Closing summary
The US added another 150,000 jobs in October, fewer than expected, amid signs that the white-hot US jobs market is cooling. The unemployment rate rose to 3.9% from 3.8% in September.
Economists had been expecting the US to add 180,000 jobs over the month. The pace of job growth slowed sharply from September when the economy added a revised 297,000 – a still impressive figure and far higher than had been expected.
Our other main stories today:
Thank you for following us this week. Have a lovely weekend. We’ll be back next week. Take care – JK
UK shopper numbers down 5.7% in October, says BRC
The number of people who were out shopping in October fell sharply last month, as heavy rain (Storm Babet) kept consumers at home.
According to the latest data from the British Retail Consortium, retail footfall dropped 5.7% year-on-year in October, worsening from September’s 2.9% decline.
Within that, high street footfall fell 4.6%, while retail parks and shopping centres posted declines of 4.3% and 7.3% respectively.
Helen Dickinson, the BRC’s chief executive said:
Umbrellas were up as heavy rainfall descended across the UK in October, leading many shoppers to stay at home.
As inflationary pressures on households begin to ease, some people are shopping around slightly less, braving the rain only to make their final purchases.”
While consumer confidence may be higher than 2022, it is still very weak. The economic landscape remains tough, with input prices and cost pressures above normal levels.
Bank of England's Pill: Inflation won't necessarily fall fast as demand slows
Britain’s stubbornly high inflation will not necessarily fall quickly as demand slows, according to the Bank of England’s chief economist Huw Pill.
He spoke a day after the central bank held its benchmark interest rate at 5.25% (the highest since the 2008 financial crisis) for a second meeting in a row.
Pill said:
The overall judgments of the MPC has a little bit switched from being associated with demand factors to be more associated with supply factors.
We can be less sanguine about the idea that the slowing of demand, the slowing of activity that we are seeing will lead to inflation returning to target.
Falling profitability of UK firms casts doubt on ‘greedflation’
Official figures show the profitability of UK companies declined in the second quarter of the year, indicating that fears of price gouging to boost profits margins are misplaced.
The net rate of return for private non-financial corporations (PNFCs), which excludes oil and gas firms operating in the North sea, was 9.6% in the three months from April to the end of June this year, down from a revised estimate of 10.7% in the first quarter.
The net rate of return is a measure of company profitability used by the ONS. A breakdown of the figures that shows the fortunes of services and manufacturing firms follows the same pattern.
Company profitability was almost identical in 2019, before the pandemic, revealing that with a few minor ups and downs in the last three years, companies have maintained their profit margins.
And these ups and downs were mostly related to government energy subsidies, which have reduced this year and lowered profit margins previously boosted by subsidies.
This situation contrasts with the average household, which have also been helped by energy subsidies, but suffered low wage rises from these same companies (their employers) and seen disposable incomes sink during the same period.
Updated
US services growth slows in October
More data from the US: The Institute for Supply Management’s services index fell to a five-month low of 51.8 in October, from 53.6 in September, indicating slower growth.
Any reading above 50 indicates growth.
This is more evidence that economic growth is slowing after a blockbuster third quarter, said Paul Ashworth, chief North America economist at Capital Economics.
Unlike the renewed slump in the manufacturing index, however, the dip in the aggregate services index was driven not by a slump in new orders, but rather new-found weakness in current business activity, employment and inventories.
The supplier deliveries index also dropped back further, indicating that supply shortages are largely a thing of the past. In contrast, the new orders index strengthened to 55.5, from 51.8.
Cameron Misson, economist at the UK think tank Centre for Economics and Business Research, has also looked at the US jobs report.
Today’s data may be an early signal that the US labour market is cooling, reinforcing the Federal Reserve’s decision to hold interest rates at its November meeting. Subdued non-farm payroll growth, a slight uptick in unemployment, and slowing wage growth are all evidence the central bank’s interest rate hikes are having the desired effect of slowing economic activity.
