The FTSE 100 is heading for a winning week after a soft US jobs report cooled Federal Reserve rate-hike bets. London’s blue-chip index closed up 1.7% on Thursday at 10,652.87, and futures point to further gains on Friday. Defence and drug stocks led the rally.
A weaker-than-expected US jobs report has pushed London stocks toward a winning week, with the FTSE 100 called 33 points higher on the futures market on Friday. That builds on Thursday’s surge, when the FTSE 100 closed up 174.53 points, or 1.7%, at 10,652.87.
Soft payrolls cool rate-hike bets
The catalyst was the US labour market. The economy added just 57,000 nonfarm jobs in June, from 129,000 in May and short of the roughly 110,000 consensus. Both the April and May readings were revised lower, and the unemployment rate eased to 4.2% from 4.3%.
Investors read the numbers as making a near-term interest-rate hike less likely. According to AJ Bell’s head of markets: “Markets have interpreted the employment figures as making it less likely the Fed will raise interest rates.” Analysts at TD Economics said market odds for a July hike were “completely pushed back,” with a hike having been 30% priced before the payrolls print. Attention now turns to June consumer price inflation, scheduled for July 14.
Defence and pharma lead the risers
The rally was broad but tilted toward heavyweights. Defence contractors Babcock International and BAE Systems both jumped 5.5%, leading the blue-chip risers. Drug stocks AstraZeneca and GSK climbed 4.9% and 3.8%, while Diageo advanced 3.6%.
European peers moved with London. The Cac 40 in Paris ended up 1.7% and the Dax 40 rose 2.2% in Frankfurt. In New York, the Dow Jones added 1% to a fresh record high, while the Nasdaq fell 0.8% on a semiconductor selloff.
Friday’s setup
London looks set to build on the move. Futures indicate the FTSE 100 will open up 24 points, or 0.2%, at 10,675.57 as traders await a run of composite PMI reports. US markets are closed for the Independence Day holiday, thinning trading. Brent crude was trading higher at $72.33 a barrel on Friday morning, up from $70.76 on Thursday.
Sources: Yahoo Finance UK, Share Talk
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