FTSE Continues Slide on Fed Fear & Weaker UK Outlook
Bullish NFP data may slow down Fed action as inflation fears rise. Jobs in London’s financial center hit lowest number since 2020.
- NFP data indicate an expanding economy
- Investors see Fed keeping rates on hold for longer
- Jobs in the City of London decline to pandemic levels
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The FTSE opened down 0.60% this morning following Friday’s decline of 0.70%. Strong employment data from the US lead global markets lower, and the FTSE followed suit.
Usually, strong NFP numbers send stock markets higher, but the current scenario is geared toward lower interest rates. Any deviation from the path of lower rates has stronger impact than economic activity.
Probability of Fed Cuts Delayed
The markets have been changing sentiment on the timing of the Fed policy, and Friday’s NFP data has cemented that idea further. The expanding economy indicated in the jobs number gives rise to inflation risk.
At the same time the most recent comments by Fed officials show caution in cutting rates too quickly.
Currently the CME FedWatch calculates a probability of 2.7% for a cut in January. More importantly for the March meeting the probability of a cut has gone from 52% to 19.7% over the past month.
Delays in Fed policy may also influence the BoE in its next MPC meetings. The [[GBPUSD]] has taken a beating, and the pound has lost 2.1% since last week. A weaker currency is a concern for the BoE as the UK has a trade deficit and can expect to import inflation.
FTSE Live Chart
UK Jobs Outlook
A top recruiter published data that showed a drop in jobs in Europe’s largest financial center, the City of London. Job vacancies in London’s financial center dropped in Q4 2024 by 20% compared to the previous quarter.
The decline in job postings is the lowest since June 2020, and Q4 of 2024 showed a decline over the same quarter in 2023 of 12%. Overall, the total decline in job postings in 2024 was 28% lower than 2023.
The data was compiled from a survey, which showed that respondents were mainly concerned about rising costs. The cost they mention are related to the UK’s new budget, which includes increases in social security payments.
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