Aurelia Butler

LONDON (Reuters) – Children returning to school after an illness-ravaged December provided an unexpected, one-off boost to Britain’s economy in January, when growth in output exceeded forecasts, data showed on Friday.The Office for National Statistics (ONS) said Britain’s economy expanded 0.3% month-on-month, after a drop of 0.5% in December – a reading that is likely to further allay recession fears, at least in the short term.A Reuters poll of economists had pointed to growth of 0.1%.The pound rose against the dollar and euro on the back of the figures, which showed growth was powered entirely by services – much of it due to the one-off bounce in the education sector.The entertainment sector – helped by the men’s soccer Premier League returning to action after the 2022 World Cup – was another fillip for the economy.In a sign of deeper problems for the economy, manufacturing and construction contracted.”Looking beneath the surface, the figures suggest the economy is on weaker ground than it appears,” Ruth Gregory, deputy chief UK economist at consultancy Capital Economics.Martin Beck, chief economic advisor to the EY ITEM Club forecasting group, said widespread strikes in December and January likely explained why the economy remained below its level in November. The ONS said economic output in January stood 0.2% below its pre-pandemic level of February 2020 – in contrast to other advanced economies – and had shown zero growth over the last three months and the past year.Friday’s data are unlikely to materially change the debate at the Bank of England as it weighs up whether to raise interest rates again at its March meeting. The chance of a 25 percentage point increase in Bank Rate on March 23 receded slightly on Friday to about 83%, according to financial market pricing, from 100% earlier this week.CLASSROOM ECONOMICSPrime Minister Rishi Sunak said the fundamentals of Britain’s economy were strong, adding that his finance minister Jeremy Hunt would announce more details about the government’s economic plans in his upcoming annual budget. Hunt looks set to keep his grip on the public finances in Wednesday’s budget, refraining from big tax cuts or spending increases until the next election comes closer into view. Graphic: UK’s growth card https://www.reuters.com/graphics/BRITAIN-ECONOMY/zdpxdxblypx/chart.png The opposition Labour Party, ahead of Sunak’s Conservatives in the opinion polls by a wide margin, said the data showed the economy was only “inching along” amid a wider trend of managed decline.The ONS said half of the 0.3% growth rate comprised the education sector, as a result of children returning to school after a significant drop in attendance in December.The government had previously reported high rates of flu and scarlet fever during December. Fear of contracting COVID-19 over Christmas may also have contributed to children being taken out of school early.Education represents 6% of Britain’s economy and student numbers are the main way the ONS measures the quantity of service the sector provides. Graphic: Return to school after sickly December boosts UK GDP https://www.reuters.com/graphics/BRITAIN-ECONOMY/xmpjknmrxvr/chart.png More

LONDON (Reuters) – Global stocks languished at two-month lows on Friday ahead of Wall Street’s opening bell as Silicon Valley Bank shares came under fresh pressure, and investors waited to see how U.S. nonfarm payrolls could shape Federal Reserve thinking on rates.Crude oil was heading for its biggest weekly loss in five weeks on worries about the prospect of steep interest rate rises in the United States slowing growth and hitting fuel demand.The yen erased earlier losses on the Bank of Japan keeping stimulus settings steady, while the dollar eased against the Swiss franc ahead of the U.S. data.The MSCI All Country stock index was down 0.5%, hitting its lowest level since mid-January.In Europe, the STOXX index of 600 companies was down 1%, off its lows as selling pressure eased and U.S. stock index futures steadied.SVB Financial Group, which does business as Silicon Valley Bank, had sought on Thursday to reassure tech clients as its stock collapsed by 60% while it was attempting to raise funds to plug a $1.8 billion hole caused by the sale of a loss-making bond portfolio.Silicon Valley Bank, whose shares were down more than 40% in premarket trading on Friday, raised questions over the unrealised losses on bond portfolios among U.S. banks, and what that could mean for capital requirements, analysts said.The concerns rippled through lenders in Europe.The STOXX index of European bank shares sank 3.45% to its lowest level in more than a month, with Credit Suisse hitting an all-time low.”I think it’s panic and it’s company specific,” said Patrick Spencer, vice-chair of equities at RW Baird, adding it was a further sign of how the rise in borrowing costs and the end of cheap money was shaping markets.”We are actually taking advantage of the panic induced selling and we are upgrading some of the regional banks,” he said.U.S. Labor Department data on nonfarm payrolls were due before the opening bell on Wall Street, and economists have forecast payrolls have likely increased by 205,000 last month, less than half of the huge 517,000 added in January.”Anything more than 300,000 would blow the doors off the market,” Spencer said.ING bank said U.S. Federal Reserve Chair Jerome Powell has explicitly referred to Friday’s jobs data as a key driver, together with next week’s U.S. inflation figures, ahead of the Fed’s policy decisions on March 22.Powell has warned rates could rise further and faster if data shows that is needed to get a grip on inflation.U.S. stock index futures were mixed. Fund flows: Global equity sector funds https://fingfx.thomsonreuters.com/gfx/mkt/zdvxdxbmyvx/Fund%20flows-%20Global%20equity%20sector%20funds.jpg JAPANESE STIMULUS STEADYThe yen weakened and Japanese government bond yields plunged after the Bank of Japan opted to keep stimulus settings steady as expected at Governor Haruhiko Kuroda’s last meeting in charge. The benchmark 10-year JGB yield, which the BOJ pins within 50 basis points either side of zero, pulled back sharply from that ceiling to last sit at 0.445%. The yen was up 0.5% at 136.679 per dollar after a knee-jerk drop of as much as 0.6%.Japan’s Nikkei pared earlier losses to be down 1% after the central bank decision but selling began later in the session and the index was off 1.7%.The U.S. dollar was slightly weaker and the yield on short-end Treasuries were slightly weaker at 4.8264%.Markets were pricing in about a 50% chance of a 50 basis point Fed increase this month, down from more than 70% a day earlier. Bitcoin was off 3% at $19,761 as the fallout from the demise of Silvergate weighs on the broader mood in digital assets. Crypto-focused lender Silvergate said it was closing down. Brent crude futures eased 0.75% to $80.99 a barrel while gold was up 0.14% at $1,833 an ounce. More

