Better than expected US jobs data clouds path of interest rate cuts
Susannah Streeter, chief investment strategist, Wealth Club: ‘’Even though confidence is seeping out of the US economy, employers are taking a glass‑half‑full approach and have taken on more staff than expected. While there could be anomalies in this delayed data release, given the chaos of the partial government shutdown, it does indicate that the US economy is continuing to show resilience. This has helped propel the internationally focused FTSE 100 higher in afternoon trade, as prospects for the world’s largest economy appear more upbeat. While lower‑and middle‑income households are more pessimistic about the economic prospects ahead, wealthier consumers are keeping spending more buoyant, helping with job creation.
Investors had been bracing for a disappointing number, but with new hires coming in at 130,000, sharply above consensus forecasts of 70,000 for January, it has dampened hopes slightly of a super‑easy path ahead for interest‑rate cuts. A higher interest‑rate environment affects the value of future earnings and can weigh on high‑growth firms in particular, which is why we may see an uneven reaction on equity markets. Stocks focused on the broad health of the US economy are likely to see gains while a more downbeat reaction looks may unfold for the tech sector already facing AI jitters.”