Economy

WASHINGTON (Reuters) – U.S. job growth slowed sharply in October amid disruptions from hurricanes and strikes by aerospace factory workers, but the unemployment rate held steady at 4.1%, offering assurance that the labor market remained on solid footing ahead of Tuesday’s election.Nonfarm payrolls increased by 12,000 jobs last month after surging by a downwardly revised 223,000 in September, the Labor Department’s Bureau of Labor Statistics said on Friday.Economists polled by Reuters had forecast payrolls rising 113,000. Estimates ranged from no jobs added to 200,000 positions created. Hurricane Helene devastated the Southeast in late September and Hurricane Milton lashed Florida a week later. A total 41,400 new workers were strike, including machinists at Boeing (NYSE:BA) and Textron (NYSE:TXT), an aircraft company, when employers were surveyed for October’s employment report. The remaining 3,400 were workers at three hotel chains in California and Hawaii.Workers who do not receive a paycheck during the survey period, which includes the 12th day of the month, are counted as unemployed in the survey of establishments from which the payrolls number is calculated. The Labor Department’s closely watched employment report was the last major economic data before Americans head to the polls to choose Democratic Vice President Kamala Harris or Republican former President Donald Trump as the country’s next president. Polls show the race is a toss-up. Americans have not warmed up to the economy’s strong performance, which has outshined its global peers, rankled by high prices for food and rents. Low layoffs have been the hallmark of the labor market’s strength.The unemployment rate was unaffected by the distortions as the striking workers would be counted as employed in the household survey from which the jobless rate is derived. Workers unable to work because of bad weather would be reported as employed, “with a job, but not at work” as per the BLS’ classification.Economists expected the Federal Reserve to sort through the noise and cut interest rates by 25 basis points next Thursday. A rise in the unemployment rate to 4.3% in July from 3.8% in March was one of the catalysts for the U.S. central bank’s unusually large half-percentage-point interest rate cut in September, the first reduction in borrowing costs since 2020. The Fed’s policy rate is now set in the 4.75%-5.00% range, having been hiked by 525 basis points in 2022 and 2023. Though employers have pulled back on hiring, they are retaining their workers, underpinning wage gains and consumer spending. Average hourly earnings rose 0.4% after gaining 0.3% in September. Wages increased 4.0% in the 12 months through October after advancing 3.9% in September. More

LONDON (Reuters) -Short-term British government borrowing costs headed for their biggest weekly jump in over a year on Friday, while the pound faced its longest stretch of weekly losses in six years as Labour’s tax-and-spend budget raised inflation expectations.Two-year gilt yields, which led the selloff as investors pared back rate cut expectations, have risen 26 basis points on the week, set for their biggest weekly increase since June 2023.Benchmark 10-year yields were up 21 bps, the biggest weekly move this year, having touched their highest in a year on Thursday at 4.526%. Yields however dipped on Friday and sterling edged higher, suggesting investor sentiment was calming. While the surge in government borrowing costs and the drop in the pound are sizable, the speed and scale are far short of the crisis that rocked markets in September 2022 following then-Prime Minister Liz Truss’s budget of billions in unfunded tax cuts.”2022 was something really quite off the scale. But that doesn’t mean that what we saw this week wasn’t important,” City Index market strategist Fiona Cincotta said.Yields have jumped as markets digest the government’s plans, which will add nearly 70 billion pounds a year to the public spending bill, according to Britain’s fiscal watchdog, with just over half covered by higher taxes and the rest by increased borrowing.The UK’s Office for Budget Responsibility now expects inflation will average 2.6% next year, compared with a previous 1.5% forecast.Traders expect less than 90 bps of rate cuts by the end of next year, having priced in well over a percentage point prior to the budget.They still expect a rate cut at the Bank of England’s meeting next Thursday but have reduced the chance of a December cut to less than 50%. Some investors said the moves may be exacerbated by positioning shifts, with many investors having favoured gilts before the budget. BNP Paribas (OTC:BNPQY) Asset Management told Reuters it had closed its overweight position in gilts, while Artemis is selling 10-year gilts following the budget.BUYING OPPORTUNITYInvestors including Lazard (NYSE:LAZ) Asset Management and AXA Investment Managers reckon gilts look attractive with higher yields. “It doesn’t strike us as an irresponsible budget,” said AXA’s head of total return and fixed income Nick Hayes.”When I speak to the investment banks, they talk about decent buyers of gilts across the curve… you’re not seeing any panic selling.”Rabobank said on Friday the market reaction had been “overdone,” with the OBR expecting Britain’s deficit, based on current spending and revenue, to turn to a surplus in four years.Sterling edged up 0.3% against the euro on Friday, though it was still headed for its biggest one-week slide against the single European currency in more than a year, down by 1%. Against the dollar, it was steady on the day at $1.291, but down 0.4% on the week, set for its fifth weekly decline – the longest such stretch since late 2018.The currency falling as markets reduce rate cut bets shows the budget is not being seen as good for growth, City Index’s Cincotta said.The OBR revised up growth projections modestly for this year and next, but lowered them for 2026-2027.Investors are sitting on one of the largest bullish positions in sterling on record., worth $6.05 billion and the biggest bet against the dollar among the major currencies, according to the most recent weekly data from the U.S. markets regulator, making it vulnerable to further drops. The derivatives market shows traders are more willing to pay more for options to sell sterling rather than buy it than at any time in the last 16 months.”We like short GBP even more given its limited move so far,” Neil Mehta, portfolio manager at BlueBay Asset Management, said.For the time being, UK bonds were likely to remain jittery, with the U.S. presidential election taking place next week. “We anticipate high volatility in global rates markets next week, which could be even more pronounced in gilts,” Lazard Asset Management’s co-head of global fixed income Michael Weidner said. More