However, wage and price inflation remain too high, so expect interest rates to remain elevated for an extended period of time.
The Fed kept interest rates unchanged on Wednesday and along with other major central banks such as the Bank of England, is widely expected to keep borrowing costs at the current level for some time.
Fed chair Jerome Powell said then that robust jobs growth showed more people were coming back into the workforce, and an uptick in immigration. “That’s a big supply-side gain that is really helping the economy.”
Treasury secretary Janet Yellen has echoed this sentiment, telling the Financial Times in an interview last month that growth was a “positive, not a negative” that reflected “more people wanting to work and finding jobs”.
Updated
Wall Street has opened higher: the Dow Jones rose nearly 150 points or 0.4% to 33,988. The S&P 500 added 16 points, or 0.4%, to 4,334 while the Nasdaq gained nearly 70 points, or 0.5%, to 13,362 at the opening bell.
Updated
Wall Street shares are expected to rise at the open, after the weaker than expected non-farm payrolls data, which showed slowing job growth and a surprise uptick in the unemployment rate to 3.9%. This boosted investor expectations that the Federal Reserve won’t hike interest rates again.
You can find the US Labor Department figures here.
Jay Hatfield, chief executive at Infrastructure Capital Management, said:
It is consistent with the views of the market that the job market and the economy is decelerating and that’s going to keep the Fed on hold and will cause central banks next year to cut rates.
Updated
Here’s more instant reaction. Daniel Casali, chief investment strategist at the wealth management group Evelyn Partners, said:
While there is increasing evidence that US job creation is slowing, it is unlikely to change the Fed’s plan to keep interest rates ‘higher for longer’ to address inflation in the near term.
Nevertheless, overall employment is still expanding by around 2% per annum and that should provide support for consumption growth. Other measures of labour activity are also indicative of a relatively healthy labour market. For instance, weekly initial job claims are a timely signal for the unemployment trend. Given this was recently reported at an historically low level, this implies there are fewer workers seeking unemployment benefits.
Similarly, the September reading for job openings (from the JOLTS survey) came in at 9.6 million, versus the pre-pandemic level of around 7m at the end of 2019. This shows that firms are still looking to hire. Indeed, the Manpower survey rebounded in the fourth quarter to show that a net 36% of firms were planning to hire in the 3 months, compared to 20% at the end of 2019.
Importantly, average hourly earnings from the payroll report are slowing and that should give the Fed some comfort that wage-driven inflation is coming under control. Though recent bumper wage deals agreed between the United Auto Workers’ labour union and major auto manufacturers is a risk to the overall inflation outlook.
US factory jobs declined by 35,000 last month while government jobs increased by 51,000. There were also job gains in health care and social assistance.
Andrew Hunter, deputy chief US economist at Capital Economics, said:
The muted 150,000 gain in non-farm payrolls in October is another sign that the economy’s strength in the third quarter is likely to unwind in the fourth. With wage growth also continuing to slow, it is increasingly hard to imagine the Fed hiking interest rates any further.
Admittedly, recent strike action hit payrolls again last month, with 33,200 UAW (United Auto Workers) workers walking out during the October survey period. That helps explain the 35,000 fall in manufacturing payrolls, which will be reversed in November with the autoworkers’ strike now over.
That said, strikes can’t explain the declines in employment in transportation & warehousing, information and finance. Furthermore, payrolls are still being supported by growth in the non-cyclical government and health care & social assistance sectors – excluding those, payrolls rose by just 22,000 last month.
Finally, after a blip in September, the persistent pattern of downward revisions to past months has returned – with August and September payroll gains revised down by a cumulative 101,000.
The UAW union struck deals with the car manufacturers Ford, General Motors and Stellantis in the past week, ending the car worker strikes.
Updated
US government bonds rallied after the data, which showed employers hired fewer people than expected in October.
