London open: FTSE rallies as investors speculate on US interest rates

The FTSE opened on the front foot on Monday after weak US jobs growth pushed back expectations for an interest rate hike.

The non-farm payrolls report on Friday showed the US added 142,000 jobs in September, well below analysts’ expectations of 201,000. August was also revised down from 170,000 to 135,000.

“While it’s always important not to over-react to one single data release, we’ll make an exception in this case,” said Paul Ashworth, chief US economist at Capital Economics. “The chances of a rate hike by the US Federal Reserve this year just went way down,” he added, saying he expects the central bank will wait until early 2016 for an increase.

Fed chair Janet Yellen had said policymakers expected a rate rise this year before the data.

Turning to Monday’s agenda, the Markit/CIPS purchasing managers’ index on UK services is due at 0930 BST. Analysts expect a reading of 56 in September, up slightly from 55.6 a month earlier. A reading above 50 signals an expansion in activity while a level below that indicates a contraction.

Markit will also release its final estimate of US services PMI for September which is expected to be confirmed at a reading of 55.6.

Meanwhile, ISM’s US non-manufacturing composite at 1500 BST is predicted to fall to 57.5 in September from 59 in August.

In the Eurozone, Greece is set to unveil a 2016 draft budget later on Monday to satisfy international creditors. In July Greece agreed with its creditors to implement spending cuts and economic reforms in exchange for an €86bn bailout.

On the company front, Lloyds Banking Group rallied on news the government will start offering portions of its stake in the lender to private investors in spring 2016.

Glencore surged on reports the struggling mining company is in talks to sell its agricultural business. Singapore´s sovereign wealth fund, Japanese trading house Mitsui &Co. and a Canadian pension fund are among the parties who had expressed an interest in the unit, Bloomberg reported.

Trinity Mirror gained after saying it is on track to meet full-year expectations.

Rolls Royce advanced after announcing plans to cut another 400 jobs in its marine business on top of the 600 job cuts already announced in May.

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