MUMBAI (Reuters) – Political turmoil after Japan’s ruling coalition lost its majority in a snap election last weekend could lead the Bank of Japan to delay its next interest rate hike until January, a former BOJ board member said on Friday.”If the yen depreciates further (against the dollar), the probability of a rate hike by Bank of Japan in December will increase, but otherwise I think that January of next year could be likely,” said Takahide Kiuchi, who sat on the BOJ board from 2012 to 2017.Kiuchi told the Reuters Global Markets Forum that if dollar-yen rises above 155 and the government is forced to intervene in the currency market again, it may pressure the BOJ to hike rates to arrest further yen depreciation.Despite various rounds of intervention in 2024, the yen fell to a 38-year low of 161.96 per dollar on July 3 and then reversed its downtrend after the BOJ’s July 31 decision to raise interest rates to 0.25%.On Friday the yen was 0.4% lower on day at 152.63, having risen on Thursday on less dovish comments from BOJ Governor Kazuo Ueda after the bank kept rates on hold.”The BOJ’s basic policy stance has not been changed,” said Kiuchi, now an executive economist at Nomura Research Institute, adding that he expected the bank to reach a terminal policy rate of around 0.75% by mid-2025.The head of the opposition party, Yuichiro Tamaki — whom the ruling LDP is courting for support after losing its majority in the lower house — said the BOJ should wait for at least six months before hiking interest rates.Kiuchi believes the ruling party will have to accept the opposition party’s policy stance that ultra-easy monetary policy should be maintained until wage gains increase sustainably above inflation.”Maybe BOJ is refraining from making a comment on the political situation, but I think the political situation could be very influential for the Bank of Japan monetary policy,” Kiuchi said. “That’s a large risk.”(Join GMF, a chat room hosted on LSEG Messenger, for live interviews: ) More