This pushed bond yields lower (yields move inversely to prices). The yield, or interest rate, on benchmark 10-year Treasuries fell 11 basis points to 4.55%, the lowest in three weeks. Two-year yields dropped 10 bps to 4.87%, the lowest since early September.
European bonds also rallied, as did sterling and the euro, rising 0.8% against the dollar to $1.2305 and $1.0714 respectively.
BREAKING: Non-farm payrolls come in at just 150K vs last week's reading of 336K ⚠️
— Markets & Mayhem (@Mayhem4Markets) November 3, 2023
The forecast was for 178K
The unemployment rate is 3.9%
This comes after strong JOLTS data, a weak ADP reading, and unemployment claims staying low pic.twitter.com/JWkCySfNj8
US jobs report weaker than expected
The US economy added 150,000 jobs in October, fewer than expected, and previous months were revised lower, suggesting the economy is not quite as strong as thought.
Economists had expected 180,000 new jobs. In September, employers hired 297,00 more people, less than the 336,000 previously reported, and in August, there were 165,000 new private sector jobs, revised down from 227,000.
The unemployment rate ticked up to 3.9% from 3.8% in September.
The dollar index, which measures the greenback against a basket of other major currencies, fell to a 10-day low.
Updated
UK regulator closes investigations into Facebook Marketplace and Amazon Marketplace
Britain’s competition watchdog has closed its separate investigations into Meta’s Facebook Marketplace service and Amazon marketplace, accepting commitments from both tech companies.
The Competition and Markets Authority said Amazon’s commitments “help ensure that third-party Marketplace sellers can compete on a level-playing field and that UK customers get access to the best deals”.
Meta welcomed the move.
We welcome the CMA’s decision to close its investigation into Marketplace on the basis of the commitments offered by Meta to put in place systems and controls designed to confirm and validate that advertiser data from competitors is not used in Marketplace.
Ann Pope, senior director for antitrust enforcement at the CMA, said:
We have accepted Amazon’s commitments as they help thousands of independent UK sellers to compete on a level playing field against Amazon’s own retail arm. This should also mean customers get access to the best product offers.
The commitments secured from Meta mean the firm cannot exploit advertising customers’ data to give itself an unfair advantage – and as such distort competition.
Economists say UK economy 'flirting with recession'
Tim Moore, economics Director at S&P Global Market Intelligence, which compiles the UK services survey, said:
A shallow downturn in UK service sector activity persisted in October as businesses struggled to make headway against a backdrop of worsening domestic economic conditions and stretched household budgets.
Forward-looking survey indicators suggested that service providers will continue to skirt with recession. The degree of optimism towards the business outlook was the lowest in 2023 so far, despite relief that interest hikes have taken a pause this autumn.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said:
The composite PMI suggests that the economy is flirting with a mild recession, but we continue to think that one will be narrowly avoided.
Unemployment rose slightly in the eurozone in September, according to the latest official figures.
The jobless rate rose to 6.5% from 6.4% in August, with just over 11 million people out of work including 2.2 million young people (under the age of 25), the EU’s statistics office Eurostat said. The youth unemployment rate ticked up to 14%. Across the EU, the overall unemployment rate was stable at 6%.
Martin Beck, chief economic advisor to the EY ITEM Club forecasting group, said:
Although October’s final services PMI came in slightly higher than September’s reading, it still signalled a modest contraction in private sector activity. The EY ITEM Club thinks GDP should still grow in Q4, helped by a fading drag from strike action in the public sector, but the pace of growth is likely to be marginal.
The Monetary Policy Committee will have had sight of October’s survey in arriving at its November interest rate decision. The picture of weak activity, easing cost pressures and falling employment painted by the latest survey will likely have contributed to the committee’s decision to keep Bank Rate unchanged again.
Optimism at UK service firms sinks to lowest this year
A closely watched survey has shown a slight reduction in service sector output as lacklustre demand conditions continued in October, and optimism worsened to the lowest level so far this year.
