Economy

LONDON (Reuters) -Global stocks extended their gains on Friday after data showed the U.S. economy added fewer jobs than expected in October, bolstering investors’ hopes that the Federal Reserve is finished hiking interest rates.The dollar tumbled after the data, which showed that the U.S. nonfarm payrolls rose by 150,000 in October, lower than the 180,000 predicted and September’s downwardly revised 297,000 figure.Equities remained on track for their biggest weekly rise in a year after the Fed left interest rates steady for a second meeting running on Wednesday and the Bank of England followed suit on Thursday, helping bond yields to tumble.MSCI’s index of world stocks was last up 0.45%, having traded roughly 0.26% higher before the data. It was on track to finish the week 4.5% higher, which would be the largest weekly rise since November 2022. The dollar index, which tracks the currency against its major peers, was last down 0.74% at 105.45. It traded 0.29% lower at 105.89 before the data.Futures for the S&P 500 stock index rose and were last up 0.37%, after the index jumped 1.9% the previous day.”Investors will interpret today’s jobs weak jobs report as a sign that demand is slowing in the labour market,” said Richard Flynn, managing director at Charles Schwab (NYSE:SCHW) UK, in emailed comments.”For central bankers, a loosening labour market is another reason to lean away from further interest rate hikes – something investors might view as a silver lining.”Europe’s benchmark Stoxx 600 equity index was up 0.25% on Friday, after trading around 0.1% higher before the nonfarm payrolls. It was set for a weekly increase of 3.5%.The 10-year U.S. Treasury yield was last down 10 basis points (bps) at 4.572%, having traded 3 bps lower at 4.639% previously.The yield, the reference for borrowing rates around the world, dropped 20 basis points over the Wednesday and Thursday sessions after the Fed and BoE meetings.Central bank officials stressed that more may need to be done to tackle inflation, but many investors believe the next move in borrowing costs is likely to be down.”Once the market can become convinced that all these central banks are on hold … that can encourage bond yields to move lower,” said Samuel Zief, head of global FX strategy at JPMorgan Private Bank.A decision on Wednesday by the U.S. Treasury to issue less long-term debt than expected also fuelled the rally in bonds, as did data on Thursday suggesting the U.S. economy might finally be cooling.Oil prices were down for the week, in part because the Israel-Hamas war has not widened as some feared. Brent crude oil futures were 3.4% lower since Monday at $87.33 a barrel, although were up 0.5% on Friday. More

WASHINGTON (Reuters) – U.S. job growth slowed more than expected in October in part as strikes by the United Auto Workers (UAW) union against Detroit’s “Big Three” car makers depressed manufacturing payrolls, while wage inflation cooled, pointing to an easing in labor market conditions.Nonfarm payrolls increased by 150,000 jobs last month, the Labor Department’s Bureau of Labor Statistics (BLS) said in its closely watched employment report on Friday. Data for September was revised lower to show 297,000 jobs created instead of 336,000 as previously reported. Economists polled by Reuters had forecast payrolls rising 180,000. The economy needs to create roughly 100,000 jobs per month to keep up with growth in the working-age population. Manufacturing employment dropped 35,000 after increasing 14,000 in September. The BLS reported last week that there were at least 30,000 UAW members on strike during the period it surveyed business establishments for October’s employment report. The strikes have since ended, which could provide a lift to November’s payrolls. Average hourly earnings rose 0.2% after climbing 0.3% in September. In the 12 months through October, wages increased 4.1% after rising 4.3% in September. The unemployment rate rose to 3.9% from 3.8%. The report could strengthen financial market expectations that the Federal Reserve is done raising interest rates for the current cycle. The U.S. central bank held rates unchanged on Wednesday but left the door open to a further increase in borrowing costs in a nod to the economy’s resilience.The labor market is the major force behind the economy’s staying power, with gross domestic product recording an annualized growth pace of nearly 5% in the third quarter. Though wage pressures are easing because of the expanding labor pool and fewer people changing jobs, the annual growth in average hourly earnings remains above the 3.5% that economists say is consistent with the Fed’s 2% target. Wages have not been the main driver of inflation, but some economists worry that recent hefty contracts, including the ones scored by the UAW, airline pilots and the union representing UPS workers, could complicate the Fed’s fight against inflation. They argued that the recent surge in worker productivity would not be enough to offset the higher compensation as the economy was now predominantly services. But others disagreed, saying that the record-setting contracts would only become an issue for wage inflation if the Fed raised rates too high and choked off demand. They viewed the UAW contract as getting wages in the auto sector more aligned with the surge productivity during the COVID-19 pandemic. More

