FTSE 100 lifted by Oil gains, while we await US jobs report

A downbeat start for European markets today, as traders are left considering the potential implications of the US jobs report later on in the day. After recent jitters that have seen commodities and tech targeted in the first part of the month, many are left wondering whether these assets represent a major opportunity or cause to diversify to a greater extent. Notably, the FTSE 100 has managed to outperform its European peers, with its exposure to the commodity space helping lift the index amid gains for the price of oil and a weakening US dollar. The rise in oil has helped lift the price of WTI into a one-week high, as signs of deteriorating US investment signal a possible weakening of future output despite Trump’s “drill baby drill” mantra. 

Asian markets enjoyed a bullish session overnight, as the Takaichi trade continues to push Japanese stocks higher. Coming off the back of a weekend that saw the PM gain a majority victory in the Lower House snap election, the prospect of a pro-growth policy set has helped drive positive sentiment for stocks despite the gains seen for the yen over the course of the week. With Takaichi pledging to slash consumption taxes, wage increases, and higher spending/investment across defence and technologies, there is a perception that the country will seek to take advantage of the recent inflation-led boost to wages rather than return to the low growth-low wage pattern of the past. Meanwhile, in China the release of inflation data raised some eyebrows, with the decline from 0.8% to 0.2% signalling a potential setback after years of negative price growth. Notably, much of the weakness came at the hands of a -0.7% drop in food prices, although there is an expectation that this could be a one-off seasonal shift that corrects in a month’s time. Given the fact that the Lunar New Year fell some two-weeks later in 2026, the surge in food purchases will likely show up in February rather than the January boost seen in 2025. 

Today looks to be centred around the latest jobs report out of the US, with traders having to weigh up whether a deterioration in the jobs market would be enough to force the hand of Powell before he leaves in May. Whilst that remains the less likely outcome, markets are currently pricing a 40% chance that we see the Fed ease in either March or April. Notably, we have seen comments from Peter Navarro and Kevin Hassett in which both tried to dial down expectations for today’s report. Navarro stated that payroll expectations should be lessened significantly owing to the deportations seen under Trump. Meanwhile, Hassett similarly noted that a slower population growth should result in less impressive jobs data going forward. Notably, the weakness of the jobs market does fly in the face of the impressive 4.4% GDP rate seen for Q3, with a distinct divergence between economic growth and employment trends. And whilst Trump’s deportation efforts will undoubtedly have an impact of the jobs market, the disruption in the AI space will likely further extend this trend of higher growth and rising unemployment. For markets, the declines seen in the US dollar highlights both a shifting narrative around a potential cut under Powell and the prospect of a dovish Warsh. Further weakness off the back of downbeat Challenger job cuts, JOLTS job openings, and ADP payrolls would undoubtedly push the Fed closer to a cut in the event of a weak inflation release on Friday.