This suggests that the jobless rate would have been 0.29 pp lower in the absence of the shutdown, or 7pc rather than 7.3pc.
Gold falls on strong US jobs data
15.51 Gold has dropped to a three-week low after the payrolls. It is down 1.85pc to $ 1283.44 today.
Mike van Dulken, head of research at Accendo Markets, notes that gold “remains under significant multi-month taper-fear-induced pressure” at $ 1350, with a potential for another revisit of $ 1250 if the dollar strengthens (or indeed the euro weakens) further.
Gold in Friday’s trading. Source: Bloomberg
France’s ‘AA’ Hollande pays price for kowtowing to EMU deflation madness
15.34French President Francois Hollande has paid the price for kowtowing to EU madness, says Ambrose Evans-Pritchard.
Yes, S&P says France has bottled it on reforms. Francois Hollande’s patchwork of measures – losing momentum anyway since early 2013 – will not be enough to pull the country out of sclerosis.
It warns too that France is on borrowed time with a state sector over 56pc of GDP, now higher than Sweden, but without Swedish labour flexibility and free enterprise. We all know this.
But the deeper critique is that France has been set an impossible task.
… Hollande campaigned in 2012 on a growth ticket. He dabbled briefly with a Latin Bloc alliance to force a change in EMU policy, but hid behind Italy’s Mario Monti (who tried to calibrate it), and never took the lead. It was doomed to failure.
Instead, Hollande lamely buckled to EMU-core demands, and split the French Left by going along with Angela Merkel’s catastrophic Fiscal Compact. This treaty is an infernal deflationary machine for 20 years to come, the ultimate culmination of German folly. Hollande was told by an army of French economists – including the excellent Observatoire, on the Left – that this would lead to depression and deflation, as it has.
Without wishing to cause too much offence, he risks becoming the Pierre Laval of 1935, the executor of deflation decrees that he does not really understand, the pacificist idealist (yes, Laval was, once) who lost his way trying to enforce the mad logic of the 1930s Gold Standard, the EMU of its day. (Laval lost his way further under Vichy, but that is another story).
You can read his full blog here.
US Consumer confidence unexpectedly falls to near two-year low
15.19 It’s not all good news out of the US.
Consumer sentiment fell to 72 in November, its lowest since December 2011 and below both October’s final reading of 73.2 and the 74.5 forecast.
American hotel giant Marriott to pull out of Athens
15.12 American hotel giant Marriott International will pull out of Athens after a 30-year run.
Local representative for the hotel Andreas Meletiou told AFP
We had a 30-year contract which runs out on December 31. After discussions, both sides agreed not to renew.
The hotel will continue to operate directly from its parent company, ASTY S.A.
On its website, the Athens Ledra Marriott said: “Please be advised that as of December, 31st 2013 the hotel will no longer operate as a Marriott.”
The luxury hotel is situated on the central Syngrou avenue, close to the Greek capital’s city centre.
Athens Ledra Marriott in Athens
Twitter shifts in to the red
14.55 That didn’t take long. Twiiter shares are starting to lose ground in early trading in New York.
US markets open, Twitter continues to climb
14.45 US markets have just opened and it would appear that investors are continuing to pile into Twitter on its second day of trading on the New York Stock Exchange.
Wall Street is also in the black on the back of the surprisingly strong jobs growth report.
The Dow Jones is up 30.05 points (0.19pc) at 15,624.03.
The broad based S&P 500 advanced 3.66 (0.21pc) to 1,750.81, while the tech-rich Nasdaq added 18.88 (0.49pc) at 3,876.22.
Good news is bad news
14.27 So while the strong jobs numbers are good for the economy, they are not so good for markets.
Signs of a strong economic recovery support the US Fed beginning to taper its $ 85bn montly asset prices imminently and markets do not like that.
But its not just a good number, it’s a great number and that is a further problem, says Marcus Bullus, trading director at MB Capital, comments:
A nice mid-100s rate of job creation would have been cosily reassuring and allowed the markets to continue their steady upward march.
But such an outlandishly strong number for October, combined with the sizeable upward revisions for August and September, shows that the US economy is powering ahead – and will greatly increase the chance of imminent tapering.
