The FTSE 100 managed to close slightly higher on Friday, gaining 7.73 points or 0.1% to finish at 10,368.05. This modest rise came despite a downturn in mining stocks and a broader sell-off in US markets following unexpectedly robust jobs data that heightened speculation about potential interest rate hikes by the Federal Reserve.
Market Performance Overview
The FTSE 250, however, did not share in the positive sentiment, falling by 241.91 points or 1.0% to 23,060.74. The AIM All-Share also declined, shedding 10.99 points or 1.4% to settle at 797.27. Over the course of the week, the FTSE 100 recorded a loss of 0.4%, while the FTSE 250 and AIM All-Share experienced declines of 1.6% and 2.6%, respectively.
In Europe, the mood mirrored that of London, with the CAC 40 in Paris slipping 0.3% and the DAX 40 in Frankfurt decreasing by 0.8%.
Wall Street Reaction to Strong Jobs Data
Across the Atlantic, US markets reacted negatively to the latest employment figures. The Dow Jones Industrial Average dropped by 0.3%, the S&P 500 fell 1.2%, and the Nasdaq Composite experienced a significant decline of 2.2%. The US Bureau of Labour Statistics reported that non-farm payrolls increased by 172,000 in May, far surpassing the anticipated growth of 85,000.
Additionally, previous figures for April and March were revised upwards, indicating a stronger labour market than previously thought. The unemployment rate remained steady at 4.3%.
TD Economics analysts noted that the Federal Reserve’s stance has shifted from considering interest rate cuts to contemplating rate hikes as the labour market shows signs of reacceleration. “Yields across the curve jumped higher post-payrolls, with Fed futures now fully pricing in a rate hike by year-end,” they stated. This change in tone suggests that the Federal Open Market Committee (FOMC) may adopt a more hawkish stance in their upcoming policy announcement on June 17th.
Currency and Commodity Market Movements
The robust jobs data bolstered the US dollar, while bond yields rose significantly. The pound traded at 1.3371 dollars on Friday, down from 1.3436 the previous day, and the euro weakened against the dollar, trading at 1.1542 compared to 1.1624 on Thursday. However, sterling gained against the euro, moving to 1.1583 from 1.1558.
In the commodities market, oil prices saw a slight retreat. Brent crude for August delivery was priced at 93.70 dollars a barrel, down from 94.88 dollars at the previous day’s close.
Inflation Expectations in the UK
In the UK, businesses have reported a slight easing in their expectations for price increases, according to a Bank of England survey. Firms now anticipate raising prices by 4% over the next year, down from earlier predictions of 4.4%. This marks a small shift in inflation expectations, yet still reflects ongoing concerns related to energy prices and the lingering effects of geopolitical tensions.
Barclays commented that while there are signs of a stabilization in inflation expectations, the employment outlook remains bleak. “We think this is consistent with there having been a level shift in near-term expectations at the onset of the conflict, but no further acceleration,” they added.
Corporate Highlights and Sector Performance
Among the biggest gainers on the FTSE 100 were Imperial Brands, rising by 75.0p to 2,761.0p, and Unilever, which climbed 110.5p to 4,188.5p. The London Stock Exchange Group and AstraZeneca also performed well, with increases of 222.0p and 304.0p, respectively.
Conversely, the mining sector faced significant losses, with Fresnillo dropping 198.0p to 2,986.0p and Endeavour Mining decreasing by 249.0p to 3,975.0p.
Looking ahead, Monday’s global economic calendar features key data releases, including US consumer inflation expectations, Japanese GDP figures, and German factory orders.
Why it Matters
The current fluctuations in the FTSE 100, combined with the strong US jobs report, highlight the interconnectedness of global markets. As economic data influences central bank policies, investors must remain vigilant about potential interest rate changes, which can have far-reaching implications for both domestic and international markets. Understanding these dynamics is crucial for making informed investment decisions in an increasingly volatile economic landscape.
