Closing summary
Before we close up for the day, here is a summary of some of the main developments.
- US markets opened slightly lower, but are now up. Following eight straight days of losses, Wall Street appears to have been boosted by the non-farm payrolls report. It was a solid jobs report, with no nasty shocks and an unexpected jump in wages. It does raise the prospect of a rate hike in December, but this was already the expectation.
- If the S&P 500 were to close down (it is currently up 0.2%), it would mark the longest running streak since 1980.
- Across the Atlantic, European markets are far more jittery about the prospect of a Trump victory at Tuesday’s presidential election. The FTSE is the biggest faller of the major indices, down 1.4% at 6,692.
- The pound meanwhile is back above the $1.25 mark for the first time since 6 October.
- In the eurozone, a series of PMI surveys suggested the single currency bloc got off to a reasonable start in the fourth quarter, mainly thanks to Germany.
That’s all for today. Thank you for all your comments and please join us again on Monday. Have a great weekend. AM.
Berenberg’s chart of the week:
Mickey Levy, Berenberg’s US chief economist:
The 2016 Presidential elections have been a painful story focused on two deeply flawed and damaged candidates. The winner will carry burdens into the White House.
The latest polls are pointing to a Hillary Clinton victory and Republicans maintaining control of the House of Representatives. The Senate is a tossup. Congress is crucially important – plurality in each chamber conveys leadership of every committee – and will determine policy deliberations as well as many appointments in the new administration .
Here in Greece, the EU’s economic tsar Pierre Moscovici has ignited a fierce row with Yanis Varoufakis, the former Greek finance minister.
With a few choice words in his new book, “Midnight in Europe” Moscovici not only accuses the ex finance minister of “unbridled narcissism” but says his negotiating tactics with international creditors at the height of the euro crisis in 2015 did much to exacerbate Greece’s ailing economy.
With his frantic pre-occupation with the media and unbridled narcissism, Varoufakis drew the limelight on himself and for several months cannabilised the discussions.
He contributed to the tension at the talks by refusing any negotiation.
Varoufakis hit back on Friday:
The more the third memorandum crumbles, the more determined, it seems, they are to honour me with their hate because I didn’t sign it. I thank them again.
Here is our full story on the US jobs report:
Wall Street opens slightly lower
US markets have opened down, as US election jitters and the prospect of a December rate hike weigh on investors’ minds. Losses are very modest so far.
- Dow Jones: flat (down 0.1 points) at 17,931
- S&P 500: -0.04% at 2,088
- Nasdaq: -0.4% at 5,038
Northern Ireland’s bid to become a more attractive place to American firms and tourists was dealt a blow on Friday.
United Airlines is pulling the plug on the only direct flight to the US, from from Belfast International Airport to Newark, after the EU blocked regional government state aid to the airline.
It was due to receive £9m keep the route going but this was blocked by the European Commission today, and as a result the American carrier will pull its service in January.
The airport’s managing dfirector, Graham Keddie, described the EU decision-making process as “abysmal, biased and unfair.”
He continued: “This is a vital link for business and losing it will be a body blow to executive ministers who use it to promote Northern Ireland to would-be investors from the United States.”
The Ulster Unionist Party described the loss of the service as an “international embarrassment.” Brussels’ decision will be seized upon by the pro-Brexit Democratic Unionist Party as further evidence of European bureaucrats over-riding the democratic wishes of the local power sharing executive and endangering jobs.
James Knightley, a senior economist at ING, says a December rate hike is now more likely, but it isn’t a done deal:
It seems as though the tightness in the labour market is starting to generate higher pay. The wage story is also good news for consumer spending with average hourly earnings not having risen this fast since mid 2009.
So with the economy creating jobs and workers being paid more, it backs the case for a rate hike from the Federal Reserve in December.
However, it isn’t a done deal. Any market turmoil relating to next week’s Presidential election would quickly scupper thoughts of a policy change.
Capital Economics says the “surge” in US wages signals the Fed will raise rates in December.
Paul Ashworth, chief US economist, writes:
The solid gain in employment and the acceleration in average hourly earnings growth in October will increase expectations that the Fed will hike interest rates in December (assuming that the election doesn’t throw a spanner in the works.)
