Please see the below article from AJ Bell received this afternoon giving a market update for today (Friday 2nd June 2023):
Market attention on Friday turned to the US employment report and, further out, the next interest rate decision by the Federal Reserve, after legislators passed a bill that will prevent the US government from defaulting on its debts.
Stocks were higher ahead of the May nonfarm payrolls report, due out at 13:30 BST.
The FTSE 100 index was up 74.26 points, 1.0%, at 7,564.53 at midday in London. The FTSE 250 was up 225.09 points, 1.2%, at 19,052.85, and the AIM All-Share was up 5.05 points, 0.6%, at 789.50.
The Cboe UK 100 was up 0.8% at 754.70, the Cboe UK 250 was up 1.3% at 16,610.82, and the Cboe Small Companies was up 0.4% at 13,632.09.
The US Senate voted to suspend the federal debt limit, capping weeks of fraught negotiations to eliminate the threat of a disastrous credit default just four days ahead of the deadline set by the Treasury.
Economists had warned the US government could run out of money to pay its bills by Monday. This left almost no room for delays in enacting the Fiscal Responsibility Act, which extends the government’s borrowing authority through 2024 while trimming federal spending.
Hammered out between Democratic President Joe Biden and the opposition Republicans, the measure passed the Senate with a comfortable majority of 63 votes to 36 a day after it had sailed through the House of Representatives.
‘Risk sentiment has improved markedly with the passage of the US debt ceiling deal through Congress,’ said Fawad Razaqzada, market analyst at City Index and Forex.com
As US President Joe Biden prepares to sign the legislation into law, attention now turns to the key US nonfarm payrolls report for May. It is expected to show an increase in jobs of 195,000, up from 253,000 in April.
‘US jobs numbers this afternoon may provide some pointers to the next move by the Federal Reserve, whose decision making no longer needs to consider the potential financial stability risks associated with default on US debt,’ said AJ Bell investment director Russ Mould.
‘If the non-farm payrolls data indicates continued tightness in the labour market, the Fed may feel it has to continue with rate rises when it meets on 14 June.’
Fed Governor Philip Jefferson and Philadelphia Fed President Patrick Harker both made the case on Wednesday for a pause in interest rates hikes at the next meeting on June 13 and 14.
Stocks in New York look to continue their rally on Friday. The Dow Jones Industrial Average, the S&P 500 index, and the Nasdaq Composite all were called up 0.5%. On Thursday they ended up 0.5%, 1.0%, and 1.3%, respectively.
The dollar was mostly lower midday Friday in Europe.
The pound was quoted at $1.2530 at midday on Friday in London, up slightly compared to $1.2523 at the equities close on Thursday. The euro stood at $1.0770, higher against $1.0737. Against the yen, the dollar was trading at JP¥138.88, unchanged from Thursday.
Despite its softness ahead of the US jobs report, the dollar is set to rise further, Brown Brothers Harriman thinks.
‘Banking sector concerns and dovish market pricing for Fed policy had been major negative headwinds on the dollar in recent months, but those have finally begun to clear,’ BBH said. ‘Now, we believe passage of the debt ceiling deal removes the final headwind for the dollar, and so we see this recent rally continuing.’
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Andrew Lloyd DipPFS
02/06/2023