The FTSE 100 has extended earlier gains, and is now up 0.6% at 7,357. BT is still leading the pack, up 4%, following the Openreach deal.
Here is how the rest of Europe is doing:
- Germany’s DAX: +0.1% at 11,987
- France’s CAC: +0.4% at 5,002
- Italy’s FTSE MIB: +0.5% at 19,671
- Spain’s IBEX: -0.03% at 9,996
- Europe’s STOXX 600: +0.3% at 374
That’s all for today. Have a great weekend everyone. AM
Wall Street opens higher after strong jobs report
Traders on Wall Street have got that Friday feeling after the stronger-than-expected payrolls report.
- Dow Jones: +0.3% at 20,924
- S&P 500: +0.4% at 2,375
- Nasdaq: +0.5% at 5,867
So next week’s Fed rate hike already looks like old news. It’s all about the one after that, and the one after that...
Oliver Kolodseike, senior economist at the Centre for Economics and Business Research:
Today, the Fed cleared the last small obstacle on its way to a now virtually certain interest rate rise next week.
Speculation will now turn to the future path of interest rates over the year. Markets will be closely scrutinising policymakers’ communication in coming weeks and months to gauge when and to what extent the Fed will continue to raise interest rates.
After March, there will be six more Federal Open Market Committee (FOMC) meetings this year, offering plenty of opportunities to tighten monetary policy further. Of course, the US economy will have to remain stable, with GDP, inflation and non-farm payroll figures of particular importance to policymakers.
Larry Elliott, the Guardian’s economics editor, gives his view on the US jobs report:
The latest US jobs report removes any lingering doubts about whether the Federal Reserve will raise interest rates next week.
Following news that the world’s biggest economy generated 235,000 net new non-farm jobs in February, it is a bolt-on certainty that the central bank will push up the cost of borrowing by a quarter of a point.
Indeed, the financial markets have already moved on from next week to musing about how many more times the Fed will tighten during the course of 2017. The feeling is that two more rate hikes are in prospect.
It certainly seems unlikely that next Wednesday’s rise will be the end of the matter. The report from the Bureau of Labour statistics showed employment up by more than the 190,000 expected by Wall Street and unemployment at 4.7%. Annual wage growth is running at 2.8%.
Policy makers at the Fed will look at this data and conclude that inflationary pressures are building as the economy approaches full employment. With US productivity so weak, the central bank will certainly be tempted to move again if and when earnings growth hits 3%.
There was plenty for Donald Trump to welcome in these figures. A mild winter has resulted in a big increase in construction jobs. Manufacturing employment was also up.
The new president has plans for a big package of tax cuts and spending increases but fiscal easing will mean more aggressive tightening from the Fed, which is already starting to fret about the risks of the economy overheating.
President Trump is happy with the non-farm payrolls report, judging by the fact he retweeted the following:
GREAT AGAIN: +235,000 https://t.co/GkockGNdtC
— DRUDGE REPORT (@DRUDGE_REPORT) March 10, 2017
US non-farm payrolls: reaction
The strong US jobs report has underlined expectations that the Fed will raise interest rates next week.
James Knightley, senior economist at ING, explains:
Ahead of this release financial markets were fully pricing in a 25 basis point rate hike from the Federal Reserve next week. Today’s data will only cement those expectations. As for the rest of the year, financial markets are pricing in just shy of two more 25 basis point hikes with the Fed’s dot forecasts suggesting FOMC members fully expect two more.
We are more cautious in pencilling just one. We sense that the current optimism on the US outlook may be tempered somewhat with Congress likely to push back against some of President Trump’s more aggressive fiscal stimulus plans.
Paul Ashworth, chief US economist at Capital Economics, says a rate hike at the Fed’s March meeting is now certain:
The 235,000 gain in non-farm payrolls in February will erase any lingering doubts that the Fed might not hike interest rates next week. It will also be greeted with a cheer from the White House.
Although February’s gain was above the official consensus forecasts at 190,000, it was broadly in line with our own 240,000 estimate. Nevertheless, many other forecasters scrambled to revise up their own forecasts earlier this week in response to the news of a bumper ADP figure. The upshot is that the market reaction may be muted.
As well as a strong non-farms number and lower unemployment rate, average annual earnings growth ticked up to 2.8% in February from 2.6% in January according to the US Bureau of Labour Statistics.
Employment rose in construction, private educational services, manufacturing, health care, and mining.
The positive jobs reports has sent US futures higher.
