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| Version 18 | Version 19 |
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| Markets slide on uncertainty over US rates after latest jobs figures -as it happened | Markets slide on uncertainty over US rates after latest jobs figures -as it happened |
| (7 months later) | |
| 5.56pm GMT | 5.56pm GMT |
| 17:56 | 17:56 |
| Citigroup is the latest big bank to say that Britain’s economic growth and the pound would be hit if it leaves the European Union. | Citigroup is the latest big bank to say that Britain’s economic growth and the pound would be hit if it leaves the European Union. |
| Citi said Brexit could knock up to 4 percentage points off economic growth over the next four years, and the pound could fall by 15% to 20%. The bank’s Michael Saunders said, “Brexit would probably trigger major economic weakness and a political crisis in the UK...with a 15-20 per cent depreciation of sterling in trade weighted terms, resultant return to import driven inflation and a major policy dilemma.” | Citi said Brexit could knock up to 4 percentage points off economic growth over the next four years, and the pound could fall by 15% to 20%. The bank’s Michael Saunders said, “Brexit would probably trigger major economic weakness and a political crisis in the UK...with a 15-20 per cent depreciation of sterling in trade weighted terms, resultant return to import driven inflation and a major policy dilemma.” |
| The warning follows something similar from Goldman Sachs. | The warning follows something similar from Goldman Sachs. |
| On that note it’s time to close for the day, and indeed the week. Thanks for all your comments and we’ll be back again on Monday. | On that note it’s time to close for the day, and indeed the week. Thanks for all your comments and we’ll be back again on Monday. |
| 5.33pm GMT | 5.33pm GMT |
| 17:33 | 17:33 |
| Helena Smith | Helena Smith |
| Over in Greece, thousands of police men (backed up by firemen and coastguard officials) are marching through Athens chanting “we save lives, don’t drown ours “ in reference to pension cuts, writes Helena Smith. | Over in Greece, thousands of police men (backed up by firemen and coastguard officials) are marching through Athens chanting “we save lives, don’t drown ours “ in reference to pension cuts, writes Helena Smith. |
| All are in uniform. They’re protesting pension funds being amalgamated and demanding that they be excluded from planned reforms by virtue of the sensitivity of their jobs. Protestors have descended on the capital from all over Greece, including the southern Aegean, site of mass refugee arrivals. The union of police employees from Trikala are participating with a banner that reads: “No to the measures of death. Stop the cuts.” | All are in uniform. They’re protesting pension funds being amalgamated and demanding that they be excluded from planned reforms by virtue of the sensitivity of their jobs. Protestors have descended on the capital from all over Greece, including the southern Aegean, site of mass refugee arrivals. The union of police employees from Trikala are participating with a banner that reads: “No to the measures of death. Stop the cuts.” |
| 5.02pm GMT | 5.02pm GMT |
| 17:02 | 17:02 |
| European markets fall after US jobs figures | European markets fall after US jobs figures |
| The initial reaction to the US jobs numbers, which showed a weaker than expected rise of 151,000 in non-farm payrolls, was that a US rate rise was therefore off the table in the immediate future. | The initial reaction to the US jobs numbers, which showed a weaker than expected rise of 151,000 in non-farm payrolls, was that a US rate rise was therefore off the table in the immediate future. |
| But as the afternoon wore on, investors began to concentrate on the rise in average earnings and the fact that the jobless rate was at an eight year low. So the prospect of a rate rise was suddenly back on the agenda, and as a consequence the dollar rose and markets fell. | But as the afternoon wore on, investors began to concentrate on the rise in average earnings and the fact that the jobless rate was at an eight year low. So the prospect of a rate rise was suddenly back on the agenda, and as a consequence the dollar rose and markets fell. |
| In reality, the outlook for the Fed’s next move is no clearer than before, and as we know, markets hate uncertainty. | In reality, the outlook for the Fed’s next move is no clearer than before, and as we know, markets hate uncertainty. |
