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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

FTSE 100 hits new 2016 high after US jobs report - as it happened

Unemployment has fallen to eight-year lows on U.S. President Barack Obama’s watch
Unemployment has fallen to eight-year lows on U.S. President Barack Obama’s watch Photograph: Kevin Lamarque/Reuters

Obama: We must build on jobs success

President Obama meeting with his cabinet
President Obama meeting with his cabinet Photograph: Bloomberg TV

In a late development, President Obama has just spoken to reporters after a meeting with his economic team.

Obama declared that the US is “pretty darn great” right now -- a rebuttal at Donald Trump and his “Make America Great” campaign. Our economy is the envy of the world, he claimed.

And the president was adamant that his policies had worked, delivering 72 months of jobs growth.

The priority is to continue that recovery, giving people better jobs and higher salaries, and making the economy “grow even faster”.

I’ll be back later with the Wall Street close....

Footsie hits new 2016 high after US jobs data

A new burst of market optimism has driven shares in London to their highest closing level since the start of 2016.

Mining stocks drove the market higher, helped by the sight of copper and iron ore prices touching their highest levels since last autumn.

Today’s US jobs report hasn’t scared the horses either, even though the poor wage growth took the shine off a decent rise in employment.

The FTSE 100 has closed for the night, and the week, up 69 points or 1.1% at 6,199. That’s its highest close since New Year’s Eve.

The Footsie has now surged by 12% since mid-February, when shares hit their lowest level since 2012 amid fears of a new banking crisis and a global recession.

The FTSE 100 over the last quarter
The FTSE 100 over the last quarter Photograph: Thomson Reuters

Jasper Lawler of CMC Markets sums up the situation:

Shares in Europe added to early gains after the US employment report eased concerns of a slowdown in the US economy without increasing chances of a faster pace of rate increases by the Federal Reserve.

Major averages in both the US and Europe are on track for a third successive week of gains. The strength in equities is largely thanks to oil prices being back close to where they started the year but today’s gains were reinforced by the biggest rise in the fix for the Chinese yuan in three weeks.

The stabilisation of the Chinese currency as well as efforts this week by authorities in China to bring down excess capacity in its commodities industries helped miners lead gains on the FTSE 100. Anglo American led the UK index with near double-digit daily gains in hot pursuit from sector-peers BHP Billiton, Glencore and Antofagasta as industrial and precious metals benefitted from a slide in the US dollar.

The top risers in London tonight
The top risers in London tonight Photograph: Thomson Reuters

Updated

The stock markets are pushing higher, as investors dash to buy shares before the European close in 15 minutes time.

Wall Street is now in positive territory, and the FTSE 100 is up 68 points at 6,200, again of 1.1%. Mining stocks continue to lead the rally, amid chatter that the commodity crunch has hit a bottom.

Bloomberg News’ Matt Boes has been truffling through the Jobs Report.

He’s spotted that unemployment among America’s Hispanic workers fell sharply last month. And the rate of retirements across the labor market dipped a little too.

White House: It's a very good report

Jason Furman
Jason Furman Photograph: Bloomberg TV

Jason Furman, who chairs president Obama’s Council of Economic Advisers, insists that “This is a very good report”.

The fall in the underemployment rate, and the rise in the participation rate, show that the labor market continued to improve, argues Furman on Bloomberg TV.

But what about the 0.1% fall in wages in February?

Furman agrees that wage growth isn’t good enough.

However, January saw unusually high wage growth of 0.5%. On average, the last two months showed wages growing faster than inflation, he says.

Updated

The drop in average earnings has tainted an otherwise solid US jobs report, says David Cheetham, market analyst at online trading platform XTB.com.

Overall the report paints a fairly strong picture of continued strength in the US labour market with the 4-month moving average remaining firmly above the 200k mark and the unemployment rate of 4.9% remains near its lowest level in a decade.

The first contraction in average hourly earnings since January last year came as an unexpected shock, although having said that there remains little evidence here of any real weakness in the labour market that would be prohibitive for Fed rate hikes in the not too distant future.’

Markets unmoved by Jobs Report

The New York Stock market
The New York Stock market has just opened Photograph: Bloomberg TV

The financial markets are not particularly impressed by today’s jobs report.

Wall Street has just opened, and the Dow Jones industrial average has dropped by 13 points or 0.08% to 16,931.

The tech-focused Nasdaq index is down 0.3%

Markets are still up in Europe, though, with the FTSE 100 up 0.5% at 6,163 points - close to its highest levels this year.

Despite a month-on-month fall in wages, overall today’s report bodes well for consumption, says Nina Skero, senior economist at the Centre for Economics and Business Research.

