UK and continental European stock markets got an afternoon boost after monthly US employment data showed an American economy on the mend but perhaps still in the need of a bit more heeling before central bankers feel it’s right for another rise in interest rates.
The gain in European shares came in spite of signs of domestic economic weakness as Spanish unemployment rose in August and Italian growth stalled in the second quarter.
The FTSE 100 leaped over 1.5% led by gains in utilities and healthcare sectors with telecoms and homebuilders the biggest drag. Carnival (LON:CCL) was amongst the biggest fallers after receiving a broker downgrade.
A near £100m profit at Go-Ahead Group (LON:GOG), the owner of Southern Rail operator Govia Thameslink Railway has been celebrated by investors with shares rising over 8%. However the results were met with indignation by Southern Rail travellers, especially in light of the £20m in taxpayer money that was just promised to improve services yesterday. CEO David Brown said the rail franchise overall had been robust with strong results in Southeastern and London Midland offsetting weakness in GTR.
US
Stocks in the US opened higher on Friday after a goldilocks unemployment report. The data probably keeps the Fed on ice until December but didn’t show the kind of huge deterioration that warrant concerns of impending recession. Trading is likely to cool off a little earlier than usual as traders head off for the long Labour Day holiday weekend.
Shares of lululemon athletica inc (NASDAQ:LULU) opened sharply lower after the maker of yoga clothing beat earnings estimates but saw a decline in same store sales and guided lower for the current quarter. Until this report, Lululemon had felt like one of the few places in the retail sector besieged by weak US consumer demand, that investors could see fast growth.
American fast food giants are getting out of the China. KFC-owner Yum! Brands Inc (NYSE:YUM) is selling a stake of its China operations whilst bids are being prepped for McDonald’s (NYSE:MCD) China stores. The fast food companies have a big presence in China but have struggled in the wake of food scares.
FX
FX trading was dominated by the August non-farm payrolls report. The US dollar slumped across the board as the three headline labour market figures missed expectations.
The US economy generated 151k jobs in August, below the 180k median expectation and below the upwardly revised 275k in July. Average earnings grew at just 0.1%, down from 0.2% and the unemployment rate remained at 4.9%, missing expectations of a drop to 4.8%.
The unemployment report was not weak enough to completely undermine the Fed’s hawkish bias since Jackson Hole. It was probably enough to see fence-sitters on the FOMC wait until the December before voting to hike interest rates. A stronger set of results could have seen Fed members start to heavily hint at September as a live meeting. Rather than making a move in September, It is more likely now that the September statement will be used as the springboard for raising rates after the election.
The weaker US data helped the British pound extend its early gains. The British pound strengthened after construction data suggested the industry almost pulled out of contraction in August. The UK construction PMI rose to 49.2, beating expectations of a rise to 46.1 from 45.9 in July.
Commodities
Commodities were higher across the board thanks to US unemployment data missing expectations. Gold topped $1330 per oz to make a one-week high whilst silver regained $19 per oz.
Oil was additionally bolstered by Russian president Vladimir Putin lending his support to a joint oil out freeze with OPEC. Brent crude oil headed back towards $47 per barrel.
"DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.
No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. "