European markets end higher
A recovery on Wall Street in the wake of the US jobs figures - and despite the uncertain end to two days of trade talks between the US and China - gave a late lift to European markets. The final scores showed:
- The FTSE 100 finished 64.45 points or 0.86% higher at 7567.14, making its sixth weekly gain in a row
- Germany’s Dax jumped 1.02% to 12,819.60
- France’s Cac climbed 0.26% to 5516.05
- Italy’s FTSE MIB added 1.12% to 24,335.02
- Spain’s Ibex ended 0.65% better at 10,104.1
- But in Greece, the Athens market fell 1.84% to 823.89
On Wall Street, the Dow Jones Industrial Average is currently up 270 points or 1.13%.
On that note, it’s time to close for the week. Thanks for all your comments and we’ll be back on Tuesday after the May day Bank Holiday.
US markets have recovered from a wobby start, with the Dow Jones Industrial Average now up more than 200 points. Chris Beauchamp, chief market analyst at IG, said:
Equities are advancing on a broad front as the week moves to its close, and while non-farm payrolls didn’t deliver anything of a particularly spectacular nature, the overall impression is of a US economy moving in the right direction. Fans of symbolic moves will be pleased to see the unemployment rate move below 4%, and even though the wage figure failed to beat expectations, the year-on-year number has continued to recover from its late-2017 weakness, with the upward trend from the 2013 lows there for all to see.
Reports that Warren Buffett had been a steady buyer of stocks in the first quarter thanks to the volatility will have stiffened a few wavering souls, helping to cancel out some of the trade war worries we saw overnight.
Mixed opening for Wall Street
A mixed US jobs and wages report has led, appropriately enough, to a mixed opening for US markets.
After an early dip the Dow Jones Industrial Average has edged up just 3 points while the S&P 500 and the Nasdaq Composite are both marginally lower.
#Payrolls didn't turn out to be the game-changer U.S. stock markets could have used as pretext to relax about inflation+dollar+Fed - they would have needed to be much weaker. Helps explain why #Dow, S&P have stayed weak into the cash open ^KO
— City Index (@CityIndex) May 4, 2018
Updated
Here’s our report on the US jobs figures:
The rebound in the dollar following the US jobs data has seen the pound lose 0.58% to $1.3495, meaning sterling has lost all the gains it made against the US currency this year.
Argentina raises rates to 40%
However much the Fed hikes, it will not be to 40% one sincerely hopes.
But the Argentinian central bank has hoisted its rates to that level in the second rise in 24 hours. On Thursday it raised them from 30.25% to 33.25% and now has lifted them to 40%.
The move comes in an attempt to defend the peso, which has fallen more than 16% so far this year against the dollar. The US Federal Reserve’s move to raise its own interest rates has seen outflows of capital from emerging market currencies and into the dollar.
Updated
The dollar dipped in the immediate aftermath of the US data, with analysts concerned about the weaker than expected wage growth and the chance it might limit the Federal Reserve’s ability to raise interest rates by as much as expected.
But the US currency soon rebounded on the basis that the figures were not really likely to sway the Fed one way or the other.
🇺🇸#US labour market continues to tighten but where is the wage growth? Wage growth is still subdued. #Fed on autopilot with 2-3 more hikes this year pic.twitter.com/3dpsHQ0LGI
— Danske Bank Research (@Danske_Research) May 4, 2018
Economist James Knightley at ING Bank said:
The April US jobs report is a bit mixed. Employment rose 164,000, but when you add in 30,000 upward revisions to the past 2 months then it is pretty much in line with the market expectation for a 193,000 rise. Unemployment fell to 3.9%, the lowest level since December 2000, but the fall from 4.1% was amplified by a sizeable chunk of unemployed people leaving the labour force – note the participation rate fell from 62.9% to 62.8%. Rounding out the report was a softer wage number. There were some downward revisions and a weaker month on month reading for April of 0.1%, which mean the annual wage growth rate remained at 2.6%, rather than coming in at 2.7% as predicted.
It isn’t a particularly exciting report and certainly shouldn’t alter market expectations for monetary policy in any meaningful way, but it just feels a bit soft given the state of the economy. Other surveys paint a stronger picture and we still believe that the wage story will turn higher and be the catalyst for the Fed to take a more aggressive stance on the inflation threat...we continue to look for 3 further interest rates rises this year, starting with June 13.
Revisions to the payroll number for February and March paint a slightly better picture overall:
February and March Non-Farm Payrolls revised higher by a net 30K.
— John Stearns (@JohnLStearns) May 4, 2018
Updated
The 164,000 increase in US payrolls in April was well below the average monthly gain of 191,000 over the previous 12 months, the Labor Department said.
In terms of sectors, there were job gains in professional and business services, manufacturing, health care, and mining over the month of April.