Strong job creation will make consumers both more able and, via boosted consumer confidence, more willing to spend.

A healthy consumer spending outlook is especially important for the US economy as the country faces challenges on other economic fronts.

CEBR agrees that the Fed could raise interest rates again soon -- something Skero calls “unwarranted and premature”.

They also sent over this chart, showing the steady recovery in the US labor market since 2010.

US non-farm payroll report
US non-farm payroll report Photograph: CEBR

Richard de Meo, managing director of Foenix Partners, is quite upbeat about the Non-Farm Payroll.

He reckons it has “shaken off the doubters” who thought the US economy was weakening.

Today’s jobs report is a mixed bag, says Paul Ashworth of Capital Economics.

But on balance, he thinks it could tee-up a Federal Reserve rate hike this summer:

Overall, it’s clear that labour market conditions are still strong. The lack of a more marked pick-up in wage growth is the only missing element.

But as far as the Fed is concerned, it is already seeing a clear acceleration in core price inflation, so it can’t delay raising interest rates for much longer. A June rate hike is coming.

Ian Shepherdson, economist at Pantheon Macroeconomics, has a cunning theory to explain the surprise dip in earnings (from $25.38 per hour to $25.35).

He thinks it’s all in the timing. Workers who are paid every fortnight would have received their second wage payment on 15th February, three days AFTER the Non-Farm Payroll survey took place.

Shepherdson says:

Don’t be taken in by the dip in hourly earnings; it just continues a very consistent pattern of undershooting in months when the 15th – payday for people paid semi-monthly – falls after the employment survey week.

Same thing in March, but then there’ll be a huge rebound, putting year-on-year wage growth at new highs.

This tweet suggests he’s right:

Financial commentators agree that today’s Non-Farm Payroll report shows solid job creation, but lacklustre wage growth.

Here’s some reaction:

Here's where those new jobs were created

Most of the jobs created in America last month were in healthcare, retail, and in bars and restaurants.

Here’s a breakdown

  • Health care and social assistance: +57,000 jobs.
  • Retail trade: +55,000.
  • Food services and drinking places: +40,000 jobs.
  • Private educational services: +28,000
  • Construction: +19,000,
  • Mining: lost -19,000 jobs

The BLS adds that:

Among the major worker groups, the unemployment rates for adult men (4.5%), adult women (4.5%), teenagers (15.6%), Whites (4.3%), Blacks (8.8%), Asians (3.8%), and Hispanics (5.4%) showed little or no change in February.

More Americans are returning to the jobs market.

The labor force participation rate rose to 62.9% from 62.7% in February. That means more people are either in work, or looking.

That could explain why wage growth is disappointing -- employers don’t need to offer large pay rises if there is still ‘slack’ in the jobs market.

Alan Krueger, Princeton economics professor, says the fall in earnings last month is a blow.

Speaking on Bloomberg TV, he says:

I’m surprised that we didn’t see a pickup in wages....This report, behind the headline jobs number, is disappointing.

Wage growth disappoints

Put the confetti away. Although job creation was strong, wage growth was not.

Average earnings of America’s private workers FELL by 0.1% during February, reversing the 0.5% rise seen in January.

That means wages are only 2.2% higher than a year ago.

Today’s report says:

In February, average hourly earnings for all employees on private nonfarm payrolls declined by 3 cents to $25.35, following an increase of 12 cents in January.

Average hourly earnings have risen by 2.2 percent over the year.

Updated

Job creation was quite broad-based last month.

The Bureau for Labour Statistics says:

Employment gains occurred in health care and social assistance, retail trade, food services and drinking places, and private educational services,

Job losses continued in mining.

The US unemployment rate remains at an eight-year low of 4.9%.

JOBS REPORT BEATS FORECASTS

Here we go!

The US economy created 242,000 new jobs last month -- a better performance than expected.

That beats market expectations for 195,00 new jobs

And January’s figure have been revised higher too, to show that 172,000 new hires (up from 151k originally).

More to follow...

Augustin Eden, research analyst at Accendo Markets, reckons Wall Street will be most interested in the earnings figures:

We expect markets to concentrate on wage growth rather than non-farm payrolls. It is, after all, inflation that’s the key metric for the Fed right now.

US jobs report: What to watch for

The waiting is nearly over.

In 30 minute time, the latest US jobs report will hit the tape and we’ll know how America’s employment market performed last month.

Here’s what to watch for:

1) How many new jobs were created in February. The consensus is for a 195,000 increase in the Non-Farm Payroll, up from a disappointing 151,000 in January.

