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| UK jobs market 'loses momentum' as real wage squeeze continues – business live | UK jobs market 'loses momentum' as real wage squeeze continues – business live |
| (about 1 hour later) | |
| Markets may be lower but could be supported at these levels. Chris Beauchamp, chief market analyst at IG, says: | |
| Stocks are falling, volatility is on the up, China’s economic growth appears to be weakening and we even have a military coup to deal with. On the face of it, the situation would be ripe for a big selloff in equity markets, but this is not 2008 or even 2015. Below the surface some sectors, such as utilities, are recovering, while in the UK and Europe markets are off their lows. | |
| It is options expiration week, and a look at positioning through put/call ratios suggests sentiment has become excessively bearish. Plus, Thanksgiving is on the horizon, and the week before this all-American holiday tends to be a good one. The bears can almost taste victory, but I suspect that 2017 will work its magic once again and the dip buyers will have their way. | |
| The concerns about a rise in US crude stocks last week proved well founded. | The concerns about a rise in US crude stocks last week proved well founded. |
| They climbed by 1.85m barrels compared to earlier forecasts of a 2.2m drop. Gasoline stocks rose by 894,000 barrels as opposed to the expected 0.9m decline. | They climbed by 1.85m barrels compared to earlier forecasts of a 2.2m drop. Gasoline stocks rose by 894,000 barrels as opposed to the expected 0.9m decline. |
| Oil prices remained in the doldrums after report but at least recovered from their lows, with West Texas Intermediate now doen 0.46% at $55.24 a barrel. | Oil prices remained in the doldrums after report but at least recovered from their lows, with West Texas Intermediate now doen 0.46% at $55.24 a barrel. |
| US markets remain in negative territory although the Dow Jones Industrial Average is off its worst levels, down 131 points or 0.5%. Connor Campbell, financial analyst at Spreadex, said: | US markets remain in negative territory although the Dow Jones Industrial Average is off its worst levels, down 131 points or 0.5%. Connor Campbell, financial analyst at Spreadex, said: |
| The markets looked pretty bloody this Wednesday, with the euro once again the only real winner. | The markets looked pretty bloody this Wednesday, with the euro once again the only real winner. |
| With US investors already fretting about the Republican tax reforms – namely the party’s ability to push them through after they failed so spectacularly on healthcare – a weak pair of inflation and retail sales readings didn’t really do much to help matters. The former came in as expected at a measly 0.1% in October, down from 0.5% in September, while the latter arrived at a better than forecast, but still miserly, 0.2%. | With US investors already fretting about the Republican tax reforms – namely the party’s ability to push them through after they failed so spectacularly on healthcare – a weak pair of inflation and retail sales readings didn’t really do much to help matters. The former came in as expected at a measly 0.1% in October, down from 0.5% in September, while the latter arrived at a better than forecast, but still miserly, 0.2%. |
| Neither figure substantially threatens a December rate hike from the Federal Reserve; however, the tendrils of doubt are never too far away, meaning the US markets could have done with something more robust to drive away the current gloom. | Neither figure substantially threatens a December rate hike from the Federal Reserve; however, the tendrils of doubt are never too far away, meaning the US markets could have done with something more robust to drive away the current gloom. |
| Instead the Dow Jones is stuck with a 130 point fall, taking the index to a sub-23300, near 4-week nadir. The dollar wasn’t much better; while it held flat against the pound, largely due to sterling’s own inflation and wage growth issues, it shed 0.1% against the euro and 0.4% against the yen. | Instead the Dow Jones is stuck with a 130 point fall, taking the index to a sub-23300, near 4-week nadir. The dollar wasn’t much better; while it held flat against the pound, largely due to sterling’s own inflation and wage growth issues, it shed 0.1% against the euro and 0.4% against the yen. |
| Things were just as glum in Europe. The FTSE is down around 50 points thanks to its commodity stocks, and is trading at its worst price since the end of September, while the DAX, displeased at the euro’s resilience, has shed nearly 120 points to hit a fresh 6 and a half week low. | Things were just as glum in Europe. The FTSE is down around 50 points thanks to its commodity stocks, and is trading at its worst price since the end of September, while the DAX, displeased at the euro’s resilience, has shed nearly 120 points to hit a fresh 6 and a half week low. |