This:
US adds 235K jobs in February vs. 190K expected; unemployment rate at 4.7% https://t.co/4g9TMgFy4u pic.twitter.com/3zJJmPzNds
— CNBC Now (@CNBCnow) March 10, 2017
Breaking: US non-farm payrolls smash expectations
The number of jobs added in February was 235,000, smashing expectations of a 190,000 increase.
The figure for January was also revised up to 238,000 from 227,000.
The jobless rate fell to 4.7% from 4.8%, as expected.
Rate hike here we come!
It was only last month that Lloyds Banking Group reported its biggest profits since the financial crisis, despite taking a £1bn hit for payment protection insurance compensation.
At the time, the £1bn was something of a relief. There was not a new provision in the fourth quarter and the £1bn was less than the £4bn the previous year.
PPI has already required Lloyds to put aside £17bn - more than another bank - to pay out claims and handle the administration. But while it hoped to draw a line under £17bn the bank has not admitted it will need to take another £350m hit, which will be taken in the first quarter of this year.
In a statement to the stock exchange, as it filed its accounts with the US authorities, it said:
The additional provision has been taken to reflect the estimated impact of the policy statement including the revised arrangements for Plevin cases, which includes a requirement to proactively contact customers who have previously had their complaints defended, and which is likely to increase estimated volumes and redress. The policy statement also confirmed a two month extension to the time bar to the end of August 2019.
Plevin is a reference to a court ruling which gives consumers grounds to complain about PPI if they were not told about commission being paid when they were sold the policy.
The time bar is a reference to the Financial Conduct Authority’s announcement last week that it is setting a deadline for complaints of August 2019 - rather than June.
Lloyds sets aside another £350m for PPI
In news just out, Lloyds Banking Group has revealed it is setting aside another £350m provision for PPI claims - just two weeks after it published results.
Lloyds takes another provision for PPI - £350m on top of £17bn already announced https://t.co/940zhC1rxo
— Jill Treanor (@jilltreanor) March 10, 2017
Just 10 minutes until US non-farm payrolls...
Economists polled by Reuters are expecting the figure for February to come in at 190,000, following 227,000 in January.
The unemployment rate is expected to drop to 4.7% from 4.8%.
Greek bailout inspectors leave without a deal
Over to Greece now, where talks with bailout inspectors have ended inconclusively. Our correspondent Helena Smith reports from Athens:
Visiting bailout inspectors have left Athens reporting progress but asserting that differences still remain, preventing the conclusion of a progress review now key to releasing further funds to the debt-stricken country.
The two sides are still believed to be at odds over labour markets reforms, the liberalisation of the energy sector, pension cuts, tax increases and property levies.
Despite the improved mood between the Greek government and creditor institutions, hopes are fading fast that the review can be wrapped up in time for the next Eurogroup meeting of eurozone finance ministers on March 20 - a deadline prime minister Alexis Tsipras had hoped to meet.
But speaking exclusively to the Guardian, the governor of the Bank of Greece, Yiannis Stournaras, played down fears that the review would drag on endlessly, pushing the country inexorably towards default when it faces huge debt repayments in July.
Sooner or later it will be completed,” he said, insisting that the continued uncertainty engulfing Greece as a result of the delays “is in no one’s interest.”
Greece has covered a lot of road. We are 90% there in terms of fiscal adjustment. The government has done well on the fiscal side, less well on the structural reform side. The emphasis now should be on structural reforms and privatisations.
Wetherspoons boss slams Hammond's 'budget for dinner parties'
Tim Martin, the boss of Wetherspoon who is never afraid to speak his mind, is not happy with Philip Hammond.
He used a first-half trading update to criticise the chancellor’s spring budget on Wednesday, which he said would saddle the pub group with nearly £30m of extra charges.
Martin said a business rates bill of £7m, a £2m apprenticeship levy and a £4m hit from the sugar tax that will contribute to £29m in extra charges was not good for the sector as a whole.
We understand the need for the government to raise taxes. However, there should be a sensible rebalancing of the taxes paid by pubs and supermarkets, if the pub industry is to survive in the long term.
In effect, this was a budget for dinner parties, no doubt the preference of the chancellor and his predecessor – dinner parties will suffer far less from the taxes outlined above, whereas many people prefer to go to pubs, given the choice, he said.
Updated
Lagarde: Greek debt must be restructured
Christine Lagarde, head of the International Monetary Fund, has been speaking about Greece again.
