US adds more oil and gas rigs
Oil prices have lost some of their gains after the US added more rigs last week, for the ninth week in ten.
According to Baker Hughes, one oil and seven gas rigs were added, taking the total to 497.
Baker Hughes Weekly North American Oil & Gas Rig Count
— Dominic Chu (@TheDomino) September 2, 2016
USA: Total +8 to 497, *OIL +1 to 407, Gas +7 to 88, Misc unch @ 2
Canada: -9 to 137
With worries about oversupply amid weak demand, Brent crude - up 3.2% ahead of the rig cound - is now up 2.7% at $46.68.
On that note, it’s time to close the blog for the evening. Thanks for all your comments, and we’ll be back next week.
European markets close higher
Heading into the weekend, investors were in buoyant mood, with the weaker than expected US jobs figures seemingly delaying any interest rate rise from the Federal Reserve until later in the year. A jump in oil prices also helped sentiment. So European markets moved sharply higher, while Wall Street was also in the ascendency. The final scores showed:
- The FTSE 100 finished up 148.63 points or 2.2% at 6894.60, its biggest one day rise since 30 June and its highest close for two weeks
- Germany’s Dax jumped 1.42% to 10,683.82
- France’s Cac closed 2.31% higher at 4542.17
- Italy’s FTSE MIB rose 1.54% to 17,183.90
- Spain’s Ibex ended up 1.67% at 8908.9
- In Greece, the Athens market added 0.56% to 582.13
On Wall Street, the Dow Jones Industrial Average is currently up 76 points or 0.4%.
Updated
FTSE 100 jumps 2.5% after US jobs figures
Markets are finished the week on a strong note following the US jobs data, which seemed to take a September rate rise off the table.
In particular, the FTSE 100 has caught fire in late trading, surging more than 2.5%. This would be the biggest daily rise since 29 June.
And analysts believe there could be more to come. Joshua Mahony at IG said:
As we move out of the summer lull, there is a feeling that today will mark moment where things move into full swing once more. While volatility has been somewhat lacking owing to diminished summer volumes, the introduction of Autumn coupled with today’s breakout in the FTSE 100 could set us up for a resurgent period in UK stocks.
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In the immediate wake of the weak US jobs data, the dollar stumbled, on the basis that a September rate rise now looked unlikely.
But the US currency has bounced back, with a number of analysts still anticipating the Fed will hike borrowing costs in December.
Against a basket of currencies, the dollar is now up 0.22% while the euro has slipped 0.3% against the US currency.
Back with the earlier UK construction figures:
Construction PMI consistent with c.5% y/y drop in housing starts by year end. https://t.co/MvAHXJ4mrD pic.twitter.com/qmVEOa2fo0
— Capital Economics (@CapEconProperty) September 2, 2016
If the US jobs data disappointed, then factory goods orders have shown their biggest increase in nine months.
New orders for manufactured goods rose 1.9% in July after falling by 1.8% in the previous months, according to the Commerce Department. This was just shy of expectations of a rise of 2%. The June figure was revised up from an initially reported 1.5%.
The chances of a September rate rise by the US Federal Reserve have dropped from 34% to 20% following the weaker than expected jobs data, according to Christopher Vecchio, currency analyst at DailyFX.
But a hike in December is not off the table. Vecchio said:
While almost every headline jobs growth read has been dubbed “most important non-farm payrolls” for the last year and a half, this one certainly held importance. This report comes on the heels of Fed Chair Janet Yellen saying that recent economic data have supported the case for a rate hike and Vice Chair Stanley Fischer saying that the Fed cannot afford “one and done.”
Immediately following the report, Fed funds futures contracts were implying a 20% chance of a rate hike in September, down from 34% ahead of the jobs data. Let’s not mince words: after forecasting four rates hikes in 2016 at their December 2015 meeting, the Fed needs to hike at least once this year – December, most likely, when their last SEP of the year comes out – to save face.
Dr. Harm Bandholz, chief US economist at UniCredit Research, is also suggesting a December move:
The August employment report showed solid employment gains, a stable unemployment rate, but weaker details, notably a decline in the average workweek and softer average hourly earnings. As the August numbers have tended to come in on the softer side in the past, we think that this mostly reflects seasonal adjustment problems rather than underlying weakness. The report thus leaves the Fed on track for a rate hike in December – September seems to be off the table now.
