London’s FTSE 100 ended lower, while the pound struggled after hawkish comments from a Bank of England policymaker were outweighed by a blockbuster US jobs report, which boosted the odds of a smaller 25 basis point cut at the next Federal Reserve meeting.
‘The September employment report was much stronger than expected, with job growth blowing past expectations, the unemployment rate declining and wage growth accelerating. The report makes another 50bp rate cut unlikely. We expect a 25bp cut in November and December,’ Oxford Economics analyst Nancy Vanden Houten commented.
The FTSE 100 index inched down 1.89 points to 8,280.63. The FTSE 250 ended up 160.02 points, 0.8%, at 20,900.08, and the AIM All-Share closed up 4.52 points, 0.6%, at 738.36.
Over the course of the week, the FTSE 100 fell 0.5%, the FTSE 250 lost 1.6% and the AIM gave back 1.0%.
The Cboe UK 100 edged up 0.1% to 828.74, the Cboe UK 250 closed up 1.1% at 18,372.42, and the Cboe Small Companies lost 0.1% at 16,699.71.
Trade was more convincing in mainland European equities on Friday. The CAC 40 in Paris closed up 0.9%, while the DAX 40 in Frankfurt ended up 0.6%.
In New York, the Dow Jones Industrial Average was up 0.2%, the S&P 500 added 0.3%, while the Nasdaq Composite shot up 0.5%.
US employment growth was sharply higher than expected last month, numbers on Friday showed, lessening the case for the Federal Reserve to enact another jumbo 50 basis interest rate cut.
According to the Bureau of Labor Statistics, nonfarm payroll employment increased by 254,000 in September, markedly ahead of the FXStreet cited consensus which predicted job additions of 140,000.
Nonfarm payrolls picked up from 159,000 in August. August’s reading was upwardly revised from 142,000.
The unemployment rate edged down to 4.1% from 4.2%.
The labour market has increasingly become the focus for the Federal Reserve. A cooler-than-expected jobs reading on Friday could have boosted the odds of another 50-basis-point cut when the central bank next meets between November 6 and 7.
The US is set to see inflation cool further towards policymakers’ target, Federal Reserve Chair Jerome Powell said Monday.
‘Disinflation has been broad based, and recent data indicate further progress toward a sustained return to two percent,’ Powell said, according to prepared remarks of a speech he is set to deliver at the National Association for Business Economics annual meeting in Tennessee.
‘Broader economic conditions also set the table for further disinflation,’ the Fed chair said.
However, Powell said the Fed is not in a hurry to cut rates.
The pound was quoted at $1.3102 at late on Friday afternoon in London, fading from $1.3110 at the equities close on Thursday. Elsewhere, the euro stood at $1.0962, down against $1.1013. Against the yen, the dollar was trading at JP¥148.59, markedly higher compared to JP¥146.72.
The Bank of England’s Chief Economist warned interest rates should not be cut too rapidly or too far.
Huw Pill signalled that rates should be cut in a ‘gradual’ manner, amid caution over the long-term path of inflation.
The comments come a day after Bank of England Governor Andrew Bailey suggested that ‘more aggressive’ rate cuts could be on the way.
Bailey said that if inflation remains in check, the bank might be able to be ‘more activist’ when it comes to reducing borrowing costs, in an interview with The Guardian.
Brent oil was quoted at $78.08 a barrel in London on Friday, up from $76.56 late Thursday.
As Israel continues to carry out air and ground attacks in Lebanon targeting Hezbollah, Iran, which arms and funds the militant group, said it would step up its response in the event of a retaliation.
Iran’s supreme leader Ayatollah Ali Khamenei vowed that his allies around the region would keep fighting Israel, as he defended his country’s missile strike on his country’s arch-foe earlier this week.
In London, pub chain JD Wetherspoon rose 0.8%, after posting annual results.
The firm said sales continued to improve despite having fewer pubs than before the pandemic, as annual adjusted pretax profit surged.
The Watford, Hertfordshire-based company said pretax profit fell 33% to £60.6 million in the financial year ended July 28 from £90.5 million a year ago.
However, its adjusted pretax profit jumped 74% to £73.9 million from £42.6 million.
Revenue rose 5.7% to £2.04 billion from £1.93 billion a year ago.
Watches of Switzerland rose 5.5%. It said it will buy Hodinkee, a pre-eminent global digital editorial content provider ‘and gateway for luxury watch enthusiasts’ for an undisclosed sum.
The New York City-based company was founded in 2008 and provides digital print and video content for people interested in luxury watches. It has about 22.2 million annual unique visitors to its website.
Also rising after announcing an acquisition, AIM-listed Good Energy climbed 8.9%. It announced its acquisition of Amelio Enterprises, a Lincolnshire, England-based solar installation company with experience in education and public sector projects.
The Chippenham, England-based renewable electricity supplier and energy services provider said the acquisition was part of the company’s strategy to expand its capability in decentralised energy services, through the expansion of its geographical presence in the solar installation market.
Good Energy has acquired 100% of the issued share capital of Amelio Solar on a debt-free, cash-free basis for an initial consideration of £5.5 million.
A deferred consideration of £500,000 may become payable in cash in the first quarter of 2025 if Amelio Solar achieves gross profit targets for the year ending December 31.
Gold was quoted at $2,655.27 an ounce late Friday, up against $2,651.03 late Thursday, but down from an intraday high of $2,670.14 after the bumper US jobs report took some of the precious metal’s shine.
Monday’s local corporate calendar has third-quarter results from Ferrexpo, a producer of iron ore pellets.
The economic calendar has a UK Halifax house price index and German factory orders at 0700 BST.
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