FTSE 100 futures could extend rally after positive US jobs data

FTSE 100 futures are trading 2% higher as the week draws to a close, suggesting the index will extend its gains in weekend markets available with IG, with UK stocks rallying on Friday after surprisingly positive US jobs figures were unveiled.

The news helped the FTSE 100 close 2% higher on Friday to 6484, with the blue-chip index rallying more than 6% over the last five trading sessions.

US unemployment figures shock markets

Rather than US payrolls falling by 7.5 million in May, as anticipated by analysts, America added 2.5 million payrolls – shocking investors and market commentators.

James Knightley, the chief international economist at ING, said the numbers were ‘simply astonishing’.

‘Apologies - this has taken a little longer to write having just fallen off my chair and broken it. US non-farm payrolls have risen 2.509mn in May versus a consensus estimate of a 7.5 million fall. This was so far away from what anyone was expecting,’ he said.

‘The ADP payrolls survey had come in stronger than expected, but even that still had a payrolls decline of 2.76 million so this is one of the biggest economic data shocks in history, if not the biggest.’

‘We also have to remember that even after today's great numbers, US employment is still 19.55mn lower than it was in February. We still have a long way to go...,’ he added.

US jobs data hides real economic impact, says BofA

US job data was so surprising to Bank of America (BofA) that it was quick to cast doubt on the figures, contending that the fall in unemployment masked the true economic impact of the Covid-19 crisis and the overall shape of the subsequent recovery.

‘While the labour market recovery started a month or two earlier than expected, therefore suggesting a V-shaped trajectory in the early stages of the recovery, it doesn’t tell us about the ultimate shape of the recovery,’ BofA said.

‘We continue to remain concerned about the health of the economy after the initial jump higher from reopening. The path ahead is still likely to be bumpy given risks posed from the virus and many millions of displaced workers.’

FTSE 100 keeps rallying

A bounce off trendline support and sharp moves higher for both stochastics and the moving average convergence/divergence (MACD) indicator point towards a resumption of the ongoing uptrend for the FTSE 100, according to Chris Beauchamp, chief market analyst at IG.

‘The price found support around 6325, at the 50-hour simple moving average (SMA) at 6354 and rising support from last Friday’s low, with further gains target 6530 and then on to 6850,’ he said.

‘Alternatively, a drop below 6320 brings the possibility of a deeper pullback, heading towards 6240 and then 6170 and 6050,’ Beauchamp added.

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