The FTSE 100 finished virtually unchanged on Friday as stronger-than-expected US employment data pushed investors to reassess the likelihood of another Federal Reserve interest-rate increase in September.
London’s blue-chip index slipped just 0.43 points to 10,831.09, while the FTSE 250 gained 0.4% to 24,584.71 and the AIM All-Share edged 0.10 of a point higher to 799.91.
For the week, the FTSE 100 gained 0.4%, while the FTSE 250 fell 1.3% and AIM lost 1.4%.
US nonfarm payrolls provided the main market catalyst. The economy added 162,000 jobs in August, far above expectations for around 56,000.
July’s employment figure was also revised sharply higher to a gain of 21,000 from an initially reported 23,000 decline, while June was revised to 31,000 from 20,000.
The unemployment rate held at 4.1%, while average weekly earnings rose 3.1% year-on-year, slightly ahead of forecasts.
The stronger labour-market figures pushed expectations of a September Federal Reserve rate increase higher, with futures markets assigning roughly a 60% probability to a move.
Attention now shifts to next Friday’s US inflation report, which is likely to be crucial in determining whether the Fed tightens policy.
Wall Street moved lower following the jobs release. The Dow Jones Industrial Average fell 0.7%, the S&P 500 lost 0.5% and the Nasdaq Composite declined 0.4%. US bond yields rose, with the 10-year Treasury yield climbing to 4.78% from 4.75% on Thursday.
Sterling weakened modestly to around $1.3522, having fallen as low as $1.3496 immediately after the jobs data.
Among individual FTSE 100 stocks, Computacenter gained 4.1% ahead of half-year results, with analysts suggesting another profit upgrade could be possible.
Vodafone rose 2.7% after Goldman Sachs double-upgraded the shares to ‘buy’ from ‘sell’.
Experian fell 4.4% after US Federal Housing Finance Agency Director Bill Pulte accused the credit-reference industry of overcharging American consumers.
On the FTSE 250, Renishaw gained 5.6% after Bank of America upgraded the shares to ‘buy’, while Genel Energy dropped 13% after DNO said it did not intend to make a takeover offer.
Elsewhere in Europe, Volkswagen jumped 6.5% after its restructuring plan won unanimous supervisory board approval. The strategy includes a further 50,000 job reductions and targets a 9% operating margin by 2030.
Brent crude eased to $95.18 a barrel, while gold fell to around $4,439 an ounce.
US markets will be closed on Monday for Labor Day, while the UK corporate calendar includes results from Standard Life and Ashmore.