Her comments that Greek debt must be restructured were hardly surprising, but it does suggest the IMF is not going to let this one go any time soon.
Speaking to French newspaper Le Parisien, Lagarde said the fund could only join the bailout programme if debts became more manageable.
“We also need a sustainable debt,” she told the paper, citing an extension of loan repayment periods and lower interest rates as possible solutions. She said she was trying to convince European leaders that Greece needs debt relief.
Lagarde insists on debt restructuring https://t.co/cg2fjUxnki pic.twitter.com/6omQMJ5NEH
— Kathimerini English (@ekathimerini) March 10, 2017
Brexit, Frexit, it’s all about the exits.
Here in the UK, Theresa May is on the verge of triggering article 50, officially kickstarting the Brexit process.
Over in France, Frexit appears a pretty remote possibility, reliant first on a Marine Le Pen election victory and then on a referendum vote. But following the shock Brexit result and Trump’s victory in the US, analysts believe it can’t be entirely ruled out.
It appears that Mario Draghi, president of the European Central Bank, would agree. Eurozone inflation is back, growth forecasts have been revised up, and yet Draghi was keen to emphasise there were downside risks at yesterday’s ECB press conference.
The risk posed by a potential Le Pen victory is clearly on policymakers’ minds.
Florian Hense, European economist at the German Bank Berenberg, spells out why policymakers are so fearful of a Le Pen victory:
The tail risk that Marine Le Pen, the leader of the far-right Front National, becomes the next president is not negligible (10% probability). Le Pen wants to pull France out of the euro and the EU. If successful, this would spell the end of Europe as we know it.
Tom Watson, Labour’s shadow secretary of state for culture, media and sport, has commented on BT’s Openreach agreement with Ofcom.
He says the government must work with unions to protect jobs an pensions:
This is a welcome announcement that must now deliver for customers, far too many of whom don’t have access to broadband or put up with a poor quality service.
The government’s failure to create healthy competition in the UK’s digital market has caused the rollout of broadband to be far too slow and millions of British households and businesses have paid the price, at a cost of billions of pounds to the economy.
While the legal separation of Openreach from BT is clearly a good thing for consumers we must also ensure it works for Openreach’s 32,000 employees and the government must work with the Communication Workers Union to ensure that jobs, pensions and terms and conditions are protected.
Now the separation has been agreed the government must waste no time in delivering the broadband infrastructure that UK homes and businesses so badly need.
As equities and the dollar rise, gold is down. The precious metal fell to its lowest in more than five weeks, at $1,194.55 an ounce.
Dollar hits 7-week high versus yen
The dollar is up as investors await the non-farm payrolls report due at 13.30 UK time.
The expectation is that the report will pave the way for a Fed rate hike at next week’s meeting. Markets are now pricing in an almost 90% chance of a hike. The dollar was up almost half a cent to 115.495 yen, the highest since 20 January.
The dollar index, which tracks the greenback against a basket of six major currencies, was flat at 101.80, but is on track for a fifth straight week of gains, it’s best run in eight months.
Hamish Pepper, currency strategist at Barclays, says the dollar’s strength might not have legs:
In the near term it’s going to be quite tough for there to be further dollar strength, given how well priced the Fed meeting is next week, and also just how much the market has priced for the year now as a whole.
Of course that [pricing] holds some relevance for the labour market report today - it implies that you really need to see quite a significant upside surprise if you’re to see continued dollar strength.
UK data: What the experts say
Alan Clarke, economist at Scotiabank, says that feeding all the data into the supercomputer, we shouldn’t be too downbeat, with the economy likely to grow at a decent pace in the first quarter of 2017:
Don’t be misled by all the negative signs! In summary, these data for January, the first month of Q1, make me confident that Q1 GDP growth can easily record 0.5% quarter on quarter still and possibly even 0.6%.
Ruth Gregory, UK economist at Capital Economics, says there are signs the economy is becoming better balanced.
She says industrial output and construction are on course to provide a bigger boost for the UK economy in the first quarter of 2017 than in the final quarter of 2016.
Of course, these sectors only account for around 20% of the economy ... But they should nonetheless prevent GDP growth from slowing too much in Q1.
Meanwhile, January’s trade figures point to more balanced growth too. All in all then, not only do today’s figures add to the evidence that economic growth has maintained a decent pace at the start of the year but they also suggest that growth is starting to become better balanced.
The ONS prefers to look at longer-term data, rather than just a monthly snapshot.
