Market report

US data points to smaller interest rate hikes


Wall Street

Stocks rose after new data pointed to a softening in US jobs and wage growth, suggesting the interest rate strategy is working and could persuade central bankers to adopt a less aggressive strategy.

US non-farm payrolls rose 223,000 in December, stronger than the 200,000 expected by analysts as the jobs market continued to show its resilience.

There was also positive news on average earnings which although 4.6% higher in December on an annual basis were lower than the 5% forecast while there were also downward revisions to November’s numbers.

In London, the FTSE 100 closed 66.04 points higher at 7,699.49, extending gains to a fourth straight session, its biggest weekly jump in two months.

As the LSE closed the Dow Jones Industrial Average was up 1.6%, the S&P 500 up 1.7% and the Nasdaq Composite up 1.5%.

The FTSE 100 today

ING suggested there are signs the US jobs market is on the turn. “A fifth consecutive drop in temporary help employment is a warning signal while softer wage inflation suggests labour market dynamics are shifting” it said.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said: “If this persists, wage growth will soon be in the 3.5% to 4% range which the Fed appears to believe is sustainable and consistent with the 2% inflation target in the medium term.

“This report will not stop the Fed raising rates by 50 basis points in February. But a further 50bp increase in March makes little sense, in our view.”

Samuel Fuller, director of Financial Markets Online, said: “Global stock markets enjoyed a good news windfall as they closed out the first trading week of the year. 

“Both the unemployment rate in the US as well as unemployment claims were better than expected, EU inflation is threatening to come down much faster than predicted and now the US jobs market has impressed too.

“Central bankers have been talking about recession for most of the last year and, if anything, that sort of forward guidance makes a shallower downturn more likely as firms take evasive action.

“Now with inflation showing signs of being tamed and indications US businesses are less troubled by a higher interest rate environment than feared, this could become one of the shallowest recessions experienced on both sides of the Atlantic.”

10.30am: Nucleus confirms Curtis Banks deal

Nucleus, the Edinburgh-based financial wrap platform, has announced the acquisition of SIPP provider Curtis Banks Group in a recommended cash deal worth £242 million. Full story here

House prices fall

UK house prices fell for the fourth month in a row in December as the cost of living crisis and rising interest rates hit demand for property. Full story here

7am: Shell windfall tax

Shell expects to take a hit of about $2billion (£1.7billion) from windfall taxes imposed on the energy sector by the EU and UK.

Europe’s largest oil and gas company also told investors in an update ahead of its full year results on 2 February that its liquefied natural gas production in the quarter will be hit by prolonged outages at two major plants in Australia. Full story here

7am: Frasers

Frasers Group said its maximum exposure to German fashion house Hugo Boss has fallen to £580 million.

The group, which includes Houser of Fraser, Sports Direct and Evans Cycles, said it holds 3.9% of Hugo Boss stock directly and a further 25% via the sale of derivatives known as put options. 

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