| So Wall Street led the drive lower, with sentiment not helped by a slump in shares of Linkedin after it fell into the red. Europe lost early gains to end the week on a downbeat note. The final scores showed: | So Wall Street led the drive lower, with sentiment not helped by a slump in shares of Linkedin after it fell into the red. Europe lost early gains to end the week on a downbeat note. The final scores showed: |
| On Wall Street, the Dow Jones Industrial Average is currently down 169 points or just over 1%. | On Wall Street, the Dow Jones Industrial Average is currently down 169 points or just over 1%. |
| 4.15pm GMT | 4.15pm GMT |
| 16:15 | 16:15 |
| On the market’s negative reaction to the mixed jobs data, David Morrison of Spreadco said investors needed guidance from the US Federal Reserve: | On the market’s negative reaction to the mixed jobs data, David Morrison of Spreadco said investors needed guidance from the US Federal Reserve: |
| [It was] a bad number on the face of it suggesting that the Fed is less likely to be in any rush to raise rates further at its March meeting, or even for the rest of 2016. If that’s the case then one would’ve expected the dollar to fall, precious metals to build on recent gains and equities to rally. | [It was] a bad number on the face of it suggesting that the Fed is less likely to be in any rush to raise rates further at its March meeting, or even for the rest of 2016. If that’s the case then one would’ve expected the dollar to fall, precious metals to build on recent gains and equities to rally. |
| But two hours after the event and with all the US markets fully open that wasn’t what we were seeing. The dollar was up; gold and silver were slipping and what began as a modest pull-back on the major US stock indices was beginning to gather downside momentum. What’s going on? | But two hours after the event and with all the US markets fully open that wasn’t what we were seeing. The dollar was up; gold and silver were slipping and what began as a modest pull-back on the major US stock indices was beginning to gather downside momentum. What’s going on? |
| Well, as is often the case the devil was in the detail. The Unemployment Rate fell to 4.9% - its lowest level since the first quarter of 2008. Average Hourly Wages rose 0.5% month-on-month (well above the +0.25 expected) and up a total of 2.5% from the same time last year. This presents a problem for the US central bank and that is what worries investors. | Well, as is often the case the devil was in the detail. The Unemployment Rate fell to 4.9% - its lowest level since the first quarter of 2008. Average Hourly Wages rose 0.5% month-on-month (well above the +0.25 expected) and up a total of 2.5% from the same time last year. This presents a problem for the US central bank and that is what worries investors. |
| Of course, it could be that everything flips round by the time we close tonight. But I can’t help thinking that investors are desperate to get some guidance from the Fed. Without that, they will continue to unwind positions and lighten up on risk. Expect further volatility. | Of course, it could be that everything flips round by the time we close tonight. But I can’t help thinking that investors are desperate to get some guidance from the Fed. Without that, they will continue to unwind positions and lighten up on risk. Expect further volatility. |
| 4.01pm GMT | 4.01pm GMT |
| 16:01 | 16:01 |
| Markets are extending their losses as investors look to the rise in US average earnings and conclude that perhaps there will be more rate rises from the Federal Reserve this year after all. | Markets are extending their losses as investors look to the rise in US average earnings and conclude that perhaps there will be more rate rises from the Federal Reserve this year after all. |
| The Dow Jones Industrial Average is now down 150 points or 0.9%, while in Europe the FTSE 100 has fallen 20 points and Germany’s Dax is down 34 points. | The Dow Jones Industrial Average is now down 150 points or 0.9%, while in Europe the FTSE 100 has fallen 20 points and Germany’s Dax is down 34 points. |
| The dollar - which has been weak all week - has also recovered some ground after the figures. The dollar index is currently up 0.6% to 97.07 after hitting a 15 week low on Thursday. | The dollar - which has been weak all week - has also recovered some ground after the figures. The dollar index is currently up 0.6% to 97.07 after hitting a 15 week low on Thursday. |
| US investors are also nervous after a slump in the shares of Linkedin after the company fell into the red, which has weighed on other tech companies. | US investors are also nervous after a slump in the shares of Linkedin after the company fell into the red, which has weighed on other tech companies. |
