FTSE hits 2-week high on hopes U.S won’t hit Mexico with tariffs

The FTSE has posted considerable gains on Friday. Currently, the index is trading at 7,323, up 0.67% on the day. On the release front, there are no key British events. All eyes are on the U.S., which will release key employment numbers. Nonfarm payrolls are expected to fall sharply to 177 thousand, while wage growth is projected to edge up to 0.3%.

Risk appetite has improved, boosting global equity markets. The FTSE has sparkled this week, posting gains of 2.3%. The index has posted four successive winning sessions and the gains have continued on Friday. Concerns about a new trade war have eased, after reports that the U.S. could delay imposing tariffs on Mexico. President Trump had threatened to punish Mexico if it does not take measures to solve the illegal immigration crisis. Mexico has responded by cracking down on illegal immigration from Guatemala, and Vice-President Pence said this was a positive step. Still, it’s unclear if Trump will suspend the tariffs, which are scheduled to take effect on June 10. If the tariffs are put in place, equity markets will likely head lower.

British PMIs, which are gauges of key sectors of the economy, are pointing to weakness in the U.K. economy. The manufacturing and services PMIs missed their estimates and came in at 48.6 and 49.4, which indicates contraction. The services PMI was slightly better, with a reading of 51.0. Still, the blue-chip FTSE has rebounded after a dismal month of May, when the index fell 3.6%. The FTSE has clawed back in June, with gains of 2.3%.

Traders are keeping a close eye on U.S. nonfarm payrolls for May. Earlier in the week, ADP nonfarm payrolls plunged to a paltry 27 thousand for May, down from 275 thousand a month earlier. Will the official release also nosedive? The markets are expecting NFP to fall to 177 thousand, compared to 263 thousand a month earlier. If the estimates are on target and NFP sags, risk appetite could drop and weigh on the FTSE.

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Economic Calendar

Friday (June 7)

• 8:30 US Average Hourly Earnings. Actual 0.3%
• 8:30 US Nonfarm Employment Change. Estimate 180K
• 8:30 US Unemployment Rate. Estimate 3.6%

*All release times are DST

*Key events are in bold

FTSE, Friday, June 7 at 8:10 DST

Previous Close: 7,259 Open: 7,269 High: 7,329 Low: 7,269 Close: 7,323

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