What will really catch the eye of Fed officials is the 0.4% m/m increase in average hourly earnings last month, which followed an upwardly revised 0.3% m/m gain in September. As a result, the annual growth rate climbed to a seven-year high of 2.8%, from 2.7%.
The US unemployment rate fell to 4.9% in October from 5% in September, as expected.
The US Labor Department said average hourly earnings grew at an annual rate of 2.8%, the highest in seven years and better than the 2.6% expected.
At 161,000, employment growth in October was weaker than the monthly average of 181,000 for 2016. The average monthly increase was 229,000 in 2015.
While the October payrolls figure slightly missed expectations, there were no nasty surprises in the report. US futures narrowed losses after the report.
It's obviously the case that one month's non-farm payrolls will either prove or disprove an entire economic ideology.
— Justin Wolfers (@JustinWolfers) November 4, 2016
Updated
Breaking: US non-farm payrolls disappoint
US non-farm payrolls increased by 161,000 in October, disappointing expectations of a 175,000 rise.
The number for September was revised up sharply to 191,000 from an initial estimate of 156,000. More to follow.
The dollar is on track for its worst week in 12 as fears mount that Trump will win the election next week.
The US currency has fallen 1.2% this week against a basket of major currencies.
Jane Foley, currency strategist at Rabobank:
Political uncertainty tends to be currency-negative because the markets find it more difficult to work out how things like trade policy foreign policy are going to play out in the economy.
The pound has just hit $1.25 for the first time since early October...
But UK markets are leading losses in Europe:
- FTSE 100: down 1.4% at 6,696
- FTSE 250: down 1.9% at 331
Connor Campbell, a financial analyst at Spreadex, says markets are having a “full on panic attack” over the possibility that Donald Trump will be the next US President.
Well what started as a few jitters morphed into a full on panic attack this Friday, the European indices plunging at the prospect of Trump moving into the White House.
Looking ahead to this afternoon and, at the moment at least, the Dow Jones futures are suggesting the US index won’t be quite as heavily hit after the bell.
And he has this to say on today’s non-farm payrolls report from the US, to be published in a little over half an hour.
Among all this election chaos comes the US non-farm jobs report for October. Now, one could argue that this is the most pointless non-farm Friday of the year given the proximity of the election, and the fact that the month’s Federal Reserve meeting has already happened.
However, the Fed stated on Wednesday that it only needs to see a bit more evidence that the US economy is in decent health before it feels confident enough to raise rates meaning that, in the eventuality of a Clinton victory, today’s set of jobs data may become more important in retrospect.
Economists are expecting a payrolls to rise by 175,000...
Pound hits four-week high against dollar
The pound has hit a four-week high against the dollar at $1.2497, up o.2% on the day.
The rise in the pound is partly a story of dollar weakness, but also Thursday’s message from the Bank of England that a rate cut is off the table for now, and the government’s Brexit loss in the High Court:
Oil prices falling for sixth day
Oil prices are on course for a sixth day of declines, driven lower by a rise in US crude stocks and softer demand.
Brent crude oil is down 0.3% at $46.20. Analysts said markets were also being hit by investor nerves, as traders pull out money ahead of the US presidential election.
Oliver Jakob from the consultancy Petromatrix told Reuters:
There has been a very strong retreat and technically, prices are starting to reach oversold levels.
Investors will look at US non farm payrolls later in the day but I think there will be a pause for a few days ahead of the US elections.
UK new car sales growth slows
Consumer appetite for new cars has seemed unstoppable in recent years as cheap finance deals and more efficient models have boosted the number of deals.
UK new car sales increased again in October, but at a slower rate of 1.4%, compared with 1.6 in September - a plate change month when sales are typically higher. Fleet sales drove the rise in October, while private sales fell 1.1% compared with the same month last year according to the Society of Motor Manufacturers and Traders.
A total of 180,168 new cars were registered in the UK last month, taking the total in the first 10 months of the year to 2.3 million - 2.5% higher than at the same point in 2015.
Mike Hawes, chief executive of the SMMT, said:
September’s number plate change is always a hard act to follow so the market’s growth in October, albeit moderate, is welcome news.
Low interest rates, affordable finance packages and a range of exciting new models helped attract buyers into showrooms and we now look to government to ensure consumer and business confidence remains buoyant.”
S&P on course for longest losing streak since 1980
As election anxiety reigns, the S&P 500 is on course for its longest losing streak since 1980 if it falls again today.