| Back in the UK, and sales of used cars fell over the summer, according to the industry body. Julia Kollewe writes: | Back in the UK, and sales of used cars fell over the summer, according to the industry body. Julia Kollewe writes: |
| The Society of Motor Manufacturers and Traders said today that the used car market declined for a second quarter, with sales down 2.1% between July and September from a year ago. About 2.1m secondhand cars changed hands. | The Society of Motor Manufacturers and Traders said today that the used car market declined for a second quarter, with sales down 2.1% between July and September from a year ago. About 2.1m secondhand cars changed hands. |
| Superminis are still popular, making up a third of sales. Along with SUVs they were the only categories to show growth. Silver remains the most popular used car colour, closely followed by black. | Superminis are still popular, making up a third of sales. Along with SUVs they were the only categories to show growth. Silver remains the most popular used car colour, closely followed by black. |
| Sales of hybrid and electric cars rose 17% to 25,196 units (electric cars alone urged 66.4%). While petrol sales fell 6.5%, demand for diesels rose 4.2% – in stark contrast to new diesels where sales have fallen sharply. | Sales of hybrid and electric cars rose 17% to 25,196 units (electric cars alone urged 66.4%). While petrol sales fell 6.5%, demand for diesels rose 4.2% – in stark contrast to new diesels where sales have fallen sharply. |
| After a bumper first quarter the market remains at record levels, with more than 6.3m buyers opting for a used car in the first nine months of this year, up 0.1% on the same period last year. | After a bumper first quarter the market remains at record levels, with more than 6.3m buyers opting for a used car in the first nine months of this year, up 0.1% on the same period last year. |
| Simon Benson, director of motoring services at used car website AA Cars, said:“Sales of used cars have suffered - but not nearly at the same rate as the new car market, which experienced a double digit decline last month. A lack of consumer confidence has rippled out across the market.” | Simon Benson, director of motoring services at used car website AA Cars, said:“Sales of used cars have suffered - but not nearly at the same rate as the new car market, which experienced a double digit decline last month. A lack of consumer confidence has rippled out across the market.” |
| The retail sales and inflation figures are likely to add more fuel to the fire in terms of a US rate rise next month, analysts believe. | The retail sales and inflation figures are likely to add more fuel to the fire in terms of a US rate rise next month, analysts believe. |
| But there is some uncertainty as to the future trend of borrowing costs, especially with a new Fed chair for the new year and a change in the composition of the decision making panel. Dennis de Jong, managing director at UFX.com, said: | But there is some uncertainty as to the future trend of borrowing costs, especially with a new Fed chair for the new year and a change in the composition of the decision making panel. Dennis de Jong, managing director at UFX.com, said: |
| The recently released figures from the US Bureau of Labor Statistics show that while inflation is creeping up as anticipated, it appears reluctant to move through the gears. | The recently released figures from the US Bureau of Labor Statistics show that while inflation is creeping up as anticipated, it appears reluctant to move through the gears. |
| What this rising inflation will provide, however, is yet another tick on the checklist, as the Fed looks increasingly likely to raise interests rates next month. | What this rising inflation will provide, however, is yet another tick on the checklist, as the Fed looks increasingly likely to raise interests rates next month. |
| With a December rate rise already priced in by many analysts, the next question is whether Jerome Powell, President Trump’s pick to be the next Fed chairman, continues current chair Janet Yellen’s cautious approach to rate movements. | With a December rate rise already priced in by many analysts, the next question is whether Jerome Powell, President Trump’s pick to be the next Fed chairman, continues current chair Janet Yellen’s cautious approach to rate movements. |
| ING economist James Smith said: | ING economist James Smith said: |
| A pick-up in core inflation and solid retail sales suggests investors may still be too cautious about the rate hike outlook for the next year. | A pick-up in core inflation and solid retail sales suggests investors may still be too cautious about the rate hike outlook for the next year. |