LONDON (Reuters) – Britain’s big global lenders HSBC, Barclays and Standard Chartered (OTC:SCBFF) are vying to tap into a boom in U.S. commercial banking as corporate America seeks expertise for international expansion plans.At stake is a growing pool of U.S. commercial banking revenues, which reached $429 billion in 2023 from $310 billion in 2019, helped by a strong U.S. economy and a boost to margins from higher interest rates, previously unreported data from consulting firm BCG showed.European banks collectively share less than 7% of those revenues, but see good growth opportunities regardless of who wins the election on Nov. 5, driven by global trade flows.”The East-West trade is really important for HSBC because of our very strong presence in Asia … but actually for the UK, the main corridor in terms of business volumes is transatlantic,” Stuart Tait, HSBC UK’s head of commercial banking, told Reuters.In the year to June 30, the value of payments made by HSBC UK’s business clients to the U.S. rose by 15%, while transactions in the other direction rose by 5%, Tait said.Rising merger and acquisition activity on either side of the Atlantic is one factor driving business. U.S. companies like the UK tech and R&D sectors in particular and UK valuations look relatively cheap, Tait said.In the first six months of 2024, U.S. firms on HSBC’s books acquiring UK businesses or creating new subsidiaries in the UK rose by 71% year on year, while UK-based clients doing the same in the reverse direction increased by 45%, HSBC data showed.”Banks like HSBC can focus on ‘trade corridors’ with the U.S. for commercial banking clients and gain share,” Amit Sukhija, a senior manager at BCG, said.The push to expand in the U.S. comes after British banks such as HSBC scaled back in Europe in recent years, amid struggles to persuade domestic corporate clients in markets such as France and Germany to buy more of their services.There have been challenges in HSBC and Standard Chartered’s core Asian market too, with both lenders having incurred losses in China amid a crisis in the Chinese real estate market.NEW ERAThe boom in U.S. business marks a more positive era after the British banks’ chequered recent past, including HSBC’s disastrous push into subprime mortgages just prior to the 2008 crisis. HSBC and StanChart have also between them paid over $3 billion in U.S. fines over failings in anti-money laundering controls since 2012, while Barclays in 2022 agreed to a $361 million penalty over mis-selling of securities in the U.S.The problems prompted the banks to prioritise corporate business over retail banking in the U.S.Executives in London are coy on whether presidential candidates Republican Donald Trump or Democrat Kamala Harris would be better for their prospects.”The question on policy will not just be decided by the presidential election, but what happens in the house, and what kinds of officials are put in, who can get confirmed, and you really won’t know all of this until into the first quarter,” Barclays CEO C.S. Venkatakrishnan told Reuters on a media call.Barclays made 31% of its revenue in the U.S. in 2023 versus 25% in 2022 as its heavily U.S.-based trading business performed strongly and it grew revenue from its growing credit cards business. The bank’s third quarter results last week showed the increasing importance of the U.S. to Barclays.It reported a 8.4% return on average allocated tangible equity, a measure of profitability, at its U.S. consumer banking division in the nine months to end-September, up from 5.7% a year earlier.Barclays is hiring more sector experts to help win business from rivals, executives at the bank said last month.It has also doubled U.S. dollar deposits at its New York branch in 2023 and again in the eight months to August this year, as it brings on board more corporate customers, its co-heads of investment banking said in the presentation to investors. Emerging markets focused-Standard Chartered is leaning on its ties in its historical roots in Asia, Africa and the Middle East, to serve big U.S. corporates expanding in those regions.Chief Financial Officer Diego De Giorgi told Reuters the bank also wants to grow its presence among U.S. financial firms as StanChart tries to hit a target disclosed on Oct. 30 of 60% of investment bank income from the sector, up from 49% in 2023.”Many of our strong relationships… are in Europe and the United States, and we will continue to invest there with financial institution clients,” he said. More

TORONTO (Reuters) – The Canadian dollar is expected to rally against its U.S. counterpart in the coming year as lower borrowing costs boost the domestic economy but the result of the U.S. presidential election could unsettle the outlook, a Reuters poll found. According to the median forecast of 40 foreign exchange analysts in the Oct. 28–Nov. 1 poll the loonie will strengthen 2.4% to 1.36 per U.S. dollar, or 73.53 U.S. cents, by end-January compared to the 1.3514 expected in last month’s poll.In a year, the currency was predicted to advance 5.5% to 1.32, versus 1.3275 seen previously.”Our forecast for a stronger Canadian dollar is based on the fact the Fed should catch up in its interest rate cutting cycle and the Canadian economy should recover quite strongly as the Bank of Canada cuts rates,” said Kyle Chapman, FX markets analyst at Ballinger Group in London.On Tuesday, Bank of Canada Governor Tiff Macklem said the central bank is starting to see the impact on the economy of its easing. The BoC has cut its benchmark interest rate by one and a quarter percentage points since early June to 3.75%.Canada’s economy is particularly sensitive to interest rate levels due to a short mortgage cycle and high household debt. At 184% of net disposable income in 2023, household debt was the highest by far in the G7, according to OECD data. The Canadian dollar weakened around 3% in October, its biggest monthly decline since September 2022. On Thursday, it touched a near three-month low at 1.3945.One potential wild card for the currency is the outcome of the U.S. presidential election on Tuesday. Republican candidate Donald Trump has proposed sweeping tariffs on imported goods. Canada sends about 75% of its exports to the United States.”The election is a fork in the road … If we get a Trump presidency then perhaps the recovery wouldn’t be nearly as strong as we’re expecting right now,” Chapman said.(Other stories from the November Reuters foreign exchange poll) More

