London stocks ended the week on the front foot after a much better-than-expected US non-farm payrolls report.
The US non-farm payrolls report provided a boost to markets as it smashed expectations in June. The Labor Department said the US economy added 287,000 jobs in June, well above the 180,000 that economists had forecast. May’s figures were revised down to 11,000 jobs from an already-low 38,000, which had been affected by 35,000 Verizon workers on strike.
However, the unemployment rate rose to 4.9% in June from 4.7% in May, more than the expected rate of 4.8%.
US employment growth rebounded with a vengeance in June, but the underlying trend remains one of a slowdown in hiring, and it’s far from clear whether June’s bumper non-farm payroll increase reflects a renewed appetite for companies to hire staff.
Today’s data add to scope for interest rates to be nudged higher before the year is out. But the bigger picture remains one in which the Fed is likely to err on the side of caution, with policymakers viewing the better than expected hiring in the perspective of a more uncertain longer-term outlook.
Earlier in the session, weak UK data had sent stocks lower.
The GfK’s post-Brexit consumer confidence index contracted further to -9 from -1 in June, marking the sharpest drop since December 1994 and the lowest level since December 2013.
“The post Brexit vote plunge in consumer confidence reported by GfK reinforces concern that consumers are likely to markedly rein in their spending over the coming months,” said Howard Archer, chief UK and European economist at IHS Global Insight.
“This would be especially damaging to growth UK prospects given the key role that the consumer has played.”
Separately, official data showed the UK’s total trade deficit in goods and services widened to £2.3bn in May but was not as bad as the £3.6bn feared by economists, as exports fell 4.4% month-on-month and imports were down 3.5%.
In the eurozone, Germany’s trade surplus shrank in May as exports declined unexpectedly, the Federal Statistical Office revealed The seasonally-adjusted trade surplus narrowed to €22.2bn in May from €24.1bn in April, according to Destatis, slightly below forecasts of €23bn. Exports fell 1.8% in May while imports rose 0.1%.
Meanwhile, the International Monetary Fund cut its growth forecast for the Eurozone following the UK’s vote to leave the European Union. In its annual report on the currency union’s economy, the IMF said it now expects gross domestic product to rise 1.6% this year, compared its estimate of 1.7% growth before the EU referendum.
Gold was set to record its longest winning streak in two years as analysts forecast further demand from investors seeking shelter from turbulent financial markets an increasingly uncertain economic outlook. Gold has been one of this year’s best performing commodities, rising almost 30% to $1,350 a troy ounce as negative interest rates and falling bond yields have increased its appeal.