ADP payrolls weakness key amid ongoing shutdown

European markets are following their Asian counterparts higher, with the FTSE 100 breaking into a record high and setting its sights on the fabled 10,000 level. In a year that has brought major volatility on the other side of the pond, it is interesting to see the seemingly boring and old-fashioned FTSE 100 fare particularly well. For the FTSE, it has been the banks, defence, and mining stocks that have done particularly well, with the construction of the index actually benefitting from some of the key themes that have dominated 2025 thus far. With the latest jobs report providing greater confidence over a rate cut from the Bank of England next month, there is reason to believe that we could also see more domestically-focused stocks fare well amid a more accommodative monetary policy. Meanwhile, we have seen growing rumours of a potential internal challenge to Kier Starmer in the face of a particularly difficult budget and falling popularity, with the prospect of an uptick in political uncertainty helping to drive the pound lower. Fortunately for the FTSE 100, a lower pound has often been associated with strong performance for companies earnings abroad and reporting in GBP.

The financials continue to strengthen today, in a week that has seen concerns around the banking sector subside. Talk of a potential $2000 tariff dividend for low to middle income earners in the US is essentially a bail out of the banks at a time of growing concern around rising consumer distress. The huge losses announced by regional banks Zions Bancorp and Western Alliance highlight fears of underlying distress in the US economy, with a surge in mortgage, credit card and auto delinquencies posing a risk to lenders as a K-shaped economy hits the worse-off. However, Trump’s plan to give out $2000 per person provides a potential injection of cash that should help ease some of the financial strain being felt within the US economy of late.

Amid an ongoing data blackout, ADP have stepped in to provide greater transparency over the direction of travel in the US jobs market. Yesterday’s weekly ADP reading saw private employers cutting an average of 11,250 jobs per week in the four weeks to October 25. This highlights a slowdown in hiring that follows on from a concerning challenger report which saw over 153k job cuts last month. With the House set to vote on the bill today, an end to the shutdown could be in sight this week. However, Kevin Hassett has noted that the absence of collation in some surveys means we might see a gap in the data even once the shutdown is resolved. With the Fed seemingly split over the merits of cutting rates in December given inflationary concerns, will the weakness seen in the private jobs reports help heighten the chance of a cut next month?