The UK's FTSE 100 index experienced a downturn on Friday, concluding its trading session lower for the second consecutive day. This decline is largely attributed to disappointing labor statistics emerging from the world's largest economy, the United States. Observing a regional retreat throughout Europe, the blue-chip index recorded a loss of 1.31%, reflecting a cautious sentiment among investors. In July, the unemployment rate in the United States unexpectedly climbed to 4.3%, surpassing both the previous month’s figures and the consensus estimate which had anticipated a rate of 4.1%.
Detailed reports from the US Bureau of Labor Statistics indicated that the number of unemployed individuals rose to 7.2 million during the same month. Moreover, data indicated a slowdown in the expansion of total nonfarm payroll employment within the United States, which increased by 114,000 in July compared to a gain of 179,000 in June.
This was also below the consensus estimate of an increase of 175,000, underscoring a notable cooling in the labor market. Back in the UK, following the recent monetary policy decision made by the Bank of England, analysts from ING suggested the possibility of two additional rate cuts from the central bank throughout 2024, provided there is an improvement in services inflation data coupled with wage growth trends.
Analysts commented, "We suspect the data on services inflation and wage growth will improve as the year goes on, making the committee more comfortable with proceeding with at least one more cut this year. We suspect that will most likely come in November, and we think that will most likely be followed by another in December.
A September rate cut is entirely plausible though, if the services inflation data starts meaningfully surprising to the downside. We think Bank Rate could reach the 3-3.5% area by next summer." In corporate news, shares of Intertek Group ($ITRK) experienced a decline of 1.41% at the end of trading.
This British company, known for its assurance, testing, and certification services, reported an attributable profit for the first half that fell below expectations, although it did show year-over-year growth in both earnings and revenue. This mixed performance has raised questions about future profitability in a challenging economic environment in the UK and beyond. Overall, the current economic landscape demands close monitoring of both local and international developments as they unfold, particularly in light of the recent labor data and its implications for monetary policy and corporate performance..