The FTSE 100 experienced a notable decline on Friday, closing 0.86% lower as UK investors redirected their attention toward what has been characterized as "yet another upside surprise" stemming from the latest US jobs data. James Knightley, the Chief International Economist at ING, underlined the implications of this report for market expectations regarding interest rate stability.
The US economy saw a robust addition of 256,000 nonfarm payrolls in December 2024, a significant increase from the revised figure of 212,000 in the prior month, surpassing the consensus estimate of 160,000. Knightley elaborated that there are two payrolls reports scheduled before the upcoming March Federal Reserve FOMC meeting.
Additionally, the annual benchmark revisions set for next month are anticipated to introduce considerable downward adjustments. However, the general consensus from the recent wave of employment reports suggests that market participants are justified in assuming a likelihood of an extended pause in rate hikes from the Fed.
This sentiment may strengthen, particularly if core inflation remains steady at 0.3% month-over-month for a fifth consecutive month in the upcoming report. In the UK, the forthcoming week promises to be pivotal, with the latest updates on inflation, GDP, and retail sales set to be unveiled. Analysts are projecting a slight uptick in the annual consumer price index for December 2024—data that could play a critical role in informing the Bank of England’s monetary policy decisions scheduled for February. Turning to corporate performance, J Sainsbury, noted as $SBRY, reported a year-over-year retail sales growth of 2.7% for the 16-week period ending January 4.
Yet, the stock faced a setback, closing down by 4.26%, as these results fell short of market expectations. Bernstein analysts commented, "Sainsbury's updated Q3-24 trading report, which included Christmas performance, indicated softer-than-anticipated like-for-like sales excluding fuel, posting a growth of only +2.8%, which is a 50 basis points miss relative to the company consensus.
This underperformance can be attributed primarily to the ongoing challenges faced by Argos, following trends observed in the first half of 2024. Nevertheless, the strength in grocery sales illustrates that the management's strategic turnaround efforts are underway and productive, while we believe the issues plaguing Argos are cyclical and should show signs of recovery within the next year.".