Analysts polled by Reuters had forecast a net gain of 22,500 jobs and for the unemployment rate to tick up to 5.6% from 5.5% in September.The softer than anticipated jobs report should reinforce expectation that the Bank of Canada may be done raising interest rates, especially after data this week indicated that the economy likely slipped into a shallow recession in the third quarter. The average hourly wage for permanent employees – a figure closely watched by the central bank – rose 5.0% from October 2022, down from the 5.3% year-over-year increase in September.The bank said last month that strong wage growth was among factors keeping underlying inflationary pressures higher than expected. The bank has projected that inflation will return to its 2% target by end-2025, but cited labor market tightness among upside risks to achieving that goal.The unemployment rate has risen four times in the past six months, and is now at the highest level since 6.5% in Jan 2022.With October’s job gains, the economy is averaging 28,000 monthly employment growth this year, up from 30,000 a month earlier.Gains were in part-time jobs, that offset a small decline in full-time positions.Employment in the goods sector increased by a net 7,500 positions, led by construction jobs.The services sector gained 10,000 jobs, led by information, culture and recreation as well as health care and social assistance. More

As a result of this new policy, the UP government has received FDI proposals amounting to Rs 60,000 crore from 25 countries. The policy specifically targets Fortune 500 companies and other FDI projects, aiming to stimulate economic growth.In the run-up to the UP Global Investors Summit 2023, roadshows in key global economies have generated a multitude of investment proposals. These initiatives are part of a broader effort by the UP government to attract FDI and promote local development.The groundbreaking ceremony marked the start of the implementation phase for these projects. As the state moves forward with these ambitious plans, it is expected that these efforts will significantly increase FDI inflows into UP, contributing to the overall economic progress of the region.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

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In response to these laws, Texas Attorney General Ken Paxton launched an investigation into several Wall Street firms, including JPMorgan, Bank of America, and Wells Fargo for potential breaches of the energy law due to their membership in the Net Zero Alliance. This probe has triggered disruptions in Texas’s municipal bond market, a crucial funding source for infrastructure projects in cities, schools, and hospitals. Dimon emphasized JPMorgan’s neutrality and stated that the bank makes decisions based on risk, legal, credit, and reputational factors. He denied any claims of discrimination or boycotts against the energy or firearms industries. Despite the ongoing controversy and disruption in bond deals, JPMorgan plans to hire an additional 1,000 local bankers by 2025 in Texas and other locations. Currently, JPMorgan employs over 30,200 individuals in Texas, with more than 17,000 based in the Dallas-Fort Worth area and a health and wellness center located at its Plano campus.Research from the University of Pennsylvania suggests that these laws could cost Texas taxpayers millions due to limited competition in the $4 trillion municipal bond market. Following Paxton’s probe, RBC Capital Markets and Wells Fargo were dropped from underwriting municipal deals approved by the Attorney General’s Office.Despite being the largest global financier of both fossil fuels and clean energy, JPMorgan was not included in the state comptroller’s list of companies like Credit Agricole (OTC:CRARY) SA that restrict oil and gas business. The firm remains committed to its Texas operations and recently hosted a summit featuring notable figures such as Matthew McConaughey and Dallas Mavericks owner Mark Cuban. Meanwhile, Gov. Greg Abbott continues to promote Texas’ pro-business policies.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