Services firms experienced another reduction in business activity, although the downturn was only marginal and slightly less marked than in September, according to the final reading from the monthly S&P Global and CIPS purchasing managers’ index survey.
Survey respondents typically cited cost of living pressures, high interest rates and weak consumer confidence as factors holding back customer demand. Job shedding continued in October, reflecting lower new orders and uncertainty about the business outlook. The degree of optimism among services companies regarding year ahead growth prospects was the lowest in 2023 so far.
At 49.5 in October, the headline business activity index was up slightly from 49.3 in September and above the earlier ‘flash’ reading of 49.2. However, it remained below the crucial 50.0 no-change threshold for the third month running. Lower volumes of service sector output in recent months contrast with moderate growth earlier this year (the index averaged 53.3 during the first half of 2023).
Banks must guard against 'larger and faster' bank runs, says BOE's Hauser
Regulators need to ensure that banks have adequate financial buffers as advances in technology increase the risk of bank runs, a senior Bank of England official has warned.
Andrew Hauser, the central bank’s executive director for markets, said challenges facing central banks included
how to ensure that banks’ liquidity insurance remains appropriate as technology change increases the risk of larger and faster deposit runs, of the kind seen this spring in the US.
The sudden collapse of the Californian lender Silicon Valley Bank in March caught regulators by surprise, as people rushed to get their money out using online banking services.
In a speech at a conference organised by King’s College in London, Hauser said central banks need to assess where their balance sheets should settle, after expanding them massively over 15 years of emergency bond buying,
as monetary policy makers return inflation – which remains far too high – to target, through a combination of higher interest rates and unwinding Quantitative Easing (QE) and other ‘unconventional’ policy interventions.
A third challenge is:
how to ensure the stability of the financial system as a whole in the face of the growing incidence of systemic liquidity shocks, not just in banks but increasingly in non-bank market finance too.
You can read Hauser’s full speech here.
In a separate report, the FAO stuck to its forecast for world cereal production of 2.8bn metric tonnes this year, up 0.9% from 2022.
Global wheat production in 2023 is forecast at 785.1m tonnes, 2.2% (18m tonnes) lower than last year’s level.
Turning to 2024, winter wheat plantings are underway across the northern hemisphere and area growth is expected to be limited, reflecting softer crop prices this year.
In the United States, drought conditions have partially dissipated in key producing states, and with above-average rainfall forecast for the next months, weather conditions appear to be more favourable for early stages of the 2024 crop; plantings have progressed at an average pace as of October.
In the European Union, comparatively dry and warm conditions are favouring sowing of the winter wheat crop, with plantings already nearing completion in northern countries.
In Ukraine, the continuing effects of the war, including constrained access to fields and low farm-gate prices, along with less-than-ideal weather conditions, are seen engendering a reduction in the wheat area.
The FAO Meat Price Index fell 0.6%, the fourth monthly decline, leaving it 3.4% below its value a year ago.
In October, international pig meat prices fell for a third month, driven by persistently sluggish import demand, especially from some East Asian countries, while some leading suppliers had high exporting capabilities.
By contrast, world poultry meat prices rebounded slightly, as avian flu outbreaks continued to constrain supplies from several world leading suppliers and consumer demand stayed robust, because poultry is more affordable than other meat.
International beef and lamb prices also increased slightly, reflecting robust import demand from some leading importers, despite ample supplies of beef from Australia and Brazil and lamb from Oceania.
The FAO Sugar Price Index dropped 2.2% in October after two consecutive monthly increases, but remained 46.6% above the level a year earlier.
The decline was mainly driven by strong production in Brazil, despite the negative impact of rains on sugarcane crushing in the first half of October. The weakening of the Brazilian real against the US dollar and lower ethanol prices in Brazil also weighed on world sugar prices. However, persistent concerns over a tighter global supply outlook in the recently started 2023/24 season, together with shipment delays from Brazil, capped the declines in world sugar prices.