| Updated | Updated |
| at 4.17pm GMT | at 4.17pm GMT |
| 3.49pm GMT | 3.49pm GMT |
| 15:49 | 15:49 |
| Something a bit lighter on non-farms day: | Something a bit lighter on non-farms day: |
| Twitter thought this @FerroTV #jobs tweet was in French. pic.twitter.com/p2icWi3i5N | Twitter thought this @FerroTV #jobs tweet was in French. pic.twitter.com/p2icWi3i5N |
| 3.13pm GMT | 3.13pm GMT |
| 15:13 | 15:13 |
| Larry Elliott | Larry Elliott |
| Back with the US jobs data, and the weaker than expected headline figure adds to the feeling the Federal Reserve erred in raising interest rates in December, says Larry Elliott: | Back with the US jobs data, and the weaker than expected headline figure adds to the feeling the Federal Reserve erred in raising interest rates in December, says Larry Elliott: |
| Hindsight is a wonderful thing. It’s easy to be wise after the event and say a decision was a mistake. But it’s hard to imagine that the Federal Reserve would have raised interest rates in December had it known then what it knows now. | Hindsight is a wonderful thing. It’s easy to be wise after the event and say a decision was a mistake. But it’s hard to imagine that the Federal Reserve would have raised interest rates in December had it known then what it knows now. |
| News that employment growth as measured by the increase in non-farm payrolls was up by 151,000 is just the latest piece of evidence to suggest that the US economy is going through a tough period. Growth in the fourth quarter was weak, sales of durable goods suggest that businesses are reluctant to invest, and consumers are saving rather than spending the windfall from lower oil prices. | News that employment growth as measured by the increase in non-farm payrolls was up by 151,000 is just the latest piece of evidence to suggest that the US economy is going through a tough period. Growth in the fourth quarter was weak, sales of durable goods suggest that businesses are reluctant to invest, and consumers are saving rather than spending the windfall from lower oil prices. |
| Even so, Janet Yellen, chairman of the Fed, is not going to hit the panic button and reverse December’s increase – at least not yet. There are two reasons for that: a U-turn would be a considerable blow to the central bank’s reputation; and the Fed will want to see more evidence before it decides that the world’s biggest economy is heading for a recession rather than simply going through a temporary soft patch. | Even so, Janet Yellen, chairman of the Fed, is not going to hit the panic button and reverse December’s increase – at least not yet. There are two reasons for that: a U-turn would be a considerable blow to the central bank’s reputation; and the Fed will want to see more evidence before it decides that the world’s biggest economy is heading for a recession rather than simply going through a temporary soft patch. |
| Larry’s full analysis is here: | Larry’s full analysis is here: |
| Updated | Updated |
| at 3.14pm GMT | at 3.14pm GMT |
| 3.08pm GMT | 3.08pm GMT |
| 15:08 | 15:08 |
| Really the worst of both worlds for PT government. Long list of austerity measures and still gets budget smashed by Commission | Really the worst of both worlds for PT government. Long list of austerity measures and still gets budget smashed by Commission |
| 2.59pm GMT | 2.59pm GMT |
| 14:59 | 14:59 |
| EU says Portuguese budget "non-compliant" but will be re-assessed in Spring | EU says Portuguese budget "non-compliant" but will be re-assessed in Spring |
| The European Commission has said that it accepts the Portuguese budget after some changes, but it is still at risk of non-compliance with EU rules. It will assess the budget again in the spring. It said: | The European Commission has said that it accepts the Portuguese budget after some changes, but it is still at risk of non-compliance with EU rules. It will assess the budget again in the spring. It said: |
| The European Commission considers that the Portuguese government’s 2016 Draft Budgetary Plan is at risk of non-compliance with the provisions of the Stability and Growth Pact. In its Opinion adopted today, the Commission therefore invites the authorities to take the necessary measures within the national budgetary process to ensure that the 2016 budget will be compliant with the Stability and Growth Pact. | The European Commission considers that the Portuguese government’s 2016 Draft Budgetary Plan is at risk of non-compliance with the provisions of the Stability and Growth Pact. In its Opinion adopted today, the Commission therefore invites the authorities to take the necessary measures within the national budgetary process to ensure that the 2016 budget will be compliant with the Stability and Growth Pact. |