| Falling core inflation has seen markets remain fairly cautious on the outlook for interest rates through much of this year. However, the latest data for October saw core CPI expectedly rise to 1.8% year on year, providing some tentative evidence that inflation may be finally starting to turn a corner. Headline CPI dipped back slightly to 2% as gasoline prices re-adjust following the hurricanes a couple of months ago. | Falling core inflation has seen markets remain fairly cautious on the outlook for interest rates through much of this year. However, the latest data for October saw core CPI expectedly rise to 1.8% year on year, providing some tentative evidence that inflation may be finally starting to turn a corner. Headline CPI dipped back slightly to 2% as gasoline prices re-adjust following the hurricanes a couple of months ago. |
| This rise in core CPI tallies with the latest above-consensus producer-price inflation data released yesterday, which saw core PPI hit a five-year high of 2.4%. Given the weaker dollar and higher energy prices, we are optimistic that inflationary pressures will continue to build as we head into next year. Likewise, we also expect wage growth to continue gradually picking up in 2018. | This rise in core CPI tallies with the latest above-consensus producer-price inflation data released yesterday, which saw core PPI hit a five-year high of 2.4%. Given the weaker dollar and higher energy prices, we are optimistic that inflationary pressures will continue to build as we head into next year. Likewise, we also expect wage growth to continue gradually picking up in 2018. |
| There was some equally good news from today’s retail sales data. The headline rate of growth was held back somewhat by falling gasoline prices. But 0.3% month on month growth in the control group (which excludes volatile items) suggest that consumers started the fourth quarter on a solid footing. This is one reason why we are looking for another near-3% GDP growth reading this quarter. | There was some equally good news from today’s retail sales data. The headline rate of growth was held back somewhat by falling gasoline prices. But 0.3% month on month growth in the control group (which excludes volatile items) suggest that consumers started the fourth quarter on a solid footing. This is one reason why we are looking for another near-3% GDP growth reading this quarter. |
| All of this argues in favour of a December rate hike, but markets are still sceptical that we will get much more than one hike during next year. However, with the Fed broadening out the reasons for tightening policy - with references to loose financial conditions and rich asset valuations - we suspect investors are too cautious. There is also the annual rotation of regional Fed voters, which will see two hawks (Williams and Mester) take over the votes of two doves (Kashkari and Evans) in 2018. We expect two hikes next year. | All of this argues in favour of a December rate hike, but markets are still sceptical that we will get much more than one hike during next year. However, with the Fed broadening out the reasons for tightening policy - with references to loose financial conditions and rich asset valuations - we suspect investors are too cautious. There is also the annual rotation of regional Fed voters, which will see two hawks (Williams and Mester) take over the votes of two doves (Kashkari and Evans) in 2018. We expect two hikes next year. |
| Earlier there was some US data, showing both retail sales and inflation on the rise, albeit a very small increase in the latter | Earlier there was some US data, showing both retail sales and inflation on the rise, albeit a very small increase in the latter |
| An increase in car purchases helped retail sales rise to a better than expected 0.2% in October, offsetting a decline in demand for building materials. Economists had forecast no change. Meanwhile the September figure was revised upwards from 1.6% to 1.9%. | An increase in car purchases helped retail sales rise to a better than expected 0.2% in October, offsetting a decline in demand for building materials. Economists had forecast no change. Meanwhile the September figure was revised upwards from 1.6% to 1.9%. |
| On the inflation front, consumer prices edged up 0.1% in October as a boost to oil prices from the hurricane-related disruptions to the Gulf Coast fell away. In September, the consumer price index had climbed 0.5%. | On the inflation front, consumer prices edged up 0.1% in October as a boost to oil prices from the hurricane-related disruptions to the Gulf Coast fell away. In September, the consumer price index had climbed 0.5%. |
| The data - the inflation figures in particular - was seen as negative for the dollar. Lukman Otunuga, research analyst at FXTM, said: | The data - the inflation figures in particular - was seen as negative for the dollar. Lukman Otunuga, research analyst at FXTM, said: |
| Sellers immediately attacked the dollar on Wednesday after U.S. consumer prices marginally increased by 0.1% in October – the smallest gain witnessed in three months. | Sellers immediately attacked the dollar on Wednesday after U.S. consumer prices marginally increased by 0.1% in October – the smallest gain witnessed in three months. |