JOHANNESBURG (Reuters) -President Joe Biden’s administration wants to work with Congress to improve the United States’ flagship trade programme with Africa, not just renew it without changes, U.S. Secretary of State Antony Blinken said on Friday.First launched in 2000, the African Growth and Opportunity Act (AGOA) grants exports from qualifying African countries duty-free access to the United States – the world’s largest consumer market. It is due to expire in September 2025, and discussions are currently under way over what would be its third reauthorisation. African countries are pushing for an early 10-year extension without changes to reassure businesses and investors. Despite longstanding bipartisan support from U.S. lawmakers, who view AGOA as critical in countering the influence of China in Africa, there are divisions over the need for updates.A recent push in the U.S. Senate is aiming to pass a quick AGOA renewal. Biden has also said he fully supports the initiative’s reauthorisation. “But we don’t just want to extend AGOA, we want to work with the United States Congress to make it even better,” Blinken said in a video message to U.S. officials and African trade ministers meeting in Johannesburg to discuss AGOA’s future.’FORWARD-LOOKING VISION’Over $10 billion worth of African exports entered the United States duty free last year under the programme. However, the U.S. International Trade Commission earlier this year highlighted major shortcomings. More than 80% of duty-free non-petroleum AGOA exports, for example, have come from just five countries – South Africa, Kenya, Lesotho, Madagascar and Ethiopia – in recent years.”We see that there is opportunity to shape a stronger, new, forward-looking vision for U.S.-Africa trade,” U.S. Trade Representative Katherine Tai, who is leading the U.S. delegation, told the African ministers. African governments and U.S. industry associations, however, worry that attempts to radically alter AGOA risk bogging the programme’s renewal down in a Congress that is already struggling to pass even the most critical legislation.”We would like you to look at an extension of AGOA for a sufficiently lengthy period … to act as an incentive for investors to build factories on the African continent,” South African President Cyril Ramaphosa told the forum.African governments are also pushing for more flexibility concerning eligibility criteria and a loosening of what is now an annual review of those criteria.The Biden administration said on Oct. 30 it intended to end the participation of Gabon, Niger, Uganda and the Central African Republic in AGOA over governance and rights failings. Harriet Ntabazi, trade minister of Uganda, whose country was suspended over “gross violations” of internationally recognised human rights, said such issues should be separated from trade.Ugandan government officials have linked their exclusion to an anti-homosexuality law that was passed by its parliament in May. “Mistakes are human. If they have been done, reconsider and we go into negotiations. We’ve never had this chance to sit together and agree. Give us another chance,” Ntabazi said. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.This article is an on-site version of our Unhedged newsletter. Sign up here to get the newsletter sent straight to your inbox every weekdayGood morning. The world largest company by market cap, Apple, reported earnings yesterday and beat expectations for revenue and earnings. But not by enough, apparently. The shares fell a bit in late trading. More evidence that Big Tech stocks have gotten ahead of themselves. If you still think Apple is cheap, tell us why: [email protected] and [email protected]. Are we there yet?Market moods and market narratives change quickly. Before this week began, the mood had been pretty dour for several months, despite consistently strong news about growth. This has a lot to do with a steady increase in long-term interest rates and inflation that wasn’t declining quickly enough. The slogan was “higher for longer”, and stocks didn’t like it one bit.That anxious psychological regime seems to have disappeared — all at once — during Federal Reserve chair Jay Powell’s press conference on Wednesday. The changes have been dramatic. Most importantly, the 10-year yield has fallen a striking 25 basis points over two days. The shorter end of the curve has fallen only a third as much, suggesting that the market did not hear Powell hinting at an imminent cut, but rather at easier policy in the medium-term. The rate futures market broadly agreed, but was less vigorous: it added about half a rate cut