Susannah Streeter, chief investment strategist at Wealth Club, said: “The US labour market has lost more momentum than expected, reigniting sparks of hope that the Federal Reserve will stay on the sidelines and put off rate hikes this year.
“The weaker-than-expected rate of hiring may look like bad news for the economy, but it’s being read as good news by equity markets, given that it signals higher interest rates may already be doing the job of cooling the economy and that another significant increase in borrowing costs may not be required.
“Average hourly earnings did rise by 0.3 per cent month on month, but that was the same pace as in May and matched market forecasts. The unemployment rate also fell slightly, indicating underlying resilience.
“Taken together, the numbers indicate that the labour market is starting to cool, but not dramatically enough to spark concerns about economic growth.
“A Goldilocks scenario is back on the table, with hopes that the economy will stay not too hot, but not too cold. Expectations of multiple rate hikes are fading away, with only one hike now fully priced in, and not until next year. Sentiment is therefore rising, particularly towards tech stocks, with the Nasdaq and the S&P 500 set for gains in early trade.
“London’s FTSE 100 is also heading sharply higher, given the international nature of the index. If the US, the world’s largest economy, is looking set for a Goldilocks growth scenario, it’s buoying optimism towards the multinationals which make up the index.”
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