As usual, Wall Street estimates vary quite widely, from 165k to 220k.

Some observers are more pessimistic though, such:

There’s also a chance that January’s figures will be revised.

2) Where’s the wage growth? We got a surprisingly strong 0.5% pick-up in earnings growth last month, suggesting that the recovery was reaching workers’ pockets

3) Has the unemployment rate come down again? It hit an eight-year low of 4.9% in January, which should have reassured the Federal Reserve over its December rate hike.

4) But what’s the deeper picture? The labor force participation rate has been close to its lowest in decades, showing that many Americans simply stopped looking for work. Underemployment is another key measure; the report will show how many people wanted to work more hours.

Arnaud Masset, analyst at Swiss online bank Swissquote, says the Payroll will shed light on whether America’s economy risks recession this year.

Even the most hawkish Fed members have stopped giving overly optimistic speeches, instead becoming more cautious about the US outlook.

More and more market participants are wondering if the US economy is on the edge of a recession or whether this is just a temporary setback (apparently the temporary setback has become seasonal since last year…). In our opinion, it is still too early to ring alarm bells.”

Brazilian markets leap after Lula detained

Demand for Brazilian assets is surging today, after former president Luiz Inácio Lula da Silva was detained by police.

Lula was dragged into the long-running corruption scandal that has gripped Brazil for months, when federal officers raided his house early this morning.

Our Latin America correspondent Jonathan Watts explains why the move is so important:

The detention of the influential Workers party politician – who is best known by his nickname Lula – marks a dramatic new phase of the Lava Jato (“carwash”) probe into bribery and kickback allegations involving the nation’s leading companies and dozens of congressmen.

It is likely to further add to the pressure on the government of president Dilma Rousseff, who is already struggling with an impeachment challenge, economic recession and the Zika epidemic.

More here: Brazilian police detain former president Lula in corruption inquiry

Investors are piling into Brazilian assets, anticipating political change. Brazil is currently suffering a deep recession, and rampant inflation.

The Brazilian real has already surged by over 2% against the US dollar, from 3.8 against the $1 to 3.7. The stock market is tipped to leap by 6% when trading begins.

Updated

A view at the ENAMI’s (National Mining Company) copper cathodes plant at Tierra Amarilla town, near Copiapo city, north of Santiago, Chile, December 15, 2015. As copper prices have slid to a more than six-year low, miners laboring away at the countless smaller mines that pock mark the Atacama desert are finding the buckets of ore they spend all day digging from the ground are fetching less and less money. Picture taken December 15, 2015. REUTERS/Ivan Alvarado

Today’s flurry of optimism is also pushing copper to its highest level since mid-November, as Reuters reports:

Copper prices rose to their highest in nearly four months on Friday, boosted by optimism about demand prospects and output cuts that will help the market move towards balance.

Benchmark copper on the London Metal Exchange was up 1% at $4,905 a tonne at 1048 GMT, on course for its largest weekly gain since September last year.

Copper earlier touched $4,933 a tonne, its highest since November 12.

Updated

Iron ore has hit its highest level since last October this morning, continuing a recent rally.

Iron ore is benefitting from reports that China is cutting its steel sector and laying off millions of workers, in an attempt to cut oversupply.

But traders should be cautious, given iron ore demand is so closely linked to China’s economic growth. Trimming supply doesn’t guarantee demand for steel, as the Wall Street Journal warned this week.

Here’s our take on today’s car figures:

BHS saleFile photo dated 26/01/15 of a BHS store on Oxford Street as the new owners of the store chain are “exploring options” including closures for the future of around a third of its 171 sites, it was disclosed today. PRESS ASSOCIATION Photo. Issue date: Tuesday March 17, 2015. It comes less than a week after retail tycoon Sir Philip Green announced the sale of the loss-making business to a consortium of little-known investors called Retail Acquisitions for a nominal sum reported to be as little as £1. See PA story CITY BHS. Photo credit should read: Dominic Lipinski/PA Wire

It’s a bleak morning for workers at troubled UK high street chain BHS.

The company’s owners are planning to cut 350 jobs, and is also threatening to close half its stores unless landlords cut the rent.

The job cuts come a day after BHS filed for insolvency protection, as we reported yesterday. My colleague Graham Ruddick has the story:

The retailer intends to make 220 people redundant in stores and 150 people in head office. Another 100 roles that had not been filled in BHS’s head office in recent months will also be scrapped, meaning its central operations will shrink by roughy a third.

BHS bosses briefed staff about the job losses and the turnaround plan on Friday morning.