Taken with the barnstorming 2.8pc GDP growth recorded in the third quarter, such surging rates of job creation could encourage the Fed to start reducing its QE programme as soon as December.
The $ 85billion a month crutch that the US, and the world economy, have come to rely on is now set to be pared back sooner rather than later.
Dollar spikes after jobs numbers
14.12 The dollar jumped straight after those jobs number. It is now up 0.36pc against a basket of currencies.
Dollar in Friday’s trading. Source: Bloomberg
Reaction to US jobs numbers
14.02 While everyone seems to acknowledge it is a very strong jobs number, there is a split on when tapering will occur. Several say they now expected the US Fed to start trimming its $ 85bn monthly asset purchases in December or January, while say the numbers are mixture and have urged the central bank to remain cautious.
Doug Cote, ING Investment Management
There is a false expectation the Fed won’t move until March. Inflation is getting to its target and with a better-than-expected-read here, we could get a taper in December or January and I don’t think that was priced in. I don’t think the Fed can defend not tapering sooner than current market consensus.
Kathy Jones, Charles Schwab
It’s a bit of a mess of a report because you don’t know about the reliability of the numbers. The BLS is telling us that there’s not much impact from the furloughed government workers. They were not counted as unemployed. We don’t know about those companies that were government contractors who may have laid people off during the government shutdown.
It may be that the labor market is beginning to pick up some steam but I would take it with a grain of salt. It’s a very mixed picture.
Douglas Borthwick, Chapdelaine Foreign Exchange
The headline is spectacular, but the number everyone is looking at is the change in household employment, which fell 720,000. Another big concern is the labor force participation rate dropping.
The amount of people leaving the workforce is astounding and the change in nonfarm payrolls isn’t keeping up with that side of the equation. That is stopping the dollar from strengthening as much as you would expect on the headline. I think people leaving the workforce is very negative for the economy. The Fed has to remain cautious.
Cameron Hinds, Wells Fargo
This is a shockingly impressive number. I don’t think I heard a single person project the number could be this high. We thought there were going to be a lot of cross currents relative to the government shutdown, but it certainly looks like the private sector drove this very healthy number.
We will see what happens behind the doors at the Fed but certainly there will be some reassessment of at least the possibility of a December and/or January tapering.
Pierre Ellis, Decision Economics
Obviously October payroll growth was a lot stronger than forecast particularly in private payrolls. With upward revisions to August and September numbers, this just emphasizes the unreliability of first-round estimates of anything.
There probably will be no rush to taper in December. It’s a message that things are not sliding off the table.
(Quote courtesy of Reuters)
Government shutdown did not affect jobs numbers
13.47 According to the statement from the US Bureau of Labor Statistics, the 16-day government shutdown has not impacted on the non-farm payrolls.
There were no discernible impacts of the partial federal government shutdown on the estimates of employment, hours, and earnings from the establishment survey.
But economist Justin Wolfers says you can see the impact in the finer details of the numbers:
Unemployment rate nudges higher
13.44 As expected the unemployment rate has nudged slightly higher to 7.3pc in October, from 7.2pc a month earlier.
One thing a lot of economists have picked up on is the participation rate which dropped to 62.8pc last month – the lowest since 1978.
Markets edge lower after jobs numbers
13.37 That better than expected US non-farm payrolls data has spooked investors, with the FTSE 100 sliding lower following the figures to trade down 0.7pc at 6,648.
With traders now betting the Fed could taper sooner than hoped, European markets are all broadly lower with Germany’s Dax down 0.6 and the Cac 40 in France off 1.1pc.
US September jobs numbers revised up
13.33 As well as October’s figure being much higher than expected, September’s number has been revised upwards to 163,000 from 148,000.
US non-farm payrolls surpass expectations
13.30 US non-farm payrolls out and they have smashed expectations.
The US added 204,000 jobs in October, far better than the 120,000 that had been expected.
Lunchtime update on markets
13.23 European markets are still in the red after the France downgrade and ahead of the US jobs numbers.
In London the FTSE 100 is down 0.42pc
In Germany the Dax is down 0.7pc
In France the Cac is down 1.13pc
In Spain the Ibex is down 0.68pc
In FTSE Mib is down 0.28pc
Troika completes final review of Ireland before bailout ends
12.57 The troika have been in Dublin this week to for its final review as part of Ireland’s €85bn bailout.
In its report published this morning the international lenders say Ireland’s programme “remains on track in the context of the nascent economic recovery”.