| Although the 0.1% increase in consumer prices was in line with market expectations, it continues to highlight how stubbornly low inflation in the United States remains a recurrent theme. While it is widely expected that the Federal Reserve will raise interest rates in December, the future path of rate hikes beyond 2017, is open to discussion amid low inflation concerns. On a positive note, U.S. retail sales unexpectedly rose 0.2% in October which is likely to boost sentiment towards the U.S. economy and offer some support to the tired dollar. | Although the 0.1% increase in consumer prices was in line with market expectations, it continues to highlight how stubbornly low inflation in the United States remains a recurrent theme. While it is widely expected that the Federal Reserve will raise interest rates in December, the future path of rate hikes beyond 2017, is open to discussion amid low inflation concerns. On a positive note, U.S. retail sales unexpectedly rose 0.2% in October which is likely to boost sentiment towards the U.S. economy and offer some support to the tired dollar. |
| Taking a look at the technical picture, the dollar Index dipped towards 93.40 following the release. The 94.00 level has the ability to transform into a dynamic resistance that could encourage a further decline towards 93.50 and 93.00, respectively. A solid breakout back above 94.50 threatens the current bearish setup. | Taking a look at the technical picture, the dollar Index dipped towards 93.40 following the release. The 94.00 level has the ability to transform into a dynamic resistance that could encourage a further decline towards 93.50 and 93.00, respectively. A solid breakout back above 94.50 threatens the current bearish setup. |
| US markets are on the slide again, hit by a falling oil price and continuing worries about the ability of the Republicans to achieve their proposed tax cuts. | US markets are on the slide again, hit by a falling oil price and continuing worries about the ability of the Republicans to achieve their proposed tax cuts. |
| West Texas Intermediate - the US benchmark - is down 0.9% at $55.19 a barrel after the International Energy Agency issued a gloomy outlook on the prospects for global demand for oil. Later come the latest US crude inventory figures, with investors worried they might show an increase. | West Texas Intermediate - the US benchmark - is down 0.9% at $55.19 a barrel after the International Energy Agency issued a gloomy outlook on the prospects for global demand for oil. Later come the latest US crude inventory figures, with investors worried they might show an increase. |
| So the Dow Jones Industrial Average is currently down 155 points or 0.66% while the S&P 500 opened 0.5% lower and the Nasdaq Composite lost 0.58%. | So the Dow Jones Industrial Average is currently down 155 points or 0.66% while the S&P 500 opened 0.5% lower and the Nasdaq Composite lost 0.58%. |
| Back in London, a Bank of England deputy governor has insisted that wages should rise in 2018 as low unemployment forces bosses to pay more for labour. | Back in London, a Bank of England deputy governor has insisted that wages should rise in 2018 as low unemployment forces bosses to pay more for labour. |
| Obviously there’s not much sign of this happening yet, given today’s lacklustre wage growth. | Obviously there’s not much sign of this happening yet, given today’s lacklustre wage growth. |
| But Ben Broadbent insists that reports of the death of the Phillips Curve (the classic inverse relationship between unemployment and pay) were exaggerated. | But Ben Broadbent insists that reports of the death of the Phillips Curve (the classic inverse relationship between unemployment and pay) were exaggerated. |
| Deputy Governor of the @bankofengland Ben Broadbent - Brexit and Interest Rates - @LSEEI pic.twitter.com/CQC7SBSC88 | Deputy Governor of the @bankofengland Ben Broadbent - Brexit and Interest Rates - @LSEEI pic.twitter.com/CQC7SBSC88 |
| Broadbent told an audience in London that: | Broadbent told an audience in London that: |
| “Several commentators have questioned the MPC’s central prediction that wage growth will rise next year. Some have gone further and pronounced the death of the Phillips curve. | “Several commentators have questioned the MPC’s central prediction that wage growth will rise next year. Some have gone further and pronounced the death of the Phillips curve. |
| There are always risks to any forecast. But the latter claim, at least, is premature.” | There are always risks to any forecast. But the latter claim, at least, is premature.” |
| Broadbent also blamed the tumble in the pound after the EU referendum for pushing down real wages, as the weak currency made imports pricier and thus pushed inflation up. | Broadbent also blamed the tumble in the pound after the EU referendum for pushing down real wages, as the weak currency made imports pricier and thus pushed inflation up. |