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Wall Street opens higher
US investors have also got that Friday feeling, with markets rising in early trading:
- Dow Jones: + 0.4% at 18,498
- S&P 500: +0.4% at 2,180
- Nasdaq: +0.4% at 5,250
As in Europe, there is relief on Wall Street that a September rate hike appears to be off the table.
Updated
European markets build on gains
European investors are in an upbeat mood as the week draws to a close.
Miners are behind much of the rise, as commodity prices rise on a weaker dollar, and sentiment has improved now that a US rate hike in September looks increasingly unlikely.
- FTSE 100: +1.5% at 6,850
- Germany’s DAX: +0.9% at 10,626
- France’s CAC: +1.6% at 4,509
- Italy’s FTSE MIB: +0.6% at 17,030
- Spain’s IBEX: +1% at 8,847
- Europe’s STOXX 600: +1.2% at 348
Oil jumps as US jobs data hits dollar
The price of a barrel of Brent crude oil is up 1.7% at $46.24 after the weak US jobs report sent the dollar sharply lower.
The US West Texas Intermediate futures rose 1.8% to $43.93 a barrel.
Despite the rise, Brent crude is still on track for its biggest weekly decline since late July because of concerns about over supply.
This is what happened to the euro v dollar immediately after payrolls:
Euroooooooooooo#NFP pic.twitter.com/S3Zvsi1xoW
— Maxime Sbaihi (@MxSba) September 2, 2016
The US jobs report also showed the unemployment rate was unchanged at 4.9% in August. It was expected to ease slightly to 4.8%.
Earnings growth of 0.1% was also weaker than July, when wages increased by 0.3%. Economists predicted 0.2% growth.
James Knightley, a senior economist at ING, says the Fed is likely to wait until 2017 to raise rates (but a December hike is not off the table):
The report doesn’t support the case for a September rate hike, probably being more consistent with our current view that the first quarter of 2017 is the more likely point the Fed chooses to raise rates.
After all inflation pressures are very benign and the US election has the potential to weigh on sentiment and activity a touch.
On the other hand, an increasing number of Fed speakers have suggested that they are comfortable to hike rates despite relatively subdued employment growth meaning a December move should not be ruled out.
Here is the full story on the US non-farm payrolls report:
Pound surges against dollar after weak US jobs report
The pound hit a one-month high against the dollar after the weak US payrolls report, now up 0.4% at $1.3320.
Updated
Reaction to those surprisingly weak US non-farm payrolls is coming in:
So. Pub?
— World First (@World_First) September 2, 2016
Breaking: US payrolls disappoint
Figures just out show non-farm payrolls were up 151,000 in August, disappointing forecasts of 180,000 and way below July’s upwardly revised 275,000.
This will pour cold water on expectations that the Fed will raise rates in September.
US markets are expected to open lower:
US Opening Calls:#DOW 18410 -0.03%#SPX 2168 -0.11%#NASDAQ 4782 -0.02%#IGOpeningCall
— IGSquawk (@IGSquawk) September 2, 2016
Five minutes until non-farm payrolls...
The dollar is treading water ahead of the US employment figures due shortly.
Against a basket of currencies it is down just 0.09% at 95.7, after falling 04% on Thursday after weaker than expected manufacturing figures. Meanwhile the pound has edged up 0.02% to $1.3270.
The non-farm payrolls will give investors and economists further clues as to whether the US Federal Reserve is likely to increase interest rates at this month’s meeting.
Reuters poll: ECB to hold policy in September
Economists polled by Reuters believe the ECB will leave policy unchanged when the governing council meets next week.
However, they believe eurozone policymakers will vote for an extension to their asset purchasing programme by the end of 2016.
The ECB has been buying mostly government bonds for over a year, and currently at a rate of €80bn a month. Interest rates are at zero and deposit rates - those paid by banks to hold money at the central bank – are negative.
Despite these measures, inflation is just 0.2%, well below the ECB’s target of close to but just below 2%.
Back in Dublin, a protestor from Irish campaign group Uplift is pictured with an open letter to the government, urging it to drop plans to appeal the EU’s Apple tax ruling.
The protestor is dressed as Snow White, the fairytale character offered a poisoned apple by the evil queen.
