SEEK OR WELCOME FURTHER LABOR MARKET COOLING
*POWELL: MY CONFIDENCE HAS GROWN THAT INFLATION IS ON PATH TO 2%

— zerohedge (@zerohedge) August 23, 2024

The FTSE 100 has held its own this week, sticking very close to the 8,300 level. Friday saw the index above this level, but only by a few points.

A stronger pound against the dollar can be blamed for the FTSE 100’s muted response as the inverse relationship with the FTSE 100 sucked the life out of any attempt for UK stocks to follow the US higher.

Dollar weakness weighed on the FTSE 100’s many overseas earners and offset the general optimism around Powell’s speech.

JD Sports continued yesterday’s rally and broke to the highest levels since January with a 2%. Concerns about a guidance downgrade in the early days of 2024 are subsiding after the retailer released reasonably strong sales growth figures yesterday. JD Sport’s strong growth in North America will have helped the stock higher on Friday, with borrowing costs set to fall.

Melrose was the FTSE 100’s top faller after UBS analysts took an axe to their price target, cutting it from 770p to 400p. Melrose shares were down 8% at the time of writing.

Direct Line shares slipped slightly on Friday after the insurer admitted it had made an error calculating its solvency ratio for the year full year ended 2023.

However, the impact on shares was minimal as the group used the opportunity to provide some insight into capital generation in the most recent period – which was very good.

“Stepping down into the FTSE 250 and Direct Line has had to flag an error in its reported solvency figures for 2023,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.

“The reported 197% capital ratio has been revised down to 188%, but this is still well above the target range of 140-180%. Errors are never good, but this doesn’t change much and the short update has actually given Direct Line the chance to deliver some positive guidance ahead of half-year results, with capital generation looking positive over the half so far.”

Direct Line shares were down 2% at the time of writing.

The FTSE 100 was higher on Thursday as investors reacted to Federal Reserve minutes released overnight, which signalled that the US central bank is on the verge of cutting interest rates at its September meeting.

“The Fed might have given its strongest signal yet that it is ready to start cutting interest rates, but the market isn’t going all-in with its bet on monetary policy,” said Dan Coatsworth, investment analyst at AJ Bell.

After a strong rally in US stocks since the flash crash early in August, the market reaction was fairly muted in last night’s US session. This suggests that the recent rally in stocks has already priced in the current market pricing of a rate cut amid slower US economic data.

The S&P 500 closed up 0.5% and is less than 1% away from all-time highs. European traders took their cue from the US rally and the FTSE 100 was trading 0.35% higher at the time of writing.

“Traders are still only pricing in a 67.5% probability of a US rate cut at the Fed’s next meeting on 18 September,” Dan Coatsworth said.

“One could argue that is quite low given weak jobs data strengthens the argument to cut now. In theory, this narrative warrants a much higher percentage probability for a cut in the cost of borrowing.

“It was only a few weeks ago that the market panicked about a potential recession in the US amid suggestions that the Fed had acted too late in cutting rates. However, these fears seemed to have evaporated given how equity markets have quickly recovered most of the territory lost earlier in the summer. Investors have regained their optimism and perhaps they now don’t want to see a rate cut as it would confirm a gloomier backdrop.”

JD Sports

JD Sports was the FTSE 100’s top riser on Thursday as investors bought into improving sales figures. Doubts swirled around JD Sports after it cut profit forecasts earlier in the year, but today’s update shows the firm is back on the right path.

“After a challenging period of volatile conditions and guidance downgrades, JD Sports got back on the front foot in the second quarter,” explained Aarin Chiekrie, equity analyst, Hargreaves Lansdown.

“Like-for-like sales were up 2.4% in the period with the strongest growth coming from North America. Despite the tough economic conditions, the group hasn’t shied away from its expansion in North America and Europe.

“The Hibbett acquisition was completed in late July, expanding the group’s presence in the US through its 1,179 stores, which will further strengthen its foothold in the world’s largest sportswear market. The full-year outlook remains on track, with management expecting pre-tax profits to land in the £955-£1,035mn range, on a pre-Hibbett basis.”

JD Sports shares were 6% higher at the time of writing.