Kate Davies, senior statistician, says:
Taking the last three months together, construction and manufacturing both grew strongly, with a considerable narrowing in Britain’s trade deficit. However, both manufacturing and construction were broadly flat on the month with the trade balance little changed.
Construction orders fell back a little overall in second half of 2016, albeit after strong growth in the first half of the year.
UK manufacturing and construction output shrinks
Just in, a flurry of UK data for January from the Office for National Statistics.
It provides the first official snapshot of how key parts of the economy were performing at the beginning of 2017.
Here’s a snapshot:
- Manufacturing output fell 0.9% (economists forecast a 0.6% drop)
- Industrial output fell 0.4% (in line with forecasts)
- Construction output fell 0.4% (economists expected a 0.2% drop)
- Trade deficit narrowed unexpectedly to £10.8bn
Updated
BT shares up 4% after Openreach deal
Investors have welcomed BT’s agreement to separate from Openreach, which controls the UK’s broadband infrastructure.
BT is top of the FTSE 100 leader board this morning, with shares up 4% at the moment (and higher earlier).
Neil Wilson, senior market analyst at ETX Capital, gives his take on BT’s shares:
Shares in BT rallied on the open after the company finally reached a settlement to separate its prized Openreach division. It ends a lot of uncertainty over the future of BT and investors cheered the news with the stock gaining 5% in early trading.
It’s a marked contrast to the dark day in January when the shares plunged by a fifth just in just a few hours on troubles at its Italian division. Today’s gains have so far not seen the stock recover to the level it was trading at before news of the accounting trouble in Italy rocked the group.
German imports jump in January
Earlier we had German trade data, which showed a stronger-than-expected rise in imports in January according to the federal statistics office.
Imports grew by 3% compared with December, outpacing 2.7% growth in exports which was also a bigger-than-expected rise.
Germany imported goods worth €84bn in January, and exported goods worth €99bn.
Economists polled by Reuters had forecast a 0.5% increase in imports and a 1.85% rise in exports.
German #exports in January 2017: +11.8% on January 2016 #foreigntrade https://t.co/on1KRpvqWc pic.twitter.com/g7hmjLUbvd
— Destatis news (@destatis_news) March 10, 2017
Markets rise ahead of US jobs report
Markets have a spring in their step this morning, with European indices following Asian shares higher.
Today’s non-farm payrolls are viewed as the last hurdle to get over before the Fed takes the plunge and raises rates next week. So the report is keenly awaited on both sides of the Atlantic.
Here are the scores so far this morning:
- FTSE 100: +0.4% at 7,343
- Germany’s DAX: +0.4% at 12,024
- France’s CAC: +0.3% at 4,996
- Italy’s FTSE MIB: +0.9% at 19,739
- Spain’s IBEX: +0.4% at 10,041
- Europe’s STOXX 600: +0.3% at 374
BT reaches agreement to legally split from Openreach
In terms of corporate news, BT dominates this morning.
The telecoms giant has finally reached an agreement with Ofcom to legally separate Openreach, which controls the UK’s broadband infrastructure.
BT has been in dispute with the regulator over the split for about two years. Under the deal Openreach will be stripped of BT branding and become a “distinct company with its own staff and management, together with its own strategy and a legal purpose to serve all of its customers equally”.
The idea is that an independent Openreach will boost competition in the sector and boost the roll-out of superfast broadband.
BT’s rivals, including Sky, TalkTalk and Vodafone, have argued that BT has deliberately been slow to open up the network to their engineers, which has hampered their ability to offer homes superfast broadband access.
Here is our full story:
The agenda: It's US payrolls day
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 in the US. Economists polled by Reuters are predicting that 190,000 jobs were added in February, following 227,000 in January.
It would take an absolute shocker on the downside to derail expectations that the Federal Reserve will raise rates at its policy meeting on Wednesday next week.
Victoria Clarke, economist at Investec, said a rate hike next week is pretty much a done deal:
The Fed looks to be locked onto a course that would see it raise the Fed funds target rate range by 25 basis points to 0.75-1.00%, short of a sizeable shock to market sentiment and/or a massive downside surprise in the February payrolls report.
Note that with a March hike effectively a done deal, the key focus for markets will be the forward guidance on the prospect of rate rises ahead.
Some economists think today’s payrolls number could come a fair bit stronger than consensus expectations, not least because of a strong ADP jobs report on Wednesday, which easily beat expectations.
We’ll be tracking all the main events through the day...
