- Data shows the world's strongest economy created 216,000 jobs in December
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Strong US jobs data yesterday caused a New Year's hangover for the FTSE 100, as fears grew that interest rate cuts may be some time away.
Data shows the world's strongest economy created 216,000 jobs in December, compared with 170,000 forecast by experts.
It prompted US Treasury Secretary Janet Yellen to declare that a “soft landing” was underway – in which inflation falls without the hard shock of a recession.
But that added to doubts that have crept into markets in recent days about whether interest rates will fall as soon as traders had hoped.
The FTSE 100 lost 0.4 percent, or 33.46 points, to 7689.61.
Sign of the times: Data shows US economy added 216,000 jobs in December, compared to the 170,000 experts predicted
That meant it ended the first trading week of the year 0.6 percent lower than where it started. It was the first fall in London's blue chip index in six weeks.
Michael Hewson, chief market analyst at trading platform CMC Markets, said: 'After a strong end to 2023 on expectations of early rate cuts from central banks, markets have started 2024 with the equivalent of a cold shower.'
British bonds have also sold off this week, with yields on 10-year government bonds – which rise when prices fall – rising by a quarter of a percent, the biggest weekly rise since October.
It was a chaotic session for US markets yesterday as traders also processed individual data from the services sector.
These weak data painted a contrasting picture to the main jobs report and contributed to the rise in stocks and bonds.
However, the major Wall Street indexes were still on track for their worst weekly performance since October.
Markets are scaling back bets on US interest rate cuts that had fueled a rally in recent weeks of 2023.
The chances of a cut by March were put at 57 percent last night, down from 65 percent before the jobs figures were released. Markets have also scaled back expectations about the pace of UK interest rate cuts over 2024 after data this week suggested a positive end to the year for the economy.
Traders are in the strange position that good news for the economy is bad news for the markets, as this will discourage central banks from cutting interest rates.
Janet Mui, head of market analysis at asset manager RBC Brewin Dolphin, said of the US jobs data: “Overall, the report is not market friendly for now.”
In Europe, hopes for a rate cut took a hit after data showed inflation rose to 2.9 percent in December, up from 2.4 percent in November. It was the first increase after seven months of decline.