In the wake of the worst economic crisis in its recent history, Ireland undertook a comprehensive set of reforms, which from December 2010 were supported by an EU-IMF programme. The implementation of the programme, which will expire in the coming months, has been steadfast.
Ireland’s economy has been growing above the euro area average since 2011. Growth prospects for Ireland are strengthening after weakness in the earlier part of this year. Goods exports, retail trade, property prices, and consumer confidence are all increasing.
Declining unemployment and improving business surveys suggest that the job creation seen in the first half of this year is continuing, which is a crucial element for a revival of domestic demand. Overall, however, Ireland is expected to record low growth in 2013. A somewhat higher growth rate, of about 1.75pc, is projected for 2014 as its trading partners also begin to recover.
France versus UK
12.21 S&P was the first of the three major credit agencies to have stripped France of its AAA status in January 2012 before Fitch and Moody’s followed suit.
France and the UK carry the same rating level by Fitch and Moody’s at AA+ and Aa1 respectively, while S&P holds the UK at AAA and France 2 notches below at AA.
From a ratings standpoint, the UK appears to be in the lead, says Ashraf Laidi, chief global strategist at City Index, who also notes that with UK GDP set to growth more than three times faster than France at 1.6pc, the balance continues to tip in favour of the UK.
And the UK has greater control of its monetary policy.
One key reminder is that the UK the enjoys greater monetary autonomy than France or any other Eurozone member via currency policy (ability to talk down the pound via BoE’s inflation & growth pronouncements), monetary policy (stepping up asset purchases programs to reduce supply of outstanding gilts and reduce borrowing costs) and European policy (unburdened by contributing into the European Financial Stability Facility or upcoming European Stability Mechanism).
Source: City Index
12.01 Greek consumer prices fell sharply by 2pc in October on a 12-month comparison, official data showed on Friday, revealing continued deflation.
The most marked annualised drops in October were recorded in the miscellaneous goods and services sector, where prices fell on average by 4.8pc.
Prices in education were also down by 4.4pc, while in the communications sector they fell by 4.2pc.
The continued drop in consumer prices is largely the result of drastic austerity measures that the heavily indebted country has had to adopt in return for international rescue loans to avoid bankruptcy.
Source: Hellenic Statisical Authority
Hollande defends French policy after S&P downgrade
11.38 French President Francois Hollande has hit back at S&P and said his government would carry out all savings measures possible without endangering France’s welfare model.
Hollande told reporters in Paris that only the economic policies pursued by his government could underpin France’s credibility.
Aberdeen slips as Macquarie enters bid to buy Swip
11.25 Aberdeen Asset Management shares have fallen 4.4pc – the biggest drop in the FTSE 100 – following a report it faces competition from Macquarie in its bid for Scottish Widows Investment Partnership. The latter has apparently made a cash offer for Swip, while Aberdeen has proposed issuing new shares to pay for the acquisition.
But even if Aberdeen does buy the business from Lloyds Banking Group, would the deal be a sensible move for the fund manager? Analysts at Jefferies think not. They said today:
We believe that Aberdeen’s success has been despite its acquisitions rather than because of them and view the potential acquisition of Scottish Widows with some concern. Our analysis shows that Aberdeen has made a significantly lower return on equity from its deals than its cost of equity and that they have diluted the success of the original core business.
Dollar firms against euro after ECB cut and US jobs data ahead
11.06 With the unexpected ECB rate cut and S&P downgrading France, the euro has fallen.
Meanwhile the dollar is nearing a seven-week high today as markets awaited their monthly serving of US jobs data
The euro fell to $ 1.3410 following S&P’s announcement and was at its weakest level against sterling since January and hit multi-month lows against a crowd of other currencies.
Dollar nears seven-week highs
Trading volumes well above average levels
10.44 With the ECB rate cut taking many City institutions by surprise, coupled with Twitter’s listing on the New York Stock Exchange, trading volumes were more than 50pc above the typical average, CMC head of sales trading Matt Basi says, with a record number of clients logging on to their trading platform during yesterday’s afternoon session.