LONDON/FRANKFURT (Reuters) – European bank shares tumbled on Friday in the wake of a dramatic sell-off in U.S. lenders as concern spread that the sector will be vulnerable to the rising cost of money.Europe’s STOXX banking index fell more than 4%, set for its biggest one-day slide since early June, with declines for most major lenders, including HSBC, down 4.5%, and Deutsche Bank (ETR:DBKGn), down 7.9%. Shares in Italy’s UniCredit and Intesa Sanpaolo (OTC:ISNPY) also fell sharply.The global rout in bank stocks was prompted by Silicon Valley Bank (SVB), a major banking partner for the U.S. tech sector, which was forced to raise fresh capital after selling a package of bonds at a loss to meet depositor demands for cash.”The market is treating this as a potential contagion risk,” said Antoine Bouvet, senior rates strategist at ING in London.”It makes sense to me that a remote probability of a U.S. banking system-wide crisis should also come with a small probability of contagion to Europe,” he said.Already bruised, the sector could face another bout of turmoil later on Friday if U.S. employment data points to a further racheting up of interest rates.Shares in major U.S. banks such as JPMorgan Chase & Co (NYSE:JPM) and Citigroup (NYSE:C) were set to fall again when Wall Street reopens. Europe’s battered banks https://www.reuters.com/graphics/EUROPE-BANKS/myvmoaejrvr/chart.png LEVERAGE PROBLEMThe crisis at SVB underscored the risks to banks from the end of easy money. Banks typically invest heavily in government bonds, in particular those of their home country. A spike in interest rates has led to a sell-off in bonds, leaving banks exposed to potential losses on the securities they hold.John Cronin, an analyst at Goodbody, said investors were worried about the falling value of banks’ investments and how that could hit the capital underpinning their business, as well as savers switching banks for a better deal.Offering higher deposits to attract customers could also eat into bank profits.Global borrowing costs have risen at the fastest pace in decades over the last year as the Federal Reserve lifted U.S. rates by 450 basis points from near zero, while the European Central Bank hiked the euro zone’s by 300 bps.Other parts of Europe and many developing economies have done even more. There are concerns, however, that price inflation is staying high, something that would drive further rate hikes.Neil Wilson, Chief Market Analyst at Markets.com, said that the SVB episode could be the “straw that breaks the camel’s back” for banks after worries about ever higher interest rates and a fragile U.S. economy.”It is leverage in the system that is the problem,” said James Athey, investment director at Abrdn. “Monetary policy way too easy for way too long.”The race to raise rates https://www.reuters.com/graphics/GLOBAL-MARKETS/klvygnlbyvg/chart.png (Writing By John O’Donnell; Additional reporting by Jo Mason, Marc Jones, Iain Withers and Yoruk Bahceli; Editing by Elisa Martinuzzi and Toby Chopra) More