| BoE's Broadbent: Brexit-Linked Fall In STG Is Why We Have Negative Real Wage Growth - RTRS | BoE's Broadbent: Brexit-Linked Fall In STG Is Why We Have Negative Real Wage Growth - RTRS |
| Breaking away from UK unemployment briefly, there are three important developments in Greece. | Breaking away from UK unemployment briefly, there are three important developments in Greece. |
| First, the Greek government has launched a €30bn debt swap, asking investors to hand over existing bonds in return for new debt. | First, the Greek government has launched a €30bn debt swap, asking investors to hand over existing bonds in return for new debt. |
| It’s an attempt to ease Athens’ return to the financial markets after years of bailouts. These new bonds won’t mature for many years, sparing Greece any nervy repayment deadlines. | It’s an attempt to ease Athens’ return to the financial markets after years of bailouts. These new bonds won’t mature for many years, sparing Greece any nervy repayment deadlines. |
| #Greece's Public Debt Mngnt Agency facilitates an important €29.7bn bond swap operation.New bonds to have far longer maturities: 5, 10, 15, 17 & 25 years.#ESM | #Greece's Public Debt Mngnt Agency facilitates an important €29.7bn bond swap operation.New bonds to have far longer maturities: 5, 10, 15, 17 & 25 years.#ESM |
| But secondly, ratings agency DBRS has warned that Greece is unlikely to make much progress in its current bailout talks this year. | But secondly, ratings agency DBRS has warned that Greece is unlikely to make much progress in its current bailout talks this year. |
| Thirdly, the country’s leftist-led government has taken further steps to relax capital controls that were imposed to stop its banks collapsing during the crisis two years ago. | Thirdly, the country’s leftist-led government has taken further steps to relax capital controls that were imposed to stop its banks collapsing during the crisis two years ago. |
| Helena Smith reports from Athens | Helena Smith reports from Athens |
| The Greek government’s narrative of impending exit from seemingly perpetual crisis took a knock today as the Toronto-based rating agency said it was unlikely that Athens would complete crucial bailout talks before the end of the year. | The Greek government’s narrative of impending exit from seemingly perpetual crisis took a knock today as the Toronto-based rating agency said it was unlikely that Athens would complete crucial bailout talks before the end of the year. |
| In a note the ratings service reckoned a compliance review with international auditors representing creditors keeping Greece afloat would not be completed until 2018. | In a note the ratings service reckoned a compliance review with international auditors representing creditors keeping Greece afloat would not be completed until 2018. |
| Wrapping up the review was key to unlocking debt relief talks and discussions on the type of support Greece would receive once its current bailout programme ended in August next year | Wrapping up the review was key to unlocking debt relief talks and discussions on the type of support Greece would receive once its current bailout programme ended in August next year |
| Meanwhile, the leftist-led coalition took another step Wednesday towards easing capital controls imposed to prevent a run on banks at the height of the debt crisis. A degree that went into effect today, foresees depositors being able to fully withdraw sums in bank accounts transferred from overseas as of December 1st. People who have not previously held bank accounts will also be able to open one under the new regulations signed by finance minister Euclid Tsakalotos and published in the government gazette. | Meanwhile, the leftist-led coalition took another step Wednesday towards easing capital controls imposed to prevent a run on banks at the height of the debt crisis. A degree that went into effect today, foresees depositors being able to fully withdraw sums in bank accounts transferred from overseas as of December 1st. People who have not previously held bank accounts will also be able to open one under the new regulations signed by finance minister Euclid Tsakalotos and published in the government gazette. |
| Despite what the chancellor’s tweeted (see earlier) UK unemployment isn’t actually a record low. | Despite what the chancellor’s tweeted (see earlier) UK unemployment isn’t actually a record low. |
| The current jobless rate of just 4.3% is the lowest since 1975; in early 1974 it was just 3.6%. | The current jobless rate of just 4.3% is the lowest since 1975; in early 1974 it was just 3.6%. |
| Today’s jobless total of 1.42 million also isn’t a record - it was lower in 2004 and 2005. | Today’s jobless total of 1.42 million also isn’t a record - it was lower in 2004 and 2005. |