HOUSTON (Reuters) -Exxon Mobil on Friday beat Wall Street’s third quarter profit estimate, boosted by strong oil output in its first full quarter that includes volumes from U.S. shale producer Pioneer Natural Resources (NYSE:PXD). Oil industry earnings have been squeezed this year by slowing demand and weak margins on gasoline and diesel. But Exxon (NYSE:XOM)’s year-over-year profit fell 5%, a much smaller drop than at rivals BP (NYSE:BP) and TotalEnergies (EPA:TTEF), which posted sharply lower quarterly results.The top U.S. oil producer reported income of $8.61 billion, down from $9.07 billion a year ago. Its $1.92 per share profit topped Wall Street’s outlook of $1.88 per share, on higher oil and gas production and spending constraints.”We had a number of production records” in the quarter, said finance chief Kathryn Mikells, citing an increase of about 25% year-on-year in oil and gas output to 4.6 million barrels per day. Exxon shares rose about 1.3% in premarket trading to $118.25 per share.Exxon earlier this month flagged operating profit had likely decreased, leading Wall Street analysts to shave their quarterly per share earnings outlook by nearly a dime.The results included Exxon’s first full quarter of production following its acquisition in May of Pioneer Natural Resources. The $60 billion deal drove production in the top U.S. shale basin to nearly 1.4 million barrels per day of oil and gas, helping overcome a 17% decline in average oil prices in the quarter ended Sept. 30.The company expects full year output to average about 4.3 million barrels of oil equivalent per day (boepd), including eight months of Pioneer’s contributions.No. 2 U.S. oil producer Chevron (NYSE:CVX), whose plans to acquire Hess Corp (NYSE:HES) have locked the two rivals in a bitter arbitration battle over the prized Guyana asset, also beat Wall Street estimates despite lower year-over-year earnings. Chevron’s shares were up 2.2% premarket.Exxon said it plans to issue a revised production forecast next month. The company noted that scheduled well maintenance will lower oil and gas output by about 30,000 boepd in the fourth quarter.The market is worried about oil supply outrunning demand next year, with exporter group OPEC reviewing plans to add 180,000 barrels per day (bpd) of additional oil supply from December. Oil prices slumped over the summer and remain about 12% below June’s average.Exxon disclosed it raised its quarterly dividend by 4% after generating free cash flow of $11.3 billion, well above analysts’ estimates. Rivals Saudi Aramco (TADAWUL:2222) and Chevron have had to borrow this year to cover shareholder returns after boosting dividends and buybacks to attract investors. Exxon’s earnings from producing gasoline and diesel in the quarter were $1.31 billion, down from $2.44 billion year-on-year as weak margins and a nearly month-long outage at its 251,800-bpd Illinois refinery hit segment results.Lower planned maintenance at other plants, along with gains on derivatives, helped offset weak industry-wide refining margins and the impact of the Illinois outage, Exxon said.”Refining margins definitely came down in the quarter. If you look at overall results for the refining business, we feel pretty good,” said CFO Mikells. Per unit refining margins since 2019 have about doubled on a constant margin basis, she said. Profits from Exxon’s chemical business, which has been pressured by industry overcapacity for two years, rose in the quarter to $893 million, compared with $249 million a year ago, on a slight increase in margins.”We are in a much better position (in chemicals) because we have a strong Gulf Coast footprint that benefits from Gulf Coast (natural gas) prices,” said Mikells. More

Major North American carriers with international operations are cashing in on a booming demand for overseas travel and a resurgence in business bookings. Air Canada is increasing its daily flights to China, while also adding capacity to other Asia Pacific routes.The airline also announced the repurchase of up to 35.78 million shares, its first buyback authorization since the pandemic.The repurchase aims to address the dilution that occurred due to its financing needs during the pandemic, it said.Last month, Air Canada signed a new labor deal with its pilots, which would give the aviators a general four-year cumulative pay hike of about 42%, generating about C$1.9 billion in additional value.”The demand environment remains favourable. We have adjusted our full-year guidance and underlying assumptions to account for the evolution of the fuel price environment and for certain contract-related adjustments,” CEO Michael Rousseau said.The company lowered its expectation for average price of jet fuel to C$1 per litre for 2024, from the previous estimate of C$1.03.The carrier now expects its 2024 adjusted earnings before interest, taxes, depreciation and amortization of about C$3.5 billion ($2.51 billion), compared with its previous forecast of C$3.1 billion to C$3.4 billion.Montreal-based Air Canada posted an adjusted profit of C$2.57 per share in the third quarter, compared with analysts’ average estimate of C$1.58, according to data compiled by LSEG.It reported a quarterly operating revenue of C$6.12 billion in the three months ended Sept. 30, down 3.8% over the year earlier, but beat analysts’ expectations of C$6.06 billion.($1 = 1.3929 Canadian dollars) More

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