Investing.com — Global markets reel from the sharp selloff in U.S. bank stocks on Thursday on concerns over what a medium-sized West Coast bank’s problems could mean for the broader sector. The U.S. releases its monthly labor report, with employment growth expected to revert to trend after a distorted gain in February. Stocks are struggling to get past the gain line in the meantime, amid disappointment at updates from Gap, Oracle, and DocuSign. The U.K. economy continued to defy gravity in January, and oil prices skid on fears for the U.S. economy despite some jawboning by Saudi Arabia and Russia. Here’s what you need to know in financial markets on Friday, March 10th.1. Global markets follow U.S. lower after Silicon Valley news stokes fearsGlobal markets shuddered at the first signs of stress in the U.S. banking sector since the Federal Reserve started raising interest rates last year.SVB Financial Group (NASDAQ:SIVB), also known as Silicon Valley Group, announced an emergency $2.25 billion capital raise to repair its balance sheet after taking $1.8B in losses on bonds that it had to sell to meet clients’ cash demands.While the bank stressed that the measures will restore its capital levels, the message that its client community of startups is burning through cash at an increased level sparked fears that the technology sector could cause broader – if less severe – problems at other banks too.The Dow Jones Banks index had fallen over 6% on Thursday in response to the news, while the S&P 500 Financials index fell over 4%. SVB, meanwhile, fell another 47% in premarket trading after losing 60% on Thursday.2. Jobs growth set to return to normalYou can tell things are serious when the monthly U.S. jobs report gets knocked off the top slot on the day’s newsletters.Developments in the labor market in February are going to be a crucial factor in the Federal Reserve’s decision at its policy meeting in two weeks’ time, and the numbers come only three days after Chair Jerome Powell warned that the central bank may have to step up the pace of rate hikes again to tame inflation, after trimming it at the last two meetings.Analysts expect nonfarm employment to have risen by 205,000, which would be closer to the underlying trend than the outside 517,000 gain registered last month – much of which was due to seasonal adjustments and other statistical quirks. As always, developments in the labor force participation rate and in average hourly earnings will also have a big influence on how the figures are interpreted.3. Stocks drifting lower; disappointment at Oracle, GapU.S. stocks are trending lower ahead of the jobs report as the SVB news continues to reverberate, but, frankly, no one who remembers 2007/8 is getting excited yet, given that SVB’s problems are, to a large degree, the result of its fairly idiosyncratic lending profile.By 06:35 ET (11:35 GMT), tech-heavy Nasdaq 100 futures were even bouncing a little, gaining 0.2% after losing more than 2% on Thursday. Dow Jones futures, however, were down another 87 points, or 0.3%, owing to continued losses in bank stocks, while S&P 500 futures were down 0.1%.JPMorgan (NYSE:JPM), Citigroup (NYSE:C), and Wells Fargo (NYSE:WFC) were all down by around 1%, while Bank of America (NYSE:BAC) stock was down 0.6%. Fifth Third Bancorp (NASDAQ:FITB), which has lost 20% this week on concerns of margin pressure from its corporate client base, eked out a 2.4% gain.Banks aside, Gap (NYSE:GPS) stock was set to open at a new four-month low after yet another disappointing update, while DocuSign (NASDAQ:DOCU) slumped 13% after saying its CFO has had enough after less than two years at the company. Oracle (NYSE:ORCL) also fell 4% after its quarterly update – unfairly so, in the opinion of at least some analysts on the company’s conference call.4. U.K. GDP stays out of the red, againThe U.K. economy continued to defy gravity in January, with preliminary estimates showing gross domestic product rose by 0.3%.That means that the rolling quarterly growth rate again avoided slipping into negative territory, despite a sharp rise in interest rates and collapse in consumer confidence at the back end of 2022.The numbers give the Bank of England a little more leeway to raise interest rates at its next meeting in two weeks’ time. Inflation has been running at around 10% for six months, higher than anywhere else in the G7. However, it appears to have peaked and Governor Andrew Bailey went out of his way earlier in the week to say that a rate hike isn’t certain at the meeting. His opinion was supported on Friday by worse-than-expected granular data for industrial production and construction output.The pound rose 0.5% to its highest in three days in response.5. Oil drifts lower, despite OPEC output fallCrude oil prices fell to their lowest in two weeks as the SVB news filtered through to risk assets of all stripes.By 06:45 ET, U.S. crude futures were down 0.9% at $75.08 a barrel, while Brent crude was down 0.7% at $81.00 a barrel. They were gaining little support from a Platts report suggesting that OPEC’s output fell some 80,000 barrels a day in February, not from commitments of continued cooperation in setting output levels from Russian Foreign Minister Sergey Lavrov after a meeting with his Saudi Arabian counterpart.Russia has angered some members of the OPEC bloc by unilaterally cutting production to support relative prices for its own exports, which are being shunned by western buyers due to sanctions. More

The economy is expected to have added 10,000 new jobs in February, as per a Reuters survey of analysts, compared with 150,000 job additions in the previous month. The data is due at 8:30 a.m. ET.March futures on the S&P/TSX index were down 0.3% at 7:10 a.m. ET.Traders also waited for U.S. February nonfarm payrolls data that could offer more clues about further monetary tightening from the Federal Reserve. [.N]The Toronto Stock Exchange’s S&P/TSX composite index tumbled to its two-month low on Thursday with heavy-weight financials leading declines. (TO) Oil prices fell for a fourth session and was heading for its biggest weekly loss in five weeks on worries about the prospect of steep interest rate hikes in the United States hitting fuel demand. [O/R]Among company news, brokerage BMO downgraded oil services provider Shawcor to “market perform” from “outperform”.COMMODITIES AT 7:10 a.m. ET Gold futures: $1,838.3; +0.2% [GOL/]US crude: $75; -0.9% [O/R]Brent crude: $80.9; -0.7% [O/R]U.S. ECONOMIC DATA DUE ON FRIDAYFebruary non-farm payrolls data due at 8:30 a.m. ETFOR CANADIAN MARKETS NEWS, CLICK ON CODES:TSX market report (TO)Canadian dollar and bonds report [CAD/] [CA/]Reuters global stocks poll for CanadaCanadian markets directory($1 = 1.3839 Canadian dollars) More