Despite the significant volatility clients had a huge day, with their cynicism surrounding the ECB rate cut proving profitable, as markets fell spectacularly back from their intraday highs.
Basi says volumes this morning are already well ahead of what they would expect in the build-up to a major announcement – the non-farm payrolls at 1.30pm (UK time).
Disappointing news for the UK economy
10.23 Today’s trade deficit figures are disappointing, says Howard Archer, chief economist IHS Global Insight.
Of particular concern, he says, are exports of traded goods excluding oil which fell by 1.9pc month-on-month in September and by 4pc quarter-on-quarter in the third quarter.
But that are grounds for hope that exports will pick up over the coming months, he adds.
The prospects for UK exports are being modestly helped by the eurozone finally exiting recession in the second quarter and likely continuing to see slight growth since then. Admittedly, sterling has strengthened to hit a nine-month high in October, but it is still at a pretty competitive level.
But he adds that it is unlikely that net trade will become a significant overall contributor to UK growth especially as imports are likely to be sucked in by decent domestic demand.
Growth in construction sector unexpectedly weaker than expected
10.11 More negative news for the UK – output growth in the construction sector was weaker than first estimated in the July-September period.
Construction output grew 1.7pc in the third quarter, below the preliminary estimate of 2.5pc
But unlike the trade deficit, the construction sector will not drag down the overall GDP growth for the period, the ONS said.
Construction output less than previously thought.
UK trade gap widens in September
10.05 Britain’s goods trade deficit widened more than expected in September, marking its biggest shortfall in almost a year and meaning trade will act as a drag on overall growth in the third quarter of 2013.
The Office for National Statistics said the goods trade deficit grew to £9.816 billion from £9.557 billion in August. Economists had forecast a gap of £9.2 billion.
Including Britain’s surplus in trade in services, the overall trade deficit widened slightly to £3.268 billion.
The monthly figures tend to be volatile, but over the three months to September, export volumes fell sharply by 4.6pc – the biggest fall on that measure since the three months to March 2009 – while imports rose 1.3pc.
The latest data means trade acted as a drag on quarterly economic growth in the third quarter of 2013. In the previous three-month period, trade’s contribution to GDP was neutral.
September trade deficit marks biggest shortfall in almost a year
Tullet Prebon propping up bottom of mid-caps
09.49 Back in the stock market, disappointing third-quarter earnings from Tullett Prebon have sent the interdealer broker down 5pc, the heaviest faller in the mid-cap FTSE 250. Analysts at Shore Capital said:
Tullett has reported that market conditions have remained challenging for the interdealer broker, owing to low levels of volatility, the more onerous regulatory environment for customers and uncertainty over the impact of new regulations. Consequently revenue fell by 9pc year-on-year at constant FX (same on a reported basis) in the 4 months to the end of October 2013 which, when combined with a 4pc fall in H1 (3pc reported), gives a fall of 6pc year-to-date (5pc reported basis).
Another faller this morning is FTSE 100 bookmaker William Hill, down 2.1pc after analysts at HSBC started coverage of the company with an “underweight” recommendation.
US non-farm payrolls
09.33 Aside from what’s happening on this side of the pond, markets will also be watching out for US non-farm payrolls which will be released at 13.30 UK time.
The data, which is a week late being released due to the 16-day government shutdown last month, is expected to show that 120,000 jobs were created in October, down from 148,000 created in September.
The unemployment rate is expected to have nudged up slightly to 7.3pc in October, from 7.2pc a month earlier.
Reaction to France downgrade
09.20 Mixed reaction to the France downgrade. Some are calling it the end for Hollande, others comment that little attention is paid to ratings agencies anymore.
Npower chief refuses to give up bonus
09.06 The chief executive of Npower has refused to give up his bonus following public anger over the rising cost of energy.
Paul Massara said his bonus was linked to performance and that he would only receive the sum of around £150,000 if he hit targets for employee and customer satisfaction.
Sam Laidlaw, the chief executive of British Gas owner Centrica, said this week he would not be taking a bonus this year, but Mr Massara branded the move a “gimmick”.
