Slowing US jobs growth fuels belief that rate rise cycle is ending

Today’s top stories

• US secretary of state Antony Blinken met Israeli prime minister Benjamin Netanyahu in Tel Aviv to push for a “pause” in the fighting in Gaza as concerns mounted that the war could escalate into a regional conflict. Israel-Hamas war: full coverage

• FTX founder Sam Bankman-Fried was convicted of fraud and money laundering in a landmark criminal verdict that is likely to condemn the ex-crypto tycoon to decades in prison and bolster US authorities’ attempts to bring an unruly financial sector to heel. Here’s our profile of the fallen “king of crypto”.

• Shipping giant Maersk is cutting at least 10,000 jobs as demand plunges from pandemic highs. The industry meanwhile is stepping up efforts to build steel containers outside China, which is responsible for 95 per cent of the world’s supply of the metal boxes, as it tries to protect a key part of global trade from supply chain and geopolitical pressures.

For up-to-the-minute news updates, visit our live blog

Good evening.

US jobs growth slowed sharply in October, fuelling investors’ bets that the Federal Reserve would not raise interest rates further in coming months.

The world’s largest economy added a fewer than expected 150,000 new posts last month, while the unemployment rate rose from 3.8 per cent to 3.9 per cent.

“This jobs report is . . . helping convince non-believers that this is very much the end of the rate hike cycle,” said one strategist. “We are very much in a disinflationary trend, the economy is cooling and the Fed does not have to hike rates again.” Separately, services sector data also out today reinforced the view that growth in the US economy is slowing down.

The yield on the two-year US Treasury note, which moves inversely to price and tracks interest rate expectations, fell to a two-month low of 4.86 per cent. US stocks rose.

Before today’s data, the Fed, which kept rates at a 22-year high this week, had indicated that recent stronger stats might have left it with more work to do to meet its inflation target.

As our new Big Read details, although investors are optimistic that inflation is under control and the era of rising rates is over, central bankers feel that further increases remain on the table.

Some market participants, such as BlackRock, the world’s largest asset manager, believe investors still need to factor in much higher long-term borrowing costs because of ageing populations, fractious geopolitics and costs associated with the energy transition. In any case, as commentator Soumaya Keynes writes, forecasting where interest rates are going can be a bit of a mug’s game.

As Seth Carpenter, an ex-employee of the Treasury and the Fed puts it, policymakers are far from hanging up the “mission accomplished” banner.

“The past two and a half years have shown just how difficult forecasting can be,” he said. “And I do think there is a sufficient dose of appropriate humility across central bankers about how hard it is to know for sure where things are going.”

Need to know: UK and Europe economy

The Bank of England held interest rates at 5.25 per cent and warned that its restrictive policy would have to remain for an “extended period”. BoE governor Andrew Bailey said there was a long way to go before policymakers could relax about inflation.

“We were going to be great.” Here’s our wrap of the swearathon that was a week in the UK Covid inquiry, detailing the government’s response to the pandemic.

UK housebuilding was at its weakest since the start of pandemic in the three months to September, according to surveyors, with new data suggesting a sharp drop in construction activity as interest rates increased.

Eurozone unemployment unexpectedly rose from its record low to hit 6.5 per cent in September as high interest rates and a stagnating economy took their toll on the labour market. As with the Fed, the European Central Bank is watching the job market closely for signs it will weaken and slow wage increases, a key driver of inflation.

Ukraine is bracing for attacks on its energy grid as Russia switches targets from seaports and grain-exporting infrastructure.

Need to know: Global economy

The UK AI summit was a worthy affair, writes innovation editor John Thornhill, but ultimately it’s the US, as the world’s technological hegemon, that will write the rules of the game. The gathering ended with X boss Elon Musk telling prime minister Rishi Sunak that AI would render all jobs obsolete.

Developing countries need up to $387bn a year to adapt to climate change, according to the UN Environment Programme.

Japan’s prime minister Fumio Kishida is staking his future on a $113bn stimulus plan of tax cuts and cash handouts, as he fights high inflation and record-low approval ratings. Here’s an explainer on what the end of the country’s “yield curve control” experiment means for markets.

China’s anti-corruption drive continued with a ban on party officials investing in private equity. A Big Read details how the country’s dream of “common prosperity” is beginning to fade.

Need to know: business

US regulator FTC alleged that Amazon earned $1bn in extra profit from a secret algorithm that controlled pricing, known internally as “Project Nessie”.

Shell profits hit $6.2bn in the third quarter and the company increased share buybacks thanks to high oil prices and refining margins.

There was more evidence of the bounceback in air travel, as German carrier Lufthansa reported the “highest revenue and profit ever achieved in one summer”. There was also a surge in demand for first-class tickets, despite spiralling prices.

Official data showed the profitability of UK private non-financial companies fell in the second quarter and was below its pre-pandemic average, suggesting that higher margins were not a key driver of inflation, tallying with Bank of England findings downplaying the phenomenon of “greedflation”.

Science round up

New research highlighted the growing threat posed by zoonotic infections. Environmental and population changes over the past decades are driving growing numbers of animal-to-human “spillover events”.

Another emissions problem is starting to gain traction, this time concerning tyres, which release many more polluting particles than an exhaust pipe but rarely come under scrutiny. Food chains are also at risk: a recent study showed a chemical from tyres had made its way into a lettuce plant.

The pioneering UK Biobank genetics database has won donations of $10mn each from former Google chief executive Eric Schmidt and billionaire investor Ken Griffin, highlighting the excitement about its potential for breakthroughs in combating diseases.

An FT Big Read looks at the evidence showing incidences of dementia slowing, despite the increasing prevalence of longer life. Better cardiovascular health is likely to be a significant factor, as well as “cognitive reserve” — where people whose brains remain nimble and active seem better able to tolerate the deterioration of dementia without any obvious loss of faculties.

Commentator Anjana Ahuja discusses the still poorly understood scientific reasons for menopause, a life change seemingly in conflict with the evolutionary imperative to reproduce.

Some good news

New research showing rats have humanlike powers of imagination could boost development in neuroprosthesis, the use of brain functions to control devices such as artificial limbs, robotic arms or hearing implants.

Something for the weekend

Try your hand at the range of FT Weekend and daily cryptic crosswords.

Source: Economy - ft.com