Uplift wants the government to take the money - up to €13bn plus interest – from US tech giant Apple, and invest it in public services.
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The European Central Bank is moving into focus as policymakers get ready for business at next week’s meeting.
There has been mounting speculation that recently weak eurozone data will prompt ECB president Mario Draghi and his colleagues into action.
But Peter Rosenstreich, head of market strategy at Swissquote Bank, says we shouldn’t expect too much:
It has been almost three months since the UK Brexit referendum and economic data in the eurozone seems largely unaffected. Given the general assessment that the eurozone has dodged a bullet, we suspect that the ECB will only marginally tweak forecasts and will be less likely to expand its easing programme.
We expect that Draghi will opt for a wait-and-see strategy based on the impact of the Fed policy decisions. In the absence of any sudden shifts in Europe’s economic outlook, the ECB will stay on the sidelines with its current policy mix.
We anticipate that the ECB will wait for the December meeting before announcing any official extension to quantitative easing and combine it with further adjustments to economic projections. By December’s meeting, the longer term effects of Brexit should begin to become more apparent.
Some Twitter reaction now to the news this morning that Southern rail owner Go-Ahead made almost £100m profit last year despite the travel misery endured by its customers:
Totally absurd that @SouthernRailUK profits soar to £99m whilst delivering a truly shocking service to customers https://t.co/MQcE3f5x3e
— David Lammy (@DavidLammy) September 2, 2016
Company which runs useless @SouthernRailUK makes £99m profit up 20 percent. So why is Govt giving them £20million to ease crisis
— Andrew Pierce (@toryboypierce) September 2, 2016
Sign our petition https://t.co/MQCRy7vQmT calling on the Govt to terminate the #Southern franchise now #SouthernFail pic.twitter.com/KcHEjkI7sw
— Chuka Umunna (@ChukaUmunna) September 2, 2016
Go-Ahead Group, which jointly operates Southern Rail has seen annual profits soar 27% to £99.8 million. Passengers will be furious
— Chris Choi (@Chrisitv) September 2, 2016
An old ally of Taoiseach Enda Kenny has piled the pressure on the Irish Premier over the Apple tax debacle.
Former Fine Gael minister Phil Hogan has urged the current Irish government to accept Brussels’ ruling that Apple owes the Irish exchequer billions in unpaid tax. The former environment minister is now the EU commissioner for agriculture.
Hogan confirmed on Friday that he joined the other 27 commissioners in Brussels in backing the ruling against Apple. He said it was a “collegiate decision” made by every commissioner including himself.
Hogan, who helped introduce the controversial water charges in Ireland as part of the last Fine Gael-Labour government, was Enda Kenny’s nominee for the EU agriculture post.
European markets are up as investors await the US payrolls report for August (published at 13.30 UK time).
Ana Thaker, market economist at Phillip Capital, says markets are currently pricing in a 34% probability of a September rate hike:
US non-farm payrolls promise to be crucial for markets on tenterhooks for data that could spur the Fed into a rate hike. The August payrolls figure could confirm speculation from FOMC members that the labour market is strong enough to withstand a rate hike.
However, average hourly wages are set to drop a touch which could be used a reason to defer a rate hike further despite comments from both Yellen and her second in charge, Fischer.
Yesterday’s poor ISM PMIs saw the dollar fall rapidly and indicates the fragility of the currency. However, if the labour market proves to be robust, the FOMC may be left with no choice but to tighten despite weakness in other areas.
Protestors urge Irish government to accept EU's Apple ruling
In Ireland, 10,000 people have signed a petition urging the government to accept the EU ruling that Apple must pay up to €13bn in back taxes, and to drop plans to appeal the decision.
The Guardian’s Henry McDonald in Dublin reports that the petition is to be handed over to the Irish Parliament this morning by protestors, including one dressed up as Snow White:
A petition containing 10,000 signatures is being handed over to the Irish parliament this morning urging Finance Minister Michael Noonan not to appeal against the EU ruling against Apple.
Uplift, the organisers of the petition and protest, said one of their members dressed up as Snow White because she “famously ended up in a coma after being tricked into eating a poisoned apple.”
The €13 billion the EU believes Apple owes in tax to Ireland has become a politically poisonous issue which has split the Irish Cabinet. Fine Gael and Independent members of the minority coalition government have failed so far to reach an agreement on how to respond to the EU decision.