Gimmicks of saying, ‘I’m going to reduce my bonus’ – if Sam [Laidlaw] was earning five million a year and he’s willing to give a million, good for him.
I think the issue is, are we doing absolutely everything we can to keep costs down and to make sure it’s affordable?
My bonus is linked to my performance, is linked to getting it right for customers, is linked to employee satisfaction. All of my team are linked to that. If we don’t deliver on that, we don’t get a bonus.
He also said that future power cuts are a real danger because companies have cut back on investment due to the political uncertainty around the energy industry. He’s called for politicians to “create a stable environment”.
08.51 A bit more corporate news around this morning. Louise Armitstead has the details in her City Briefing morning email.
Madrid-based Telefonica, the owner of o2, has posted a 9pc drop in net profits over nine-months, hit by the weaknesses in Spain and in Latin America.
The results are marginally ahead of expectations. Earlier this week the company announced the sale of its Czech business for €2.5bn.
Rolls Royce has appointed two new directors: Warren East, former chief executive of ARM Holdings, is joining as non-executive director and chairman of the audit committee. Lee Hsien Yang, already on the advisory board, is joining the main board as a non-executive. In an interim management statement, the company has raised its guidance in Defence Aerospace but lowed it its Marine division.
Finally, more strong results from the housebuilders: Bovis Homes has said private reservations are up 45pc from last year and it expects average sales prices to be “at least 10pc greater” than 2012.
IAG jump in profits pushes shares higher
08.38 British Airways parent International Airlines Group is a a strong riser in a weak market this morning. IAG, up 3.1pc and the second-biggest gainer in a FTSE 100 that has fallen 0.5pc, has been buoyed by a jump in a third quarter profit from €270m a year ago to €690m.
Willie Walsh, chief executive of IAG, said BA’s operating profits, up to €477m from €268m last year, was due to “a strong London and transatlantic market as well as a €100m revenue bounce-back from the Olympics effect.”
Iberia, which is also owned by IAG, made €74m in the third quarter, up from €1m last year. The results should help IAG’s shares which fell yesterday after the company announced a boardroom shake-up.
Figures showing an 8.9pc rise in October passenger traffic has also helped the shares.
BA’s operating profits up to €477m from €268m last year
Closer look at French economic growth
08.32 One of the reasons for S&P’s downgrade of France has been the weak economic recovery.
Steep budget cuts in France are expected to weigh on global growth in the near term, and the IMF recently warned the country to avoid cutting too far and too fast.
The country’s top tax rate of 75pc has caused much controversy, and many of France’s top earners have moved to other countries, including Britain, to avoid being penalised. However, once spending cuts and tax rises have been implemented, the IMF expects growth to pick up, outpacing Germany by 2018.
France, Italy and Spain heading for Japan-style economic stagnation
08.25 In a paper by the IMF, it takes a look at the Japanese choices during the country’s banking crisis in the 1990s.
As part of that it has looked at Europe and notes that in France, Italy and Spain bank recapitalisation has been delayed and the restructural reforms have been slow.
Without drastic changes, they are likely to follow Japan’s path to long economic stagnation.
Germany is fairing better.
The situation in Germany looks somewhat better mainly because the structural reform was already advanced before the crisis.
Ambrose Evans-Prtichard has tweeted the link if you want to read more.
Merlin IPO priced at 315p, shares rise
08.11 Madame Tussauds owner Merlin Entertainments priced its London stock market listing at 315p per share today, valuing the private equity-backed company at £3.2 billion.
Merlin had originally set its range of 280p to 330p for the shares.
The company, which closed the offering early due to strong demand, said 87.5pc of the sale had gone to institutional investors such as pension funds, while individual retail investors had received 12.5pc of the shares.
Shares were up to 336p in early trading this morning.
Merlin operates Legoland
European markets open in the red
08.02 European markets have edged lower in Friday’s early trading.
In London the FTSE 100 is down 0.4pc
In Germay the Dax is down 0.5pc
In France the Cac is down 0.6pc
In Spain the Ibex is down 0.4pc
In Italy the FTSE Mib is down 0.4pc
Nissan: We may quit Britain if it leaves EU
07.45 The head of Nissan has warned the car maker would “reconsider” its future in the UK if it left the European Union.
Carlos Ghosn, chief executive of the Japanese motoring company, told the BBC it would re-evaluate its position if the UK was to leave the EU.
