The FTSE 100 ended the week lower, with markets in Europe and the US also down, following economic data releases in the Eurozone and America on Friday that pointed interest to rate cuts.
Wall Street traders digested news that the US economy added fewer jobs than expected last month, according to official figures released on Friday.
US firms added 142,000 jobs during August, up from a downwardly revised 89,000 the previous month and below expectations that 165,000 workers would be added to non-farms payrolls, the Labour Department said.
The figure raises bets that the US Federal Reserve will cut interest rates by half a percentage point later this month. Wall Street investors now believe that the US Federal Reserve will slash US interest rates by half a percentage point at its next meeting, on 17 and 18 September.
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CME Group’s FedWatch Tool, which uses pricing data from the futures market to predict interest rates, is now indicating there’s a 51% chance of a 50 basis point cut later this month.
Before Friday’s non-farm payroll was released, a 50bp cut in September was only a 41% prospect, with a smaller, quarter-point cut seen as more likely.
Separately, the US unemployment rate dipped to 4.2%, down from July’s 4.3%. The number of unemployed people stood at 7.1 million, which was little changed from August.
Meanwhile, Eurozone economic growth was revised down to 0.2% from 0.3% on Friday, in a blow to Europe’s recovery. This added to expectations of another interest rate cut from the European Central Bank.
In the UK, data showed house prices rose at the fastest pace in nearly two years. Average property values were up 4.3% to £292,505 in the year to August, according to the Halifax house price index, as a sign of optimism that interest rate cuts are filtering through to the property market.
It was the sharpest jump since November 2022, and follows an increase in prices of 0.3% in August, and a 0.9% rise in July. The average house price is now just £1,000 shy of the record high set in June 2022.
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Amanda Bryden, head of mortgages at Halifax, said: “Recent price rises build on a largely positive summer for the UK housing market.
“Prospective homebuyers are feeling more confident thanks to easing interest rates. That optimism is reflected in the latest mortgage approval figures, now at their highest level in almost two years.”
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London’s benchmark index closed 0.75% lower.
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Germany’s DAX (^GDAXI) was down 1.4% and the CAC (^FCHI) in Paris was 1.1% in the red.
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The pan-European STOXX 600 (^STOXX) was 1% lower.
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Wall Street also turned red later into the trading session.
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The pound was down 0.3% up against the US dollar (GBPUSD=X) at 1.3139.
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Google abusing power over website ads, UK regulator says
Munich, Germany. 29th Aug, 2024. The Google logo can be seen on the facade in front of the company’s Munich headquarters on August 29, 2024 in Munich (Bavaria). The company’s development center is located in Arnulfpark. Credit: Matthias Balk/dpa/Alamy Live News (dpa, dpa picture alliance) Britain’s antitrust regulator said on Friday it had provisionally found Alphabet’s Google (GOOG) had abused its dominant position in digital advertising to restrict competition.
The Competition and Markets Authority (CMA) said it believed Google was using anti-competitive practices in open display ad tech through the preference of its own ad exchange, which could be harming thousands of British publishers and advertisers.
“We’ve provisionally found that Google is using its market power to hinder competition when it comes to the ads people see on websites,” said Juliette Enser, the CMA’s interim executive director of enforcement.
“Many businesses are able to keep their digital content free or cheaper by using online advertising to generate revenue. Adverts on these websites and apps reach millions of people across the UK – assisting the buying and selling of goods and services.”
Google said it disagreed with the CMA’s view and would respond accordingly.
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First Fed rate cut all but guaranteed
Washington, USA. 31st July, 2024. U.S. Federal Reserve Chair Jerome Powell speaks to media during a press conference after a meeting of the Federal Open Markets Committee, at the Federal Reserve, in Washington, DC, on Wednesday, July 31, 2024. (Graeme Sloan/Sipa USA) Credit: Sipa US/Alamy Live News (Sipa US, Sipa US) Richard Carter, head of fixed interest research at Quilter Cheviot, said:
“Today’s US jobs data is expected to determine the size and pace of the highly anticipated Federal Reserve rate cuts, and with the increase in nonfarm payrolls coming in worse than feared at 142,000, we will no doubt see increased speculation that the Fed will take decisive action with a 50bps cut on the 18th of September.
“Alongside this disappointing August figure, July’s nonfarm payrolls number was also revised down from 114,000 to just 89,000. Meanwhile, the unemployment rate fell slightly to 4.2% following a rise to 4.3% in July, and wage growth came in at 3.8% on an annual basis, up 0.2% compared to 3.6% reported last month.
“Markets have been pricing in significant cuts before year end, with many economists touting more than 1%, and today’s labour market print could exacerbate this further. As was the case last month, this data release has proven notably weaker than had been hoped, suggesting the economy may be weakening more than is consistent with the Fed’s aim of a soft landing.