The petition and protest on Friday highlights the political damage the row could inflict on a government that wants to defend Ireland’s reputation as a low-tax bridgehead into the European market for mainly US based hi-tech multi-national corporations.
The letter states:
Dear Minister Noonan,
Everyone has to pay their tax and that includes Apple, one of the world’s most wealthy corporations. When they’re allowed to avoid paying their tax bill, we all suffer.
As the Minister for Finance you have a duty to protect and safeguard the interests of every man, woman and child in Ireland. You claim you do not have enough money in the public exchequer to ensure quality healthcare for everyone; to properly resource our schools and universities; to ensure every worker has a living wage, to end homelessness. Apple’s tax bill would go a long way to solving these problems.
We, the undersigned, remind you that you have a choice and an opportunity to stand up for the people of Ireland over the interests of Apple. We call on you to not appeal the decision that Apple owes Ireland €13bn. Don’t stand in the way of Apple paying what they owe.
Updated
Mike Chappell, construction expert at Lloyds commercial banking said the PMI survey was encouraging for the industry:
The past month has seen a number of the bigger players in the sector report robust results with a relatively upbeat outlook, suggesting there may have been less negative impact from the EU referendum result than was originally feared, at least at the top of the market.
This data provides further reassurance, although the headline reading still remains below 50, which separates growth from contraction.
The order books of larger firms, many of which benefit from diversified revenue streams, appear to be in good shape, while several have either increased or restored their dividends. That said, anecdotal evidence indicates those further down the chain – such as mid-tier contractors and SMEs – are less bullish and more likely to adopt a ‘wait and see’ approach.
The breakdown of the construction PMI shows civil engineering was the strongest part of the industry in August, rising to 50 from 47.1 in July.
Housebuilding and commercial building such as offices and shops were still shrinking, but at slower rates than in July.
Housebuilding rose to 48.2 from 45.6, while commercial rose to 48.2 from 43.9.
Firms in the sector took on more workers last month, and were feeling the most confident about the business outlook in three months.
At 49.2, the headline index suggests acivity in the construction sector has been shrinking for the past three months.
Tim Moore, senior economist at Markit, said construction firms were still concerned about the Brexit vote:
The downturn in UK construction activity has eased considerably since July, primarily helped by a much slower decline in commercial building. Construction firms cited a nascent recovery in client confidence since the EU referendum result and a relatively steady flow of invitations to tender in August.
However, the latest survey indicates only a partial move towards stabilisation, rather than a return to business as usual across the construction sector. There were still widespread reports that Brexit uncertainty had dampened demand and slowed progress on planned developments, especially in relation to large projects.
Despite another month of reduced output, the latest figures can be viewed as welcome news overall after a challenging summer for the construction sector.
Updated
Breaking: UK construction improves in August
Britain’s construction sector was in better shape than expected in August according to the Markit/CIPS PMI.
The headline index increased to 49.2 from 45.9 in July, beating City forecasts of a smaller rise to 46.1.
The sector was still shrinking however, as any number below 50 signals contraction. But the rate of contraction slowed nevertheless.
UK business confidence rebounds in August
A report published overnight by YouGov and Cebr showed a rebound in UK business confidence in August.
It followed a sharp drop in July, the month after the Brexit vote, and is the latest sign that initial panic over the referendum result has subsided.
The index rose to 109.7 in August from 105 in July. Confidence was lower than before the EU vote however, with the index at 112.6 in June.
Scott Corfe, director at Cebr:
The dust is settling on the EU vote and businesses are showing signs of resilience, for now at least. With the post-Brexit panic abating and many indicators signalling a reasonably robust short-term outlook, businesses are suggesting a greater confidence for the coming 12 months when it comes to their own operations.
However, one red flag in these figures is the level of pessimism about the UK economy that the Brexit vote has engendered in British businesses. If these concerns materialise into reality, businesses could rapidly rein in their investment and hiring plans.”
RMT: Go-Ahead profit is 'obscene'
The rail union RMT has responded with anger to the news that Southern rail owner Go-Ahead made almost £100m in profit last year while commuters suffered travel misery.
General secretary Mick Cash says:
While Go-Ahead have been driving Britain’s biggest rail franchise into total meltdown the cash has been sloshing through the boardroom at obscene levels. This is reward for total failure on a scale which is off the map.