Thinning maize supplies in Argentina placed upward pressure on world maize prices, but this was capped by higher seasonal supplies in the United States, where the harvest progressed, and strong export competition from Brazil, the FAO said.
As for vegetable oils, a slight fall in that price index mainly reflected lower world palm oil prices, more than offsetting higher prices of soy, sunflower and rapeseed oils.
The FAO Dairy Price Index rose 2.2% in October from September, following nine months of consecutive declines, but was still down 20.1% from its value a year ago. World milk powder prices increased the most, mainly driven by surges in import demand for both near- and longer-term supplies, especially from Northeast Asia.
Tight milk supplies in Western Europe and some uncertainty over the impact of the El Niño weather conditions on the upcoming milk production in Oceania added further downward pressure on prices.
Global butter prices also rose, boosted by increased sales ahead of the winter holidays in Western Europe and higher import demand from Northeast Asia. By contrast, international cheese prices dropped slightly as the euro weakened against the dollar, and because of higher exports from Oceania.
Global food prices continue to drop, but at a slower pace
Global food prices continue to drop, but at a slower pace, with prices for sugar, cereal, vegetable oil and meat down while dairy products went up in price.
The UN food price index fell 0.5% in October from September to 120.6 points, its lowest level since March 2021. It was 14.8 points, or 10.9%, below its level a year ago.
The slight drop in October reflects declines in the price indices for sugar, cereals, vegetable oils and meat, while the index for dairy products rebounded, the Food and Agriculture Organization (FAO) of the United Nations said.
Wheat prices fell by 1.9% in October because of higher-than-expected supplies in the US and strong competition among exporters, and rice prices dropped 2%.
Updated
BlackRock says investors face 5.5% long-term borrowing costs
The world’s largest asset manager expects US borrowing costs to hover around 5.5% for the next five years as the central bank and investors grapple with inflationary pressures.
Ten-year Treasury yields are at 4.67%, but Jean Boivin, head of the BlackRock Investment Institute and a former deputy governor of the Bank of Canada, said markets were heading for higher long-term borrowing costs. These will come from ageing populations, geopolitics and costs associated with the energy transition to net zero, he said.
We think 5.5% long-term 10-year yields in the US is the level that seems consistent with the macro backdrop in the next five years.
It’s also consistent with the compensation for risks that bond investors should require to invest in long-term bonds.
His comments come after a rally in government bonds on both sides of the Atlantic in recent days as investors become more convinced that central banks have reached the end of their interest rate raising cycles.
Stocks, oil rise; rouble firms despite fresh US sanctions
On the markets, stocks and oil prices are heading higher today, notching up modest gains.
The UK’s FTSE 100 index rose 16 points, or 0.2%, to 7,463 while Germany’s Dax added 0.3%, France’s CAC edged up 0.1%, and Italy’s FTSE MiB advanced nearly 0.5%.
Richard Hunter, head of markets at interactive investor, said:
After a dismal October for markets, November has opened with a different narrative and a very different performance.
That the Federal Reserve held rates this week was no surprise, but the accompanying comments from Chair Powell lit the fire under stocks, with a noticeable fall in Treasury yields providing further fuel. While leaving the door slightly ajar to further rate rises should inflation unexpectedly tick higher once more, sentiment has switched to the belief that the hiking cycle is now over.
Today, yields (interest rates) on US government bonds, known as Treasuries, edged higher again, with the two-year yield climbing above 5%, after tumbling the day before, on relief that the US government announced smaller-than-expected increases in Treasury supply.
In the oil market, Brent crude, the global benchmark, rose 0.5% to $87.30 a barrel.
The Russian rouble edged up 0.4% to 92 versus the dollar, as the market digested the impact of the latest round of US sanctions against Moscow, following its invasion of Ukraine in February last year. Vladimir Putin’s decree on mandatory foreign currency sales for some exporters is still lending some support to the currency.
