FTSE Soars As Dollar Weakens On Slower US Hiring

Stock markets have surged after a slowdown in US employment growth dampened the prospect of a September interest rate hike by the Federal Reserve.

A weakening of the dollar in the wake of the US employment data helped dollar-priced commodities and commodity stocks climb worldwide.

The mining-heavy FTSE 100 gained 2.2% - or £38bn in market value - to close the day just shy of the 6,900 barrier.

Other European and US markets also made some ground after official statistics for August showed 151,000 net new jobs were created in America - with the unemployment rate remaining at 4.9%.

Both measures fell short of market expectations and followed comments a week ago by the chair of the US central bank that the case for raising rates had strengthened in recent months.

Employment data has been a crucial factor for Janet Yellen and the Fed's rate-setting committee in determining the possible timing of a rate hike - the second since last December in a move that signalled the end of the financial crisis.

The members are due to make their next decision on rates on 21 September.

The committee has previously expressed a desire to wait - given stubbornly low inflation and economic growth, both at home and abroad.

The Bank of England, in the wake of the Brexit vote, and other major central banks are still taking action in a bid to prop up output.

Another factor that will concern the Fed is sluggish wage growth - which slowed to a 2.4% annual rate from 2.6% in July.

Chris Williamson, chief business economist at IHS Markit (Stuttgart: A1139A - news) , said: "News (Other OTC: NWSAL - news) the US economy added jobs at a slower than expected rate in August, and that wage growth slowed, reduced the odds of a Fed rate hike in September.

"The data-dependent Fed will most likely see the payroll numbers as taking pressure off any immediate need to hike interest rates, significantly reducing the scope for further policy action in September.

"However, with survey data suggesting some of the recent slowdown in hiring and business activity is due to uncertainty ahead of the presidential election, a rate rise later in the year, most likely December, remains on the table providing the economic data flow picks up again in the fourth quarter."