FTSE 100 ends higher as hopes rise of US interest rate cut

The FTSE 100 forged ahead on Thursday as the bond market calmed further and investors looked ahead to Friday’s US non-farm payrolls figures as hopes build for a rate cut.

The FTSE 100 index closed up 38.88 points, or 0.4%, at 9,216.87. The FTSE 250 ended 161.61 points higher, or 0.8%, at 21,474.68 but the AIM All-Share finished down 6.47 points, or 0.8%, at 762.00.

In Europe, the CAC 40 in Paris ended down 0.2%, while the DAX 40 in Frankfurt closed 0.7% higher.

“The FTSE 100 pushed ahead as bond markets calmed down and the focus shifted to US jobs data,” said AJ Bell investment director Russ Mould.

The yield on the US 10-year Treasury was quoted at 4.20%, narrowed from 4.22% on Wednesday. The yield on the US 30-year Treasury was quoted at 4.90%, trimmed from 4.91%.

In the UK, the yield on 10-year gilts eased to 4.73% compared to 4.76% at the same time on Wednesday.

Ahead of Friday’s non-farm payrolls report, figures showed US private sector job growth slowed sharply in August.

According to payroll firm ADP, businesses added just 54,000 jobs amid signs of labour market cooling and persistent economic uncertainty.

The figure came in well below July’s upwardly revised total of 106,000 and marked the smallest gain in five months. It also missed FXStreet-cited expectations of 65,000.

Citi analyst Veronica Clark expects Friday’s non-farm payrolls to show continued gradual weakening in the jobs market with 45,000 payrolls added and the unemployment rate rising to 4.3% with upside risk.

“This should be soft enough to all but ensure a rate cut from the Fed in September,” she said.

Elsewhere, the Institute for Supply Management;s US services PMI rose to 52.0 in August from 50.1 in July, signalling the third straight month of expansion.

The business activity index increased to 55.0 from 52.6, while the new orders index surged to 56.0 from 50.3. However, the employment index remained in contraction at 46.5, the third month below the break-even 50-point mark.

Analysts at TD Economics said the surge in new orders was “encouraging”, although the report “wasn’t without blemishes, with an employment index that remained in contractionary territory for the third month in a row.

But with the Fed now putting more emphasis on softening labour market conditions, the subdued performance of the employment subcomponent in the report lines up with a host of other data favouring a rate cut at next month’s FOMC meeting, TD analysts added.

In New York, at the time of the London equities market close, the Dow Jones Industrial Average was up 0.3%, as was the Nasdaq Composite, while the S&P 500 rose 0.4%.

The pound eased to 1.3432 dollars late on Thursday afternoon in London, compared to 1.3448 at the equities close on Wednesday.

In the UK, figures showed the UK’s construction sector remained in contraction in August, with activity falling for the eighth consecutive month, led by steep declines in the housing and civil engineering sectors.

The headline S&P Global UK construction purchasing managers’ index rose to 45.5 points in August from 44.3 in July – which had marked a more than five-year low – but remained well below the neutral 50.0-point mark that separates growth from contraction.

On the FTSE 100, insurers and asset managers which had suffered from the spike in bond yields, rallied, with Aviva up 2.5%, M&G up 1.9% and Beazley up 2.1%. Admiral bucked the trend, down 2.2% as it traded ex dividend.

Retailers were a warm order, with Next up 2.3% and Tesco up 1.8%. On the FTSE 250, Asos gained 3.0%.

Also on the FTSE 250, another retailer led the way as Currys shot up 17% after a triple dose of good news.

The London-based electricals retailer won plaudits as it delivered strong trading, a positive pension review outcome and a larger than expected £50 million share buyback.

Currys said group like-for-like sales rose 3% in the 17 weeks to August 30.

Also in the green, Basingstoke-based animal biotechnology and genetics company Genus leapt 10% as it hailed “good second half momentum” that boosted annual earnings.

For the new financial year, Genus expects “significant growth” in adjusted pretax profit at constant currency, in line with current market expectations, which it puts at £79.0 million.

Gold eased from recent record highs to 3,543.56 dollars an ounce on Thursday.

A barrel of Brent traded at 67.02 dollars late on Thursday afternoon.

The biggest risers on the FTSE 100 were Rightmove, up 20.6p at 737.0p, Airtel Africa, up 5.4p at 220.6p, Aviva, up 15.80p at 645.8p, Relx, up 83.0p at 3,495.0p and Auto Trader, up 18.6p at 794.6p.

The biggest fallers on the FTSE 100 were easyJet, down 20.5p at 466.3p, Antofagasta, down 50.0p at 2,147.0p, Admiral Group, down 80.0p at 3,444.0p, Entain, down 16.0p at 836.4p and Endeavour Mining, down 48.0p at 2,712.0p.

Contributed by Alliance News