| Vice-President Valdis Dombrovskis, responsible for the Euro and Social Dialogue, said: “...The Portuguese Government is invited to take the necessary steps to ensure that the 2016 budget is compliant. In spring, the Commission will reassess Portugal’s compliance with its obligations under the Stability and Growth Pact, including under the Excessive Deficit Procedure.” | Vice-President Valdis Dombrovskis, responsible for the Euro and Social Dialogue, said: “...The Portuguese Government is invited to take the necessary steps to ensure that the 2016 budget is compliant. In spring, the Commission will reassess Portugal’s compliance with its obligations under the Stability and Growth Pact, including under the Excessive Deficit Procedure.” |
| The full statement is here: | The full statement is here: |
| European Commission adopts Opinion on Portugal’s 2016 Draft Budgetary Plan | European Commission adopts Opinion on Portugal’s 2016 Draft Budgetary Plan |
| Updated | Updated |
| at 3.07pm GMT | at 3.07pm GMT |
| 2.57pm GMT | 2.57pm GMT |
| 14:57 | 14:57 |
| We mentioned earlier that the European Commission was meeting to discuss Portugal’s anti-austerity budget, and could reject it. Well, perhaps not entirely. | We mentioned earlier that the European Commission was meeting to discuss Portugal’s anti-austerity budget, and could reject it. Well, perhaps not entirely. |
| #Portugal #OE2016 revised draft budget to be graded as 'partially compliant' by @EU_Commission. /via @diarioeconomico | #Portugal #OE2016 revised draft budget to be graded as 'partially compliant' by @EU_Commission. /via @diarioeconomico |
| Updated | Updated |
| at 3.06pm GMT | at 3.06pm GMT |
| 2.48pm GMT | 2.48pm GMT |
| 14:48 | 14:48 |
| The non-farm figures, although the headline number was lower than expected, still suggest further US rate rises this year, according to UniCredit chief economist Harm Bandholz: | The non-farm figures, although the headline number was lower than expected, still suggest further US rate rises this year, according to UniCredit chief economist Harm Bandholz: |
| The [jobs] report unequivocally supports the Federal Reserve’s (and our) baseline view that further gradual rate hikes are warranted. After all, ongoing labor market dynamics are the main driver of consumer spending, which in turn is the main driver of economic growth in the US. | The [jobs] report unequivocally supports the Federal Reserve’s (and our) baseline view that further gradual rate hikes are warranted. After all, ongoing labor market dynamics are the main driver of consumer spending, which in turn is the main driver of economic growth in the US. |
| A falling unemployment rate and faster wage gains also mean that the Fed is getting closer to meet both of its mandates. That said, many Fed officials have in recent weeks highlighted the unusual uncertainty about the outlook, and stressed that they need to see evidence that global headwinds and tighter financial conditions do not affect the US economy. So while this report is undoubtedly a step in the right direction, the FOMC wants to see more of these signs before pulling the trigger again. | A falling unemployment rate and faster wage gains also mean that the Fed is getting closer to meet both of its mandates. That said, many Fed officials have in recent weeks highlighted the unusual uncertainty about the outlook, and stressed that they need to see evidence that global headwinds and tighter financial conditions do not affect the US economy. So while this report is undoubtedly a step in the right direction, the FOMC wants to see more of these signs before pulling the trigger again. |
| And here are the odds on a hike: | And here are the odds on a hike: |
| March rate hike odds: - Before: 10%- After: 12%But now at least one rate hike in 2016 pic.twitter.com/p54XoTQDyP | March rate hike odds: - Before: 10%- After: 12%But now at least one rate hike in 2016 pic.twitter.com/p54XoTQDyP |
| 2.42pm GMT | 2.42pm GMT |
| 14:42 | 14:42 |
| Wall Street opens lower | Wall Street opens lower |
| Following the mixed US employment figures, the US market is slipping back in early trading. | Following the mixed US employment figures, the US market is slipping back in early trading. |
| The Dow Jones Industrial Average is down around 30 points or 0.16% while the S&P slipped 0.2% and the Nasdaq fell 0.4% at the open. | The Dow Jones Industrial Average is down around 30 points or 0.16% while the S&P slipped 0.2% and the Nasdaq fell 0.4% at the open. |