CMC Markets are predicting US markets will open lower. Market analyst Jasper Lawler:
Stocks in the US look set for a lower open with investors fretting over the election ahead of the October non-farm payrolls report that could act to confirm a move to higher interest rates in December.
There is some selling-exhaustion in US equities so the unemployment figures could help form a short-term base before the election next week. The market is assigning an 80% chance the Fed will hike rates in December so it would take a huge labour market downturn for a single unemployment report to change the course of monetary policy.
Neil Wilson, market analyst at ETX Capital, says markets are on a “knife-edge” before Americans go to the polls on Tuesday:
With Donald Trump having closed the gap on Hillary Clinton the election result is too close to call and markets are on a knife-edge.
There is a definite sense we’re heading for a Brexit-like event – if Trump wins there could be a sharper selloff in risky assets like stocks and the US dollar. If Clinton wins, a rally is on the cards.
Ignoring the longer-term implications, there is a strong chance of immediate and significant movements in prices – particularly as we get results in from key swing states such as Ohio and Florida. And because so many hang in the balance there is a strong chance that markets will overreact when an individual state is called.
Back in June the pound plunged 5% in a matter of seconds when Sunderland voted heavily for Leave. We could see similar gyrations in a broader range of markets, particularly if volumes are down overnight.
Ben Broadbent, deputy governor of the Bank of England, has been giving radio interviews following the Bank’s updated forecasts and decision to hold rates on Thursday.
The Bank raised its forecasts for growth in the short-term, admitting it had been too pessimistic about prospects in the immediate aftermath of the Brexit vote. Policymakers at Threadneedle Street were predicting growth of just 0.1% in the third quarter, but it came in much stronger at 0.5%.
The Bank also told households to prepare for a sharp rise in inflation next year.
Broadbent said it was perfectly normal to adjust expectations “as news comes in”.
He told BBC Radio 4 Today’s programme that he was pleased Mark Carney would remain as the Bank’s governor until 2019, a year longer than he initially signed up for:
I’m extremely happy that the current governor is staying. I think the whole country should be grateful that he is.
Updated
European markets are falling deeper into the red as unease continues to build ahead of Tuesday’s US election.
Peter Rosenstreich, head of market strategy at Swissquote Bank, offers this insight into markets and the election.
While the political risk has increased with national polls narrowing, Clinton continues to have the lead. CNN polls indicate that Clinton has a 46% to 45% lead of Trump. Heading into the last weekend before America heads to the polls, anything can happen.
Markets should continue to trade with caution ahead of the weekend and the US election, with risk skewed to the downside.
History suggests that regardless of who is in the White House (think President Obama), the USA still remains largely unaffected by a single individual.
Faster eurozone growth signalled by PMIs
The numbers are all in now, and the broad indication from the eurozone PMIs is that the signal currency bloc’s economy gained momentum in October, mainly thanks to Germany.
The composite PMI (combining manufacturing surveys earlier in the week and services surveys today) rose to 53.3 in October from 52.6 in September.
Here is how countries ranked on the PMI by output growth. (Anything above 50 signals growth.)
- Germany: 55.1
- Spain: 54.4
- Ireland: 54
- France: 51.6
- Italy: 51.1
Steady growth in German services
Markit’s Germany services sector PMI showed steady growth in October.
The headline index edged up to 54.2 from 54.1 in September, in line with expectations.
Oliver Kolodseike, economist at IHS Markit, said the survey from Europe’s largest economy was positive:
Today’s survey results present a welcome rebound in German service sector activity, after September’s data highlighted fears of a substantial slowdown in the sector.
The service sector data follow positive numbers from the manufacturing sector, released earlier in the week. The combined output of both sectors points to the second-strongest rate of expansion so far this year and suggests that the German economy continued to grow at the start of the fourth quarter.
Growth in French services sector weakens
Growth slowed in the French services sector in October according to the PMI.
The headline index fell to 51.4 from 52.1 on September, missing forecasts that growth would be stable.
Markit said companies were not seeing a big pick up in new business growth. Alex Gill:
Growth in the French service sector abated at the start of the fourth quarter, with activity increasing at the slowest rate in three months.