As well as the job cuts, BHS is threatening to close up to half its stores if landlords do not agree to reduce the rents. BHS has filed a company voluntary arrangement (CVA), a type of insolvency proceeding, in an attempt to cut its costs.

Here’s the full story:

Markets up thanks to 'crazy' change in mood

The FTSE 100 is on track to close at a new 2016 high, although the US jobs report could yet change that.

After three hours of trading, the blue chip index is up a steady 0.5% at 6161 points.

Most other European indices are higher too, following Asia’s lead overnight, meaning global markets are still at a two-month high.

European stock markets

Ryan Myerberg, a portfolio manager at Janus Capital, says optimism has come pouring back into the markets recently.

He says (via Reuters):

“We didn’t believe the ‘world is going to end’ story, but the way the mood has changed in the last couple of weeks is just crazy.”

Since the beginning of the year it has been like driving down the motorway where every couple of miles a tractor has overturned, whether that be China, oil, the banks, that you have to swerve around.”

And this tweet shows how some emerging markets have led the rally in 2016, after a couple of challenging years.

Gold hits 13-month high

Money has been pouring back into gold this morning, driving the price of billion up to a 13-month high.

Gold just hit $1274.50 an ounce, up 1% today, its highest point since February 2015.

It’s surprising to see gold and shares both rallying. But it appears that gold is in demand from investors who are worried about negative interest rates, which have helped drive down the return on many safer assets.

There’s also a theory that Chinese demand for gold could jump if Beijing imposes capital controls, to prevent money leaving the country.

Updated

A sign in Paternoster Square outside the London Stock Exchange.

The London Stock Exchange has shown by two rivals want to leap into bed with it, by posting a 31% jump in profits for the last year.

CEO Xavier Rolet remained loyal to the main suiter, Deutsche Börse.

He said the merger of equals proposed last week was “compelling opportunity” to create a dominant new global trading group.

But the strong results may also encourage Intercontinental Exchange (ICE), which runs the New York stock exchange, to muscle in. It’s already considering its options.

Joshua Raymond, market analyst at online trading firm XTB.com, explains:

“It’s been a solid year for the LSE.

The focus of course now is whether a rival bid emerges from ICE that could spark a bidding war, or if the firms major shareholders remain convinced a tie up with Deutsche Börse on the already announced conditions is the best way forward for the trading house.”

Updated

Britain’s car industry has posted its strongest February sales growth in 12 years, despite another drop in demand for Volkswagen cars

New figures from the SMMT show that the new car market grew by 8.4% year-on-year last month,

Some 83,395 vehicles being registered, which is the best performance for a February since 2004:

UK car sales

The figures also confirm that the emission scandal continues to hurt Volkswagen. Its car sales fell by 13% year on year, from 7,710 to 6,694.

Back to economics...and Italy’s statistics office has confirmed that the Italian economy grew by a measly 0.1% in the last three months of 2015.

Facebook "to pay millions of pounds more in UK tax"

(FILES) This file photo taken on November 07, 2013 shows a giant logo created with pictures of Facebook worldwide users is pictured in the company’s Data Center, its first outside the US on November 7, 2013 in Lulea, in Swedish Lapland. Facebook could be using its dominant market position to violate data protection rules, Germany’s competition watchdog, the Federal Cartel Office, said on March 2, 2016, announcing it had opened a corresponding probe against the social network. / AFP / JONATHAN NACKSTRANDJONATHAN NACKSTRAND/AFP/Getty Images

Newsflash: Social networking giant Facebook is shaking up its corporate set-up, which should mean it pays rather more tax in the UK.

The move follows heavy criticism of US tech firms for using complicated corporate structures to cut their tax liability, apparently legally.

The BBC’s business editor, Kamal Ahmed, has learned that Facebook will no longer route advertising sales to big UK clients through its Irish operation.

He’s seen an internal memo, which explains that:

On Monday, we will start notifying large UK customers that from the start of April, they will receive invoices from Facebook UK and not Facebook Ireland,

What this means in practice is that UK sales made directly by our UK team will be booked in the UK, not Ireland. Facebook UK will then record the revenue from these sales.

The move is expected to “provide transparency to Facebook’s operations in the UK”, the memo adds.

Here’s the full story: Facebook to pay millions of pounds more in UK tax

Last autumn, it emerged that Facebook UK has only paid £4,327 in UK corporation tax. It made revenues of £105m, but booked an accounting loss of £28.5m in Britain in 2014, after paying out more than £35m to its 362 staff in a share bonus scheme.