Just a fraction of these profits would be enough to keep the guards on Southern trains, keep the passengers safe and resolve the industrial dispute between RMT and the company. It is shameful that they have opted to hoard cash instead of protecting the travelling public.
It is also deeply cynical that Southern/Go-Ahead have brought forward this mega profit announcement so it doesn’t clash with the strike action by guards next week.
They are a money-raking disaster that has turned Britain’s railways into a global laughing stock and they should be slung out and replaced by the public sector option.
The pound is roughly flat this morning.
It is up 0.02% against the dollar at $1.3270, and up 0.1% against the euro at €1.1857.
Analysts are pondering whether this might be the bottom for the pound for the time being.
It has fallen by about 10% since the 23 June Brexit vote, but the latest data suggests the economy performed better than expected in August.
FTSE rises in early trading
The FTSE 100 is up 24 points or 0.4% in early trading, making up some of Thursday’s lost ground.
This is how markets across Europe are looking:
- FTSE 100: +0.4% at 6,770
- Germany’s DAX: -0.1% at 10,523
- France’s CAC: +0.2% at 4,448
- Italy’s FTSE MIB: +0.4% at 16,987
- Spain’s IBEX: -0.2% at 8,750
- Europe’s STOXX: -0.01% at 344
Connor Campbell at Spreadex, says the UK construction PMI at 9.30 could be interesting to markets following the August surge in manufacturing.
After taking a hit following the pound’s post-manufacturing PMI surge the FTSE is aiming to regain some of the ground it lost this Friday, jumping just shy of half a percent as the European session got underway.
With most of the focus on the US non-farm jobs report this afternoon there isn’t much for investors to deal with this morning. Nevertheless one would imagine that considering that shock boost to manufacturing in August the markets will be interested to see whether or not the UK construction sector has seen a similar recovery.
Any positive surprise to the construction PMI will likely benefit the pound more than the FTSE, even if sterling used up quite a lot of its market goodwill yesterday.
Southern rail owner makes almost £100m profit
Frequent travellers on Southern rail services might not be best pleased to hear its parent company Go-Ahead made a £99.8m profit in the last year, up 27%.
It follows a summer of commuter misery for passengers faced with delays, cancellations, and suspended routes at the hands of Southern rail.
Go-Ahead said its chief executive David Brown would forgo his annual bonus and declined a pay rise.
Brown said:
Southern services have been disrupted by restricted network capacity, strike action and increased levels of absence.
We apologise to the people whose lives have been affected during this time. We continue to work closely with the Department for Transport, Network Rail and other suppliers and partners to operate the best service possible while delivering the long term improvements.
Read the full story on the results here.
For an alternative perspective, follow the Guardian’s Martin Belam who is live blogging his way around Southern rail services this morning:
European markets are expected to open higher today before the US jobs data:
Our European opening calls:$FTSE 6760 up 14
— IGSquawk (@IGSquawk) September 2, 2016
$DAX 10559 up 25
$CAC 4451 up 11$IBEX 8779 up 16$MIB 16970 up 47
The FTSE 100 closed down 0.5% on Thursday, despite a major and unexpected rebound in the UK manufacturing PMI survey for August.
Jasper Lawler at CMC Markets explains:
There was some divergence between UK stock indices on Thursday with the FTSE 250 ending the day over half a percent higher whilst the FTSE 100 lost 0.5%.
The divergence came about as a result of a surprise return to expansion for the UK manufacturing industry in August.
Investors pulled funds out of multinationals exposed to a stronger pound and reallocated them into domestically focused firms that benefit from a resilient UK economy.
The agenda: all eyes on non-farm payrolls
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
It’s non-farm payrolls day. And this one takes on major significance for investors as it the last one before the next policy meeting of the US Federal Reserve on 20-21 September.
Janet Yellen, the Fed’s chair, and her colleagues on the FOMC have repeatedly stated they will look to the latest data before making their decision.
The payrolls report is the crucial indicator on the state of the US jobs market, and economists are expecting the August report to show an increase of 180,000, following a 255,000 increase in July.
Any number in line with or above forecasts will fuel expectations of a rate hike this month.
Any number below will have the opposite effect, especially following Thursday’s weak ISM manufacturing report for August.
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