into expectations for the middle of next year.Shares were thoroughly revived — they rose almost 2 per cent, and the increase was broad-based: the S&P equal weight index outperformed the cap-weighted S&P, and small caps outperformed big caps. There was a stonking rally in small and lower-quality tech names: Roku, Shopify, Affirm, Palantir, DoorDash and Carvana all rose more than 15 per cent, helped by solid earnings reports. Regional banks, heretofore a hated group, rose strongly, too — another sign that investors expect relief on interest rates.We are a bit surprised by all this; we did not hear anything in Powell’s comments that signalled a fundamental change in Fed posture. What is going on, then? Our guess is that markets are hearing what they want to hear, which is that the rate increase cycle is almost certainly over. For months, analysts and pundits have been writing that the uncertainty and volatility that have characterised the market in recent months will dissipate only when the last rate increase is in the books. Markets are daring to hope that the moment we have all been waiting for has arrived.We sympathise. Going back to 1984, traders who have correctly called the top of the rate cycle have been well rewarded. The chart below illustrates. It shows average three-month returns after buying large caps, small caps and long bonds at different points. For stock market investors, buying just as rates peak (specifically, during the week of the last rate increase) has brought handsome returns relative to buying three months earlier, or during the week of the first rate cut:The next chart breaks down this perfect-foresight trade by cycle. Not every cycle rewards good timing equally well, but the results are almost uniformly positive:By contrast, buying prematurely, three months before rates peak, is (usually) an OK trade, but with less upside and more downside:Waiting to buy once rates start to fall — that is, once everyone can see that the rates cycle is past its zenith — is no guarantee of good returns on stocks (though bonds tend to do well):It is important, however, not to look at the economic data selectively. Not all of it suggests that the cycle is clearly over.Yes, jobless claims have nudged up over the past couple weeks. Wednesday’s ISM manufacturing PMI for October came in below 47, in contraction and well below expectations. That ISM reading was bad enough to knock more than 1 percentage point off the Atlanta Fed’s GDPNow growth estimate, including halving the estimate of real consumer spending. GDPNow is currently tracking 1.2 per cent growth for the fourth quarter, a broad-based slowdown. Perhaps that clears the way for the Fed to take further increases off the table?Not so fast. The ISM manufacturing PMI measure is in conflict with S&P Global’s October manufacturing survey, which posted a nice round 50. And even if fourth-quarter growth does roll in at 1.2 per cent, that would still leave full-year GDP growth at 2.6 per cent, hardly a slow economy. That is an environment where the labour market could very plausibly keep posting sturdy payroll and wage gains, firming up inflation. The Fed has no GDP mandate. What matters is inflation and the labour market. A market convinced that the central bank is done places itself at the mercy of the data.Remember, as well, that growth slowing is not by itself compatible with bonds and stocks both rallying. That would require movement towards a soft landing — the perfect amount of inflation-busting slowing, but no more. Jonathan Pingle, chief US economist at UBS, argues that rate increases are beginning to weigh on consumers and the economy. He notes that personal interest payments relative to income have risen more than a percentage point in the past year, and that consumers are borrowing and dipping into savings to maintain spending. The bar is high for further consumption growth, and so he remains in the mild recession camp.Lastly, remember what had markets worried just a fortnight ago: the rising term premium, $80 oil, Treasury oversupply. All were pointing towards higher for longer. None of that has gone away. (Armstrong & Wu)One good readChina’s social contract has fractured.FT Unhedged podcastCan’t get enough of Unhedged? Listen to our new podcast, hosted by Ethan Wu and Katie Martin, for a 15-minute dive into the latest markets news and financial headlines, twice a week. Catch up on past editions of the newsletter here.Recommended newsletters for youSwamp Notes — Expert insight on the intersection of money and power in US politics. Sign up hereChris Giles on Central Banks — Your essential guide to money, interest rates, inflation and what central banks are thinking. Sign up here More