| Thanks to economics professor Danny Blanchflower for flagging this up. | Thanks to economics professor Danny Blanchflower for flagging this up. |
| @graemewearden re the chancellor's tweet you posted - today isn't the lowest unempt level ever 1,425,000 vs 6months in 2004 June-nov1,4231,4051,4011,3971,4071,423https://t.co/oib31tXf5i | @graemewearden re the chancellor's tweet you posted - today isn't the lowest unempt level ever 1,425,000 vs 6months in 2004 June-nov1,4231,4051,4011,3971,4071,423https://t.co/oib31tXf5i |
| In another significant development, The Young Women’s Trust has warned an extra 42,000 young people dropped out of the labour market and the education sector in the last three months. | In another significant development, The Young Women’s Trust has warned an extra 42,000 young people dropped out of the labour market and the education sector in the last three months. |
| This group became economically inactive, and were not in education or training either - a worrying sign. | This group became economically inactive, and were not in education or training either - a worrying sign. |
| Joe Levenson, communications and campaigns director at the Young Women’s Trust, says the jump highlights the challenge facing young adults - particularly mothers with young children. | Joe Levenson, communications and campaigns director at the Young Women’s Trust, says the jump highlights the challenge facing young adults - particularly mothers with young children. |
| Levenson says: | Levenson says: |
| “42,000 more young people are now economically inactive and out of education – a dramatic increase on the last quarter. | “42,000 more young people are now economically inactive and out of education – a dramatic increase on the last quarter. |
| “Young women in particular are telling us they want to work but hundreds of thousands are getting shut out of the jobs market, including by a lack of convenient childcare and support. While the Government focuses on reducing its unemployment figures, 343,000 young women who are not included in the numbers are being left jobless and forgotten. | “Young women in particular are telling us they want to work but hundreds of thousands are getting shut out of the jobs market, including by a lack of convenient childcare and support. While the Government focuses on reducing its unemployment figures, 343,000 young women who are not included in the numbers are being left jobless and forgotten. |
| “At the same time, we have a youth debt epidemic, which is only set to worsen as prices rise and wages remain low. It can be especially hard for young mums; in many cases, an hour’s childcare can cost more than an hour’s wages. It’s time for action. | “At the same time, we have a youth debt epidemic, which is only set to worsen as prices rise and wages remain low. It can be especially hard for young mums; in many cases, an hour’s childcare can cost more than an hour’s wages. It’s time for action. |
| “Much more needs to be done to improve young people’s prospects. This means giving them the right skills and support to find jobs, ensuring decent and flexible jobs are available, and extended the National Living Wage to under-25s, so they are paid the same amount for the same work. This will not only help them to become financially independent but will benefit businesses and the economy too.” | “Much more needs to be done to improve young people’s prospects. This means giving them the right skills and support to find jobs, ensuring decent and flexible jobs are available, and extended the National Living Wage to under-25s, so they are paid the same amount for the same work. This will not only help them to become financially independent but will benefit businesses and the economy too.” |
| This chart shows how the number of young adults who have left the labour force has risen, while those in work or looking for work has dropped: | This chart shows how the number of young adults who have left the labour force has risen, while those in work or looking for work has dropped: |
| Philip Hammond, the chancellor, has just welcomed the drop in unemployment and the rise in productivity seen today. | Philip Hammond, the chancellor, has just welcomed the drop in unemployment and the rise in productivity seen today. |
| Unemployment at record low and productivity now growing at fastest rate since 2011. More still to do at Budget to lock this progress in. | Unemployment at record low and productivity now growing at fastest rate since 2011. More still to do at Budget to lock this progress in. |
| (I suspect this tweet didn’t come directly from the chancellor’s thumbs; it would be very disrespectful to tweet during Prime Minister’s Questions - as Hammond is sat next to Theresa May on the front bench) | (I suspect this tweet didn’t come directly from the chancellor’s thumbs; it would be very disrespectful to tweet during Prime Minister’s Questions - as Hammond is sat next to Theresa May on the front bench) |