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FTSE extends gains on solid US jobs data

US jobs data are slightly worse than expected, but the figures suggest the Fed is on track with taking the economy off emergency support.

FTSE extends gains on solid US jobs data

The FTSE 100 extended its gains despite slightly worse-than-expected jobs data from the US, trading 32 points, or 0.5%, higher at 6,680.

US non-farm payroll figures showed employment rose by 192,000 in March, down on the market's expectation of a figure closer to 200,000. The unemployment rate, which had been expected to fall to 6.6%, stalled at 6.7%. The US dollar index dropped on the news, before recovering to trade flat.

Figures for the rise in employment in January and February have also been revised upwards by a combined 37,000 to 144,000 and 197,000 respectively, meaning growth in employment is falling slightly.

Gautum Batra, investment strategist at Signia Wealth, said March's figures were 'hardly the strong data that forecasters expected'.

'Nevertheless, as growth is materialising, albeit at a glacial pace, today's figures will not quell the Federal Reserve's tapering plans.'

With continued positive economic data from the US, investors will now be focusing on the timing and likelihood of interest rate rises. US Federal Reserve chairman Janet Yellen shocked markets last month when she suggested rates could rise 'around six months' after the end of quantitative easing, implying a rise in April next year.

Rob Carnell, chief international economist at ING Financial Markets Research, said the fresh jobs data suggested that, despite Yellen's attempts to calm the markets following that unguarded remark, a rise early next year seemed feasible. 'These data continue to point to ongoing improvements in the economy, and there is nothing here to suggest that the Fed is rushing things, if they do indeed raise rates for the first time in April 2015, as Yellen seemed to indicate at the last Federal Open Market Committee.

While the figures are slightly below expectations, they are unlikely to dent the US Federal Reserve's efforts to slow down the process of money printing through its monthly 'tapering' of quantitative easing. 'With data like this, Fed chairman Janet Yellen can continue to pursue her course of tapering, and remain comfortable that the Fed is not falling behind the curve in terms of continuing labour market slack,' said Carnell.

FTSE rises on 'easy' ECB boost and US jobs hopes

10:46: The FTSE 100 has edged higher as the market continued to digest a shift in tone from the European Central Bank and looked towards solid jobs data from the US this afternoon.

The FTSE 100 rose 28 points, or 0.4% to 6,677 as the ECB’s dovish stance on monetary policy, despite a lack of action, continued to boost sentiment.

Markets are expecting this afternoon’s US non-farm payrolls figure to show around 200,000 jobs have been added in March, and for the unemployment rate to drop to 6.6%. That would be the biggest increase since November, before bad weather began to weigh on the figures.

‘Following last month’s upside surprise [when a 175,000 rise was ahead of expectations], many think the bad weather effect to have finally thawed and the data to have gotten back to trend,’ said Jonathan Sudaria, dealer at Capital Spreads.

Michael Every, head of financial markets research at Rabobank, said that a figure of around 200,000 would be ‘more than enough to keep the Fed on the taper trail this year’, referring to the US Federal Reserve's steady reduction in the amount of stimulus it provides the economy each month. He said this week’s ADP employment report suggested today’s figures could deliver ‘a slight upside surprise’.

Rob Carnell, chief international economist at ING Financial Markets Research, said that with weather now less of an issue for the jobs data, a disappointing figure could have a bigger impact on the market than seen in previous months.

‘Whilst US weather had not totally returned to normal for this survey, we believe this set of numbers will be viewed as much “cleaner” than the previous data, and consequently, deviations from recent norms could be more market moving than in previous months – when soft data was essentially given the benefit of the doubt,’ he said.

EasyJet (EZJ.L) led the FTSE 100 higher, rising 57p, or 3.2%, to an all-time high of £18.49 after the budget airline announced a 4.8% rise in passenger numbers in March. This compared to a 4% drop suffered by rival Ryanair.

Pearson (PSON.L) rose 26p, or 2.6%, to £10.34, after analysts at Jefferies upgraded the publisher from ‘hold’ to ‘buy’ and raised its target price from £11.28 to £11.84. ‘Pearson is… moving through a difficult transition, consensus has stepped down markedly in recent weeks and we think we see the earliest signs of a US [primary and secondary education] recovery in spend, a major piece of Pearson’s North American Education core,’ said analyst David Reynolds. ‘For us, valuation also appears undemanding here.’ 

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