“When considered alongside signs of softening elsewhere in the economy, today’s worse than expected jobs data will all but guarantee a shift in the Federal Reserve’s stance. The Fed’s decision making is highly data sensitive, and with many datapoints continuously suggesting a slowing economy, it seems inevitable that we will see the first cut confirmed this month.”
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World food prices ease
H Mart food court in the American Dream Mall in East Rutherford, NJ on Saturday, August 31, 2024. (© Richard B. Levine) (Richard Levine) Global food prices eased in August thanks to cheaper sugar, meat and cereal.
The UN’s world food price index dipped to 120.7 points last month from 121 points in July.
Wheat export prices fell month-on-month due to “sluggish international demand” and strong competition among exporters, especially from “competitively priced Black Sea supplies”.
Higher than expected wheat production in Argentina and the US also pushed down prices.
The sugar price index fell by 4.7% compared with July while meat prices fell by 0.7%. World pig prices also dropped, due to a slowdown in import purchases, especially by China.
The UN’s Food and Agriculture Association says:
“The decline in August was mainly driven by the improving production outlook for the 2024/25 season in Thailand and India, following favourable rainfall that benefited sugarcane crops. In addition, lower international crude oil prices exerted further downward pressure on sugar prices.”
However, vegetable oil prices rose by 0.8% month-on-month, due to higher world palm oil prices, and dairy prices rose by 2.2%, driven by whole milk powder, skimmed milk powder and butter.
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Typhoon halts trade in Hong Kong
September 6, 2024, Hong Kong, China: Two men walk with umbrellas under a heavy rain and wind. People start heading to work after the Hong Kong Observatory lowered the typhoon signal to No. 3 as the storm receded. (Credit Image: © Keith Tsuji/ZUMA Press Wire) EDITORIAL USAGE ONLY! Not for Commercial USAGE! (ZUMA Press, ZUMA Press, Inc.) Super Typhoon Yagi came ashore on Hainan Island in southern China packing destructive winds and torrential rain after skirting Hong Kong and shutting the city’s stock market, Bloomberg reports…
The storm hit the Philippines earlier in the week, killing people and forcing thousands to flee before moving into the South China Sea. The typhoon then tracked toward southern China, dumping rain across Hong Kong.
Hong Kong scrapped trading of its $4.9 trillion stock market on Friday after the weather bureau prolonged a storm warning, which is likely be the final time a typhoon forces a halt.
The financial hub is ending its decades-long practice of shutting markets during severe storms from 23 September.
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Darktrace boss Poppy Gustafsson steps down
Konskie, Poland – May 12, 2024: Darktrace company logo displayed on mobile phone (Piotr Swat) Poppy Gustafsson, the co-founder and chief executive of Darktrace (DARK.L) is set to step down from the helm following its $5.3bn (£4.2bn) sale to US private equity business Thoma Bravo.
Gustafsson is to step down with immediate effect and will be replaced by Jill Popelka, Darktrace’s current chief operating officer.
Darktrace was founded in Cambridge in 2013 with the backing from the late billionaire tycoon Mike Lynch’s Invoke Capital.
In April, Thoma Bravo struck a deal for the London-listed British cybersecurity firm which had been considered by analysts to be undervalued by investors.
Gustafsson said on Friday:
“Darktrace has been a huge part of my life and my identity for over a decade and I am immensely proud of everything we have achieved in that time.
“Now is the right time to hand over the reins so Jill can lead Darktrace through its transition into private ownership and beyond. I remain Darktrace’s number one fan.”
Lynch and his wife Angela Bacares held a 6.8% stake in Darktrace which was worth £300m at the time of the sale. He died last month when his superyacht sunk off the coast of Italy in a storm.
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UK house prices hit two-year high
File photo dated 19/08/14 of a view of houses in north London. Average UK house prices increased by 2.2%, to £285,000 in the 12 months to May 2024, according to the Office for National Statistics (ONS). Issue date: Monday June 17, 2024. (Yui Mok, PA Images) UK house prices have risen at the fastest pace in nearly two years. Average property values were up 4.3% in the year to August to £292,505, according to the Halifax house price index.
It comes as a sign of optimism that interest rate cuts are filtering through to the property market. It was the sharpest jump since November 2022.
It follows an increase in prices of 0.3% in August, and a 0.9% rise in July, with the average house price just £1,000 shy of the record high set in June 2022.
Amanda Bryden, head of mortgages at Halifax, said:
“Recent price rises build on a largely positive summer for the UK housing market.
“Prospective homebuyers are feeling more confident thanks to easing interest rates. That optimism is reflected in the latest mortgage approval figures, now at their highest level in almost two years.”
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