Market snapshot: why it's all about jobs today

Shares rallied and bond yields stalled – at least for the time being – as some promising economic data lured US investors back into the fray after a tortuous few days.

• Our Services: SIPP Account | Stocks & Shares ISA | See all Investment Accounts

Tech blue-chips were at the vanguard of the bargain hunting, with Microsoft Corp (NASDAQ:MSFT) rising by 2.7%, Apple Inc (NASDAQ:AAPL) by 1% and Meta Platforms Inc Class A (NASDAQ:META) by 3%, while NVIDIA Corp (NASDAQ:NVDA) added almost 2% after revealing that it would be buying the AI platform Hugging Face for $13 billion. The deal expands Nvidia’s reach into software, and brings one of the largest developer communities into its fold, while representing an alternative to the likes of OpenAI and Anthropic.

The US service sector saw business activity growth accelerate during the second quarter, in its highest reading since December 2024. In addition, comments from Federal Reserve Governor Waller asked for the markets to “give disinflation a chance”, adding that he was seeing increasing signs of cooling prices.

The comments feed into one of the most eagerly awaited monthly economic releases, namely the non-farm payrolls report which is due later today. After a surprise fall of 23,000 in July, it is expected that around 58,000 jobs will have been added in August, with unemployment remaining steady at 4.1% alongside a slight moderation in wage growth.

• What global bond shock means for UK investors
• eyeQ: a Wall Street winner now trading below fair value

The usual caveats will then apply – a much stronger than expected number would increase the likelihood of an interest rate hike this month, whereas a weak reading could potentially trigger a market rally alongside a fall in Treasury yields.

However, barring any major surprises, the importance of the non-farms will be eclipsed by the CPI reading next Friday, for this month at least. That release will also mark the last major report before the Fed’s interest rate decision and, given that the Fed is more inclined towards the inflation rather than employment side of its dual mandate, it is likely to be the pivotal factor.

• Warning rocks UK housebuilding sector
• Reaction to M&G's record half-year profit

Governor Waller added in his remarks that he would be inclined to support holding rates steady if inflation data was in line with estimates, which sent yields marginally lower. It also reduced market estimates from a 63% likelihood of a rise the previous day to a toss of a coin 50:50.

The market rally consolidated the strength of the main indices. In the year to date, the Dow Jones is ahead by 11.7%, the S&P500 by 13.2% and the Nasdaq by 14.4%, with each testing record highs for the umpteenth time this year despite the fast-moving and unpredictable backdrop.

• UK bank shares latest: upgrades for Lloyds and NatWest
• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis

The FTSE100 failed to join the party despite strength in the US and then Asian markets overnight, with mining stocks generally weaker on the back of some pressure on commodity prices, with the exception of gold. Vodafone Group (LSE:VOD) was a bright spot, rising after a broker upgrade during what has been a transformative time at the once-ailing phone giant. The shares have risen by 25% so far this year and by 41% over the last 12 months as investors increasingly warm to its revised prospects.

Some strength in sterling – prompted by dollar weakness rather than improved UK sentiment – also weighed on the primary index, given the reliance of most constituents on overseas earnings. Even so, the FTSE100 is still ahead by 8.9% in the year to date and remains a reliable and sought after investment destination dependent on the level of volatility elsewhere on the global stage.