| European markets are off their best levels, with the FTSE 100 now up just 7 points after earlier climbing nearly 50 points. Germany’s Dax and France’s Cac are also up just 20 and 14 points respectively. | European markets are off their best levels, with the FTSE 100 now up just 7 points after earlier climbing nearly 50 points. Germany’s Dax and France’s Cac are also up just 20 and 14 points respectively. |
| Brent crude has dipped 0.6% to $34.25 a barrel. | Brent crude has dipped 0.6% to $34.25 a barrel. |
| 2.32pm GMT | 2.32pm GMT |
| 14:32 | 14:32 |
| So, fewer US rate cuts this year than previously forecast perhaps. | So, fewer US rate cuts this year than previously forecast perhaps. |
| Barclays on payrolls: "we now expect two rate hikes this year in June and December, as opposed to three in our previous baseline." | Barclays on payrolls: "we now expect two rate hikes this year in June and December, as opposed to three in our previous baseline." |
| 2.27pm GMT | 2.27pm GMT |
| 14:27 | 14:27 |
| "No joy in jobs report" | "No joy in jobs report" |
| More reaction to the non-farm numbers. And here’s a gloomy one from Gary Chaison, Professor of Industrial Relations at Clark University: | More reaction to the non-farm numbers. And here’s a gloomy one from Gary Chaison, Professor of Industrial Relations at Clark University: |
| There is no joy in this month’s jobs report and no sign that things have turned around. The recovery isn’t happening, it isn’t expanding and the labor participation rate is holding. While wages are up a bit, it isn’t enough to make an impact. A lot of workers have substituted good jobs for poor jobs or aren’t working at all which is why the labor participating rate continues to hold. I think the real problem is a lack of consumer confidence that we’re going to come out of this, the economy can recover or we can fall back into a recession. For the huge recession we had, we should be seeing a huge recovery and this is impacting the voters and public in general. | There is no joy in this month’s jobs report and no sign that things have turned around. The recovery isn’t happening, it isn’t expanding and the labor participation rate is holding. While wages are up a bit, it isn’t enough to make an impact. A lot of workers have substituted good jobs for poor jobs or aren’t working at all which is why the labor participating rate continues to hold. I think the real problem is a lack of consumer confidence that we’re going to come out of this, the economy can recover or we can fall back into a recession. For the huge recession we had, we should be seeing a huge recovery and this is impacting the voters and public in general. |
| 2.23pm GMT | 2.23pm GMT |
| 14:23 | 14:23 |
| Chris Williamson, chief economist at Markit, said: | Chris Williamson, chief economist at Markit, said: |
| Signs of a slowdown in hiring, still-weak annual pay growth and disappointing survey data, all pitched alongside an adverse financial market environment so far this year, reduce the odds of the Fed hiking rates again in March. | Signs of a slowdown in hiring, still-weak annual pay growth and disappointing survey data, all pitched alongside an adverse financial market environment so far this year, reduce the odds of the Fed hiking rates again in March. |
| “The unemployment rate fell to an eight-year low of 4.9% as the economy added 151,000 jobs in January, according to official estimates, signalling a marked slowing in the rate of job creation after the surge seen late last year. However, this is still a robust rate of employment growth, and a trend strong enough to keep bringing unemployment down. Furthermore, December’s numbers had in part reflected stronger than usual construction sector hiring due to unseasonably warm weather... | “The unemployment rate fell to an eight-year low of 4.9% as the economy added 151,000 jobs in January, according to official estimates, signalling a marked slowing in the rate of job creation after the surge seen late last year. However, this is still a robust rate of employment growth, and a trend strong enough to keep bringing unemployment down. Furthermore, December’s numbers had in part reflected stronger than usual construction sector hiring due to unseasonably warm weather... |
| It would therefore not be surprising if Fed policymakers decided to await clear signs of an upturn in the economic data flow and easing of financial conditions before committing to more tightening. | It would therefore not be surprising if Fed policymakers decided to await clear signs of an upturn in the economic data flow and easing of financial conditions before committing to more tightening. |