There was little change in other major industries, including construction, retail, transport and warehousing, leisure and hospitality, and government.
US Payrolls below expectations at 164,000 jobs added, but increase in last months estimate leaves market 'as you were' - Dollar heads towards 2018 highs as US jobs data loom https://t.co/WNM5NvBpMM pic.twitter.com/dp8TjmSObl
— Hawk FX (@hawkforex) May 4, 2018
US non-farm payrolls weaker than expected in April
Breaking: The US economy added 164,000 jobs in April, weaker than the 192,000 forecast by economists.
On the flip side, the number for March was revised up by the Labor Department, to 135,000 from an initial estimate of 103,000.
Average wage growth was weaker than expected, at 2.6%. Economists had predicted March’s 2.7% growth would be unchanged.
Meanwhile the unemployment rate fell more than expected to 3.9% in April from 4.1% in March. It was expected to edge down to 4%.
Almost time for the US non farm payrolls report for April. Economists are predicting a rebound in job creation after a particularly weak March.
Headline expectations according to a Reuters poll (March’s figures in brackets, which could be revised):
- Non-farm payrolls: 192,000 (103,000)
- Unemployment rate: 4% (4.1%)
- Average annual earnings growth: 2.7% (2.7%)
Updated
Growth in eurozone retail sales slowed in March, according to figures published earlier by the statistics agency Eurostat.
The volume of goods sold dipped 0.1% compared with February, as consumers spent less on non-food items. Sales had risen by 0.3% in February.
It dragged the annual rate of growth down to 0.8% from 1.8%.
Monthly sales growth was strongest in Latvia, up 2.3% in March, while sales fell 1.7% in Ireland.
US and China reach deals in some areas - report
The US and Chinese delegations have reached agreement on some aspects of the trade row but there are still relatively big differences on other issues, according to China’s Xinhua news agency. Reuters reports:
The two sides, though, committed to resolving their trade disputes through dialogue, state-run Xinhua reported.
And the U.S. negotiators agreed to bring up with U.S. President Donald Trump the question of a ban on U.S. companies selling goods and software to Chinese telecommunication equipment maker ZTE Corp after representations from the Chinese side, the report said. ZTE faced the seven-year ban after the U.S. said it failed to keep to an agreement it made after breaching U.S. sanctions.
The talks over the past two days have involved a high-level U.S. trade delegation led by Treasury Secretary Steven Mnuchin and top Chinese officials, including Vice Premier Liu He, following months of threats and counter threats from both sides in a series of disputes over trade practices.
The U.S. team has already left Beijing and is heading back to the U.S., a U.S. official told Reuters early on Friday evening. The Americans have yet to give their account of the talks.
The trade discussions had been “candid, efficient and constructive,” Xinhua said, but gave almost no details on what the officials had agreed.
The officials exchanged opinions on resolving tariffs and non-tariffs measures, on expanding two-way investment and the protection of intellectual property, and on expanding U.S. exports to China and bilateral services trade, Xinhua reported. It gave no indication of what actions might be taken based on those exchanges.
“My impression was that (the talks) didn’t go well given the rhetoric,” said Kevin Lai, senior economist at Daiwa Capital markets in Hong Kong. “I think the divide is still very big.”
Back with the trade talks, and Reuters is reporting some Chinese proposals to the US:
China proposed to the US it would increase imports of US goods and lower tariffs on some products including cars as part of bilateral trade negotiations, according to sources (RTRS)
— DailyFX Team Live (@DailyFXTeam) May 4, 2018
Eurozone surveys point to waning growth
The latest business surveys from the eurozone suggest the weaker growth achieved in the first quarter of 2018 could be spilling over to the second.
The headline index on the IHS Markit services sector PMI fell to an eight-month low of 54.7 in April, from 54.9 in March.
It nudged the composite index, which combines manufacturing and services, down to 55.1 last month, from 55.2 in March.
However, the figures still indicated fairly robust growth across the single currency bloc, with any number above 5o signalling expansion.
Ireland was the top performer in April on the composite measure:
- Ireland: 57.6
- France: 56.9
- Spain: 55.4
- Germany: 54.6
- Italy: 52.9
Chris Williamson, chief business economist at IHS Markit, provides some context:
The final PMI numbers confirm the marked, broad-based fading of the eurozone’s growth spurt so far this year. The headline index has fallen from an 11-and-a-half year peak in January to a 15-month low in April.
Despite the drop, the PMI is not yet at a worryingly low level, but the survey details hint at further easing in the coming months.
Here is our full story on the job losses planned at BT:
US delegation calls on China to cut its annual trade surplus by $100bn
Reports are coming from China of a leaked list of demands/wishes from the US trade delegation in Beijing.