Yesterday, the US imposed new measures against Russia over its war in Ukraine, targeting its future energy capabilities, sanctions evasion, seven Russia-based banks and dozens of industrial businesses.
Updated
Elon Musk: 'There will come a point where no job is needed' due to AI
The US tech billionaire Elon Musk has warned that technology could eventually replace all human jobs, as Rishi Sunak, the UK prime minister, announced that the most advanced technology companies will allow governments to vet their artificial intelligence tools for the first time.
Musk, the founder of the electric carmaker Tesla and owner of Twitter, now known as X, said:
We are seeing the most disruptive force in history here. There will come a point where no job is needed. You can have a job if you want a job … but the AI will be able to do everything.
Companies including Meta, Google DeepMind and OpenAI have agreed to allow regulators to test their latest AI products before releasing them to the public, in a move that officials say will slow the race to develop systems that can compete with humans.
Sunak made the announcement yesterday after a two-day summit at Bletchley Park at which a diverse group including the world’s richest man, the vice-president of the US and a senior Chinese government official agreed that AI poses a grave risk to humanity.
Speaking to reporters at the end of the summit, Sunak said:
I believe the achievements of this summit will tip the balance in favour of humanity.
The prime minister also announced international support for an expert body inspired by the Intergovernmental Panel on Climate Change, to be chaired by one of the “godfathers” of modern AI.
The moves were welcomed afterwards by Musk in a conversation between the pair in central London, during which Musk described what he sees as a dramatically different future for humanity.
Sam Bankman-Fried found guilty of defrauding FTX customers out of billions
Over in the United States, Sam Bankman-Fried, the founder of now-bankrupt crypto exchange FTX, was found guilty on all counts of defrauding his customers in Manhattan federal court.
The one-time mogul stood with his hands clasped facing the jury as he was found guilty on seven counts of wire fraud and conspiracy to launder money. He faces decades in prison at a sentencing hearing that US district Judge Lewis Kaplan set for 28 March 2024. The verdict, reached after just four hours of jury deliberation, brought an end to nearly a month of court proceedings that featured stunning testimony from his closest allies and the disgraced entrepreneur himself. He maintained his innocence until the end.
Mark Cohen, Bankman-Fried’s lawyer, said in a statement:
We respect the jury’s decision. But we are very disappointed with the result. Mr Bankman-Fried maintains his innocence and will continue to vigorously fight the charges against him.
Maersk to cut 10,000 jobs
The Danish shipping giant A.P. Moller-Maersk is to cut 10,000 jobs, after posting a steep drop in profits and revenue in the third quarter, as it battles with lower freight rates and lower demand for container shipping.
The Danish company now expects to revenues and operating profits to come in at the lower end of its forecast range.
Chief executive Vincent Clerc said:
Our industry is facing a new normal with subdued demand, prices back in line with historical levels and inflationary pressure on our cost base.
Since the summer, we have seen overcapacity across most regions triggering price drops and no noticeable uptick in ship recycling or idling.
In August, Maersk warned of a steeper decline in global demand for shipping containers by sea this year, due to slow economic growth and de-stocking in the wake of the Covid-19 pandemic.
Maersk said it intends to cut its workforce from 110,000 in January to below 100,000, which will result in saving $600m next year. It declined to comment on the impact on UK jobs.
Updated
Qantas chairman heckled by shareholders as they reject executive pay plans
There was chaos at the Australian airline Qantas’s annual general meeting, where shareholders shouted “shame on you” at the board’s chairman, Richard Goyder, as investors overwhelmingly rejected the embattled company’s executive pay deal.
That result, which marked one of Australia’s largest ever protest votes against executive pay, came after Goyder and the airline’s chief executive, Vanessa Hudson, apologised to investors for a year of sagas that had seen the company’s share price plummet.
Qantas has been grappling with several potentially costly issues, including a looming compensation bill for illegally outsourcing ground handling jobs and regulatory action over allegations it sold tickets to thousands of already-cancelled flights.