If anything has to change we [would] need to reconsider our strategy and our investments for the future.
Nissan is the biggest carmaker in Britain and recently announced plans to expand its factory in Sunderland. If it does so it says it will be able to produce more than 550,000, and support more than 6,000 jobs.
Nissan Chief Executive Officer Carlos Ghosn
France slams ‘critical and inexact’ downgrade
07.32 Perhaps not a surprise that France’s senior ministers have hit back at S&P.
French Finance Minister Pierre Moscovici has deplored “the critical and inexact judgements” made by the rating agency.
And Prime Minister Jean-Marc Ayrault said that “France’s ratings remains among the best in the world” and that the agency “does not take into account all the reforms” made by the government.
Euro slips after France downgrade
07.23 The single currency has slipped following the France downgrade, heading for its biggest two-week decline in more than a year.
The euro fell 0.2pc against the dollar to $ 1.34 in early trade on Friday.
The common currency is poised to drop 2.9pc over two weeks, the biggest such slide since July 2012.
Euro vs dollar on Friday. Source: Bloomberg
France downgraded by ratings agency S&P
07.14 The breaking news this morning is Standard & Poor’s has downgraded France’s credit rating for the second time in less than two years, citing risks over the country’s economy and government finances.
The ratings agency cut its debt grade from AA+ to AA, the third tier of debt quality. It said its new outlook for the grade was stable, against a previous negative watch for the AA+ rating.
This will no doubt be an embarrassment to French President Francois Hollande, whose poll ratings have been on the slide ever since his election in 2012.
France’s loss of S&P’s top-grade AAA rating in January 2012 – just before the election – was a serious blow to former president Nicolas Sarkozy’s economic credentials.
The downgrade reflects our view that the French government’s current approach to budgetary and structural reforms to taxation, as well as to product, services, and labor markets, is unlikely to substantially raise France’s medium-term growth prospects.
Best of the rest
07.10 The BBC has blamed “aggressive” forecasts, “badly structured” financial options and a lack of accountability among managers for its disastrous acquisition of the travel publisher Lonely Planet, reports the Financial Times (£).
The deal – which left the BBC with losses of about £100m – has been a continuing source of embarrassment for the broadcaster.
The Times (£) reports that George Osborne is receiving an unexpected windfall worth hundreds of millions of pounds thanks to a super-tax on wealthy people who buy property through a foreign company.
The windfall suggests that foreign holders of British property have a greater willingness than expected to pay tax, potentially stoking the Chancellor’s appetite to squeeze the group further in his Autumn Statement.
And finally, Argentina will launch criminal proceedings against British companies hunting for oil and gas in the Falklands next year, as the South American state looks to pressure the UK to the negotiating table, reports the Independent.
Top stories in the Telegraph
07.05 Leading our finance page this morning is the news that shares in Twitter opened at $ 45.10 on the New York Stock Exchange and jumped as high as $ 50.09, briefly pushing the company’s market capitalisation above the $ 27bn mark. It ended the day at $ 44.90 a share, handing the loss-making business a valuation higher than corporations such as BSkyB, Sainsbury’s and BAE Systems, Katherine Rushton reports.
Elsewhere, the Bank of England could raise interest rates as soon as next year, one of the founding members of the Monetary Policy Committee has said.
Szu Ping Chan writes that Dame DeAnne Julius, who served as a member of the rate-setting committee from its inception in 1997 until 2001, called for the Bank to be bold and raise rates soon after unemployment fell below 7pc.
Finally, Royal Bank of Scotland has agreed a $ 150m (£93m) settlement with US regulators over allegations it “cut corners” in a 2007 sale of $ 2.2bn of mortgage-backed bonds backed to investors, reports Harry Wilson.
The taxpayer-backed lender faced charges from the Securities and Exchange Commission for leading the sale of residential mortgage-backed securities to investors without properly checking the credit quality of the underlying loans.
07.00 Good morning and welcome to our daily business and markets live blog, your one stop shop for all the breaking business stories of the day.