On the list is the request that China cuts its trade surplus to $200bn by 2020, from more than $300bn in 2017.
The Wall Street Journal’s Lingling Wei has details from the list:
*U.S. Trade Group Asks China to Issue Negative List for Foreign Investment by July 1, Document
— Lingling Wei (@Lingling_Wei) May 4, 2018
*U.S. Trade Group Asks China to Cut Tariffs on All Products to Levels No Higher than U.S., Document
*U.S. Trade Group Asks China to Meet Quarterly to Review Progress, Document
Updated
New car sales in the month of April from 2002-2018:
The UK new car market grew 10.4% in April, with 167,911 new units registered https://t.co/y6liZJATtp pic.twitter.com/hqYW0HGR3Z
— SMMT (@SMMT) May 4, 2018
The rise in new car sales in April should be treated with caution, says Ian Gilmartin, head of retail at Barclays corporate banking:
The uptick in new car sales will be welcome news for many sellers, but we can’t have it both ways – just as we partly attributed last month’s poor result to an unfair comparison to an unusually strong March 2017 ahead of the tax changes, similarly April 2017 was relatively weaker after the VED increase came into force, which flatters today’s numbers.
With the exception of last year, it is still the weakest April since 2013 but after a full year of declines, the industry will cheer a sales increase in whatever way it’s achieved.
UK new car sales rise for first time in a year... but diesel sales plunge
Sales of new cars rose in April for the first time in a year, but the sharp decline in diesel sales continued.
New car registrations rose 10.4% compared with the same month last year, to 167,911 according to the latest figures from the Society of Motor Manufacturers and Traders.
However, the trade body cautioned that last month’s figures were flattered by a particularly week April last year, after buyers had brought forward purchases to avoid the new vehicle excise duty (VED) rules coming into force in the same month.
Diesels sales plunged 25% to 51,377, while petrol sales were up 38% to 107,169. Alternative fuel sales rose 49% to 9,365.
Mike Hawes, chief executive of the SMMT commented on the latest figures:
It’s important not to look at one month in isolation and, given the major disruption to last April’s market caused by sweeping VED changes, this increase is not unexpected.
While the continuing growth in demand for plug-in and hybrid cars is positive news, the market share of these vehicles remains low and will do little to offset damaging declines elsewhere.
Consumers need certainty about future policies towards different fuel types, including diesel, and a compelling package of incentives to deliver long-term confidence in the newest technologies.”
BT planning to announce thousands of job cuts, FT reports
Bad news for BT workers this morning as the British telecoms giant prepares to announce more than 6,000 job cuts next week, according to the Financial Times.
BT is expected to announce the cuts alongside its full-year results next week, when chief executive Gavin Patterson will update investors on strategy.
Shares have nearly halved over the past two years, and Patterson will be hoping that a major new programme of job/cost cuts will go some way to appease shareholders.
The latest job cuts will be in addition to the 4,000 redundancies announced a year ago, the FT reports.
Updated
European markets rise in early trading
With the exception of the CAC in France, major markets across Europe are higher this morning.
The latest scores:
- FTSE 100: +0.3% at 7,526
- Germany’s DAX: +0.4% at 12,742
- France’s CAC: -0.1% at 5,495
- Italy’s FTSE MIB: +0.8% at 24,245
- Spain’s IBEX: +0.1% at 10,050
- Europe’s STOXX 600: +0.3% at 386
While investors are likely to welcome Steven Mnuchin’s upbeat tone over in Beijing, expectations of a major breakthrough today remain low.
Lukman Otunuga, analyst at currency trading firm FXTM, explains:
The chances of a breakthrough trade deal from the two-day meeting are seen as highly unlikely. However, the talks could be a positive step for the two nations to avoid a potential trade war.
Although it is difficult to predict the outcome of the trade meetings, continual talks and negotiations between the Trump administration officials and Chinese officials may ease tensions.
Any signs of a possible breakdown in negotiations between the US and China have the ability to weigh on risk sentiment, consequently punishing global stocks.
The agenda: second day of US-China trade talks gets underway
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
A second day of trade talks between America and China is underway as the two sides negotiate policy in a meeting that could potentially avert a full-blown trade war between the world’s two largest economies.
US treasury secretary Steven Mnuchin told reporters in Beijing this morning that “we are having very good conversations” with Chinese counterparts. The comments are likely to boost hopes that a full-scale trade war can be avoided.
It’s also non-farm payrolls day in the US, which is always a favourite with investors looking for clues on the state of the wider economy and the likely timing of the next interest rate rise.
The agenda:
- 9am BST: eurozone service sector and composite PMI report for April
- 10am BST: eurozone retail sales for March
- 1.30pm BST: US non-farm payrolls report for April
- 1.30pm BST: US wage growth for April
Updated