German exports disappoint as trade remains a drag on the economy
In Germany, exports fell more than expected in September amid weaker global demand, according to figures from the federal statistics office.
Exports fell 2.4% from the previous month, worse than the 1.1% decline forecast by economists, while imports were down 1.7%. Most of Germany’s exports went to the US despite a 4% drop, and most imports came from China, down 0.9%. Exports to the UK rose 2.3% to €6.3bn, while imports from the UK rose by 5.2% to €3.2bn.
Germany is normally an exports powerhouse but exports have been a drag on the economy in four out of six quarters since the start of last year.
Carsten Brzeski, global head of macro at ING, said:
Things are still looking pretty downbeat for Germany’s economy.
The cooling of global demand is currently worsening the structural problems and the weakening of the euro since the summer is still too small to have any significant impact on exports. Export order books remain weak. Last but not least, recently German technology groups warned that they were being hit by customs delays for exports to China. As a result, trade is no longer the strong resilient growth driver of the German economy that it used to be, but rather a drag.
Maybe the only upside of today’s disappointing data is that things can hardly get worse. However, as positive signals remain absent, the base case for the German economy over the next months remains stagnation at best.
Good Morning from #Germany, where the export model is under pressure. Sep exports fell 2.4% MoM but because imports also fell by 1.7%, the trade surplus fell only slightly to €16.5bn from a revised €17.7bn in Aug. pic.twitter.com/5mOuoYTOus
— Holger Zschaepitz (@Schuldensuehner) November 3, 2023
Global stocks headed for strongest week in a year as investors bet on end of rate hikes
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
Global stocks are on course for their biggest weekly gain in a year as investors are betting that there won’t be any more interest rate hike in major economies, while bonds rallied.
World stocks, as measured by the MSCI ACWI, which captures large and mid cap stocks across 23 developed markets and 24 emerging markets, are up 4.3% so far this week, the biggest rise since November 2022.
On Wall Street, the Dow Jones industrial average jumped 564 points, or 1.7% yesterday, its best day since May. Investors are hoping that there won’t be any more interest rate hikes, although central banks are signalling that rates will stay high for an extended period – painful for people with mortgages.
The US Federal Reserve left interest rates unchanged at a 22-year high on Wednesday as inflation continues to fade from its highest level in a generation – but its chairman Jerome Powell cautioned that the Fed’s campaign to bring down price growth had “a long way to go,” leaving the door open for further hikes.
The Bank of England kept its main interest rate at 5.25% yesterday for the second meeting in a row, the highest level since the 2008 financial crisis. It warned the economy will be on the brink of recession in an election year and signalled rates will stay high for a while to tackle stubborn inflationary pressures.
It’s US jobs day! We will get the latest US non-farm payrolls figures at lunchtime, which are expected to show that companies are still hiring strongly.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said:
The Federal Reserve hinted that the rate hikes could be coming to an end because the recent surge in US long term [bond] yields helped them tighten the financial conditions without the need for another rate hike.
US growth is strong, and the jobs market remains healthy. The Fed thinks that solid labour-force participation and immigration explain the resilience of the jobs market.
Any strength in job additions or wages growth data could bring bond trades back to earth and remind them that if the US jobs market - and the economy - remains this strong, the Fed could turn hawkish again. But strong jobs data in a context of higher supply is not necessarily inflationary.
Also coming up:
We have the UN global food index later this morning, and several Bank of England speeches at the Bank’s Watchers’ conference organised by Kings College.
The Agenda
9am GMT: UN Food index for October
9am GMT: Bank of England Andrew Hauser keynote speech at conference
9.30am GMT: UK S&P Global/CIPS Services PMI final for October
10am GMT: Eurozone unemployment for September
12.15pm GMT: BOE chief economist Huw Pill speaks
12.30pm GMT: US Non-farm payrolls for October (forecast: 180,000)
2pm GMT: US ISM Services PMI for October
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