Updated

2007, MAD MENJON HAMM Character(s): Don Draper Television ‘MAD MEN’ (2007) 01 July 2007 SAB4141 Allstar Collection/LIONS GATE **WARNING** This photograph can only be reproduced by publications in conjunction with the promotion of the above TV Programme. A Mandatory Credit To LIONS GATE is Required. For Printed Editorial Use Only, NO online or internet use. 1111z@yx

Advertising giant WPP has flagged up the EU referendum as a clear risk to growth prospects this year.

WPP boss Sir Martin Sorrell warned against “Don Draper-ish” optimism, given the threats to confidence.

He cited the conflict in the Ukraine and the Middle East, and also the Brexit risk, telling the City that:

“The somewhat surprising result of the UK general lection (at least to the pollsters), with the Conservatives winning an overall majority, has resulted in an uncertainty-stimulating EU referendum, now pegged for 23 June.”

Shares in WPP are up 0.7% this morning, after it posted solid sales growth of 4.9% in the final quarter of the year.

Mining shares are now at a four-month high, having rocketed by 25% this year:

European stock markets are rising at the start of trading, as investors get ready for his afternoon’s US jobs data.

In London, the FTSE 100 has gained 35 points, or 0.6%, to 6166 - which is nearly its highest level this year.

Mining companies are topping the biggest risers, indicating renewed confidence in economic prospects, particularly in emerging markets.

The FTSE 100 top risers
The FTSE 100 top risers this morning Photograph: Thomson Reuters

Tony Cross of Trustnet Direct says:

London’s FTSE-100 is making another pitch higher in early trade despite yesterday’s suggestions that the bulls may be running out of momentum.

Gains are broad based with natural resources stocks once again finding themselves at the top of the board with continued gains for underlying metals prices still lending support here.

World markets at a two-month high

After a very ropy start to 2016, world stock markets are now at a two-month high

That’s according to the MSCI World Market index, which tracks shares in 46 different countries.

As this chats shows, share prices are now back at early January levels, before the stock market turmoil began.

MSCI World Market index

The recent rally suggests that investor panic over a global downturn was overdone.

Now, though, there is talk about whether the market is over-bought - particularly as this week’s manufacturing and service-sector data has been somewhat patchy.

Chris Weston of IG explains why the rally could fizzle out:

There is an air of fatigue from the bulls in a number of developed equity markets, but they continue to grind higher....

But the market is in need of some injection of new news to provide an injection of inspiration and cause a new leg higher. It seems unlikely this inspiration comes from today’s US payrolls.

Asian markets rise ahead of US jobs report

Stock markets across Asia have rallied today as investors express optimism ahead of this afternoon’s America’s employment report.

Over in Tokyo, the Nikkei gained 0.3%. That pushed the Japanese index to a one-month high, up over 5% this week.

Chinese traders showed some confidence too, pushing the Shanghai index up by 0.5%.

Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities, reckons that investors are less worried about the global economy.

They are also anticipating that the US Federal Reserve will be reluctant to raise borrowing costs this year, given recent turbulence.

Fujito said (via Reuters):

Globally, markets are rolling back the extreme risk-off trading they did in January and February.

“Part of the reason is that the Fed seems to be easing its insistence on raising rates.”

Updated

Introduction: It's US Jobs Day

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, business and the eurozone.

One more heave, chaps. After a heavy week for economic data, it’s the big one today - the US Non-Farm Payroll for February, which is due at 1.30pm GMT.

The NFP will show how many new jobs were created across America’s economy last month, and also show whether wages picked up or not.

Although prone to later revisions, the Payroll is a crucial measure of the health of the US labo u r market, at a time when worries over the global economy are pretty intense.

Economists predict that 195,000 Americans got hired last month, leaving the unemployment rate at an eight-year low of 4.9%. Earnings are tipped to rise by 0.2% month-on-month, down from a chunky 0.5% rise in January.

A surprisingly good, or bad, Payroll number could give the markets a shunt and renew concerns about a global recession.

But as things stand, shares are expected to rise in Europe in early trading, with the main indices called up around 0.5%.

Also coming up today....

Japan’s central bank chief Haruhiko Kuroda has been testifying in Tokyo about monetary policy issues.

At 9am,, we get the final estimate of Italian GDP for the last quarter. It will probably confirm that the economy grew by only 0.1%.

The latest UK car sales figures (for February) also land at 9am.

And in the City, we’re getting results from London Stock Exchange Group (LSE) and advertising group WPP.

Traders will be looking for news about the LSE’s planned merger by Germany’s Deutsche Börse, which could bd disrupted by a counter-offer from America’s ICE.

Updated

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