This was indicative of waning new business growth, as further solid cuts to output prices proved insufficient to prevent the slide. On a more positive note, business expectations remained strong, suggesting companies are hopeful conditions will continue to improve in the months ahead.
Italy's service sector grows
The Italian services sector grew in October, albeit at a weak rate.
The headline index on Markit’s PMI rose to 51 from 50.7 in September, where anything above 50 signals expansion. It was a little below expectations of 51.5.
This is what Markit’s Phil Smith had to say:
It’s been a sluggish start to the fourth quarter for Italy’s economy. While expansion in service sector activity picked up slightly in October, it remained weak overall and was countered by a slowdown in growth of manufacturing output.
There was also little to cheer on the employment front, with the rate of job creation across the two sectors combined barely stronger than September’s 12-month low.
Stable growth in Spain's services sector
Growth in Spain’s services sector was roughly stable in October, but the pick up in new orders and employment slowed.
The headline index on Markit’s PMI eased to 54.6 last month from 54.7 in September, but it was lower than expected, with economists polled by Reuters predicting 55.2.
Inflationary signs were evident, with the sharpest increase in companies’ costs since May 2015.
IHS Markit is forecasting the Spanish economy will grow by 3.1% in 2016, slowing to 2% in 2017.
Andrew Harker, senior economist at IHS Markit:
While the headline activity index for the Spain services PMI suggested further solid growth in October, other indices were less bullish.
Rates of increase in new orders and employment eased and companies suggested that sales wins were often a result of promotional activities.
PMI shows #Spain services activity seeing stable, decent growth in Oct, but new business growth lowest since Nov 2014 & jobs growth slowed
— Howard Archer (@HowardArcherUK) November 4, 2016
Updated
European markets open lower
Europe has followed Asia and the US, with markets down in early trading. The FTSE 100 is off 53 points.
- FTSE 100: -0.8% at 6,737
- Germany’s DAX: -0.4% at 10,282
- France’s CAC: -0.2% at 4,404
- Italy’s FTSE MIB: -0.5% at 16,333
- Spain’s IBEX: -0.3% at 8,854
- Europe’s STOXX 600: -0.4% at 330
Pound stays above $1.24
The pound rose on Thursday to a near one-month high of $1.2494 (still 16% lower than the day of the EU referendum).
It was boosted by a number of factors, including the government’s loss of the Brexit case at the High Court, the signal from the Bank of England that further rate cuts are off the table for the time being, and a weaker dollar.
The pound is roughly flat this morning, at $1.2466.
Also coming up: US non-farm payrolls and eurozone services
It’s non-farm payrolls day in the US. The figures will be published at 12.30pm UK time and are expected to show a 175,000 jump in jobs added in October, following 156,000 in September.
The unemployment rate is expected to fall to 4.9% from 5%. The payrolls data are closely watched and economists and investors will be looking for anything in the data that suggests a Fed rate rise in December is more or less likely.
Realistically however, the presidential election on Tuesday will be uppermost in investor minds, rather than the payrolls report and implications for December.
Also this morning we have the latest healthcheck from the eurozone’s services sector, with October PMI surveys.
The agenda: market nerves mount as US election nears
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Investors around the world are turning their attention to the US presidential election on Tuesday next week.
With the polls narrowing, uncertainty is rising, and with so many twists and turns in the campaign so far, investor nerves are mounting as the poll draws closer.
Wall Street closed down for an eighth successive day on Friday, marking the longest run of losses since the financial crisis in 2008.
Michael Hewson, chief market analyst at CMC Markets UK, gives this insight:
With only a few more days to US polling day the closeness of the polls continues to jangle nerves in the market, with the result that the declines appear to be gaining a momentum all of their own.
This negative sentiment is also spilling over into Europe’s markets as they also slip back as the weaker US dollar pushes up the pound and the euro, as we look again at the potential for another negative open this morning.
Most Asian markets followed Wall Street lower, with the Nikkei down 1.3% at 16,905.
Meanwhile the Vix volatility index – a measure of investor confidence known as the “fear gauge” – rose for the eighth day in succession.
European stock markets are also expected to open lower:
Our European opening calls:$FTSE 6769 down 22
— IGSquawk (@IGSquawk) November 4, 2016
$DAX 10306 down 20
$CAC 4411 down 0$IBEX 8869 down 11$MIB 16394 down 26
