FTSE 100 reverses losses after Non-Farm Payrolls miss expectations – Nokturnal

The FTSE 100 reversed early losses on Friday as markets attempted to balance upbeat results from tech giant Amazon and the lower than expected Non-Farm Payrolls report released on Friday.

WPP shares sank after lowering their guidance for the year, and Rolls Royce shares logged more flying hours, gaining another 5% on Friday. Rolls Royce shares are up 117% year-to-date.

Non-Farm Payrolls

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The Non-Farm Payrolls report is the financial market’s most highly anticipated economic data point. It provides an up-to-date insight into the US jobs market and is positively correlated with the growth of the world’s largest economy.

In July, the US added 187,000 jobs, lower than the predicted 200,000 jobs.

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S&P 500 futures ticked higher after the announcement, and the FTSE 100 bounced from the worst levels of the session, London’s leading index was trading 0.1% higher at the time of writing.

Missing jobs expectations is typically a bearish signal for stock markets, but we are in a climate where bad news for the US economy is perceived as good news for the next move by the Federal Reserve and stocks. A slower US economy would warrant pausing rate hikes and fire up equity bulls.

In addition, many are looking for a soft landing in the US economy which would be evident in a steady reduction in the number of jobs created, as opposed to a hard landing and a sharp decline in job creation.

FTSE 100 movers

Investors dumped WPP shares on Friday after the advertising giant said US technology companies held back on spending in the last quarter.

“UK advertising giant WPP has downgraded full year like-for-like revenue guidance to 1.5% – 3.0%, from 3.0% – 5.0%. Technology spending, especially in the US, has slowed, leading to a dent in performance from the group’s substantial integrated creative agencies,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.

“This outcome is unwelcome but not wholly surprising, given that corporations are in wait-and-see mode when it comes to splashing the cash and handing margin over, at a time when demand is very tough to profile.

“While demand for WPP’s suite of services hasn’t been totally washed out, it has faded this half, and investors will be wanting to see a clear path to return to full colour. Harnessing AI correctly, and swiftly, could be one way to propel large amounts of growth, but change of this magnitude always comes with risk.”

WPP shares were down over 6% at the time of writing.

Rolls Royce shares were logging more flying hours as the engine-maker continued the ascent from yesterday’s release of their half-year report. Rolls Royce is seeing early success in their transformation strategy with improved free cash flow and upgraded guidance for the full year. Rolls Royce shares were up 5% on Friday and are the FTSE 100’s top performer in 2023, gaining 117%.