Economy

US jobs growth rose at an unexpectedly rapid clip in October, defying expectations for a larger slowdown as the historically tight labour market again showed resilience in the face of the Federal Reserve’s aggressive efforts to curb demand.The economy added 261,000 positions last month, according to data released by the Bureau of Labor Statistics on Friday, down from the upwardly revised 315,000 in September and 292,000 in August. In July, payrolls swelled by more than half a million.Despite these gains, the unemployment rate ticked up to 3.7 per cent, just above its pre-pandemic low.The red-hot labour market has long been a source of discomfort for the US central bank, which is actively trying to restrain economic growth in order to bring decades-high inflation under control. Acute labour shortages have helped to drive up wages, as employers seek to fulfil strong demand for workers, adding upward pressure on inflation.Fed chair Jay Powell described the labour market as “overheated” on Wednesday, at a press conference following the central bank’s decision to lift the federal funds rate by 0.75 percentage points for the fourth time in a row. Citing recently released data that showed both labour costs steadying and job vacancies unexpectedly climbing, he warned he does not “see the case for real softening yet”.

The share of Americans either employed or seeking a job — known as the labour force participation rate — again failed to improve in October, steadying at 62.2 per cent. Average hourly earning rose 0.4 per cent, just above September’s increase but slowing the annual pace to 4.7 per cent.Powell on Wednesday cautioned that wages were “flattening out” at a level that is “well above” what would be consistent with inflation returning to the Fed’s 2 per cent target. Despite evidence that the economy is not cooling as rapidly as expected, the chair this week signalled the Fed would soon reduce the pace at which it is raising interest rates.The potential course adjustment from the US central bank comes after it pushed the fed funds rate from 3.75 per cent to 4 per cent, a level that will more forcefully curb activity.Powell made clear that a slower pace will not mean an easing up of the fight against inflation, however, with the chair warning that the policy rate would reach higher levels than expected. Following the latest jobs report, markets have now priced in fed funds rate peaking above 5 per cent next year.A higher so-called “terminal” rate further reduces the odds the Fed can avoid tipping the economy into a recession, economists warn, with the unemployment rate likely to rise above 5 per cent eventually. More

According to Refinitiv Lipper data, investors bought a net $10.19 billion worth of U.S. equity funds, compared with purchases of $7.93 billion in the previous week. GRAPHIC – Fund flows: US equities, bonds and money market funds Solid earnings beats from Apple Inc (NASDAQ:AAPL) and energy giants Chevron (NYSE:CVX), Exxon Mobil (NYSE:XOM) also boosted investor confidence during the reported week.Investors purchased U.S. large- and small-cap equity funds worth $6.62 billion and $1.59 billion respectively, although mid-cap funds witnessed outflows of $473 million.By sector, health care, tech and consumer staples funds obtained inflows worth $630 million, $478 million and $393 million respectively. However, the U.S. Federal Reserve hiked the interest rates by 75 basis points and said the peak for rates would likely be higher than previously expected. GRAPHIC – Fund flows: US equity sector fundshttps://fingfx.thomsonreuters.com/gfx/mkt/jnpwygzqopw/Fund%20flows%20US%20equity%20sector%20funds.jpg Meanwhile, outflows from bond funds stood at just $14 million, a seven-week low. Investors purchased U.S. high yield bond funds of $5.07 billion, which was their biggest weekly net buying since August 2020, but government bond funds witnessed $1.75 billion worth of withdrawals after luring inflows for nine straight weeks. GRAPHIC – US bond fundshttps://fingfx.thomsonreuters.com/gfx/mkt/byprlodzgpe/Fund%20flows%20US%20bond%20funds.jpgMoney market funds drew $46.64 billion in inflow after posting two weeks of outflows in a row. More

LONDON (Reuters) -The Bank of England must sell in “a timely and orderly” way the 19.3 billion pounds ($21.7 billion) of government bonds which it bought in its recent emergency operation to support the market, a senior BoE official said on Friday.The BoE was forced to step in to buy long-dated and index-linked gilts to halt a fire sale of assets by British pension funds following former prime minister Liz Truss’s Sept. 23 ‘mini-budget’.”We must execute a timely and orderly unwind of the assets accumulated as part of the financial stability purchase operations, whilst also delivering the MPC’s QE unwind programme,” Andrew Hauser, the BoE’s executive director for markets, said in a speech at a European Central Bank conference.Hauser said he hoped to give more details of sales “in the next week or two” and that people should “wait and see” when asked if sales would begin before the end of the year.Index-linked gilts and 20- and 30-year conventional gilts fell after Hauser’s remarks. Yields on 30-year debt reached the highest since Oct. 24, up 10 basis points on the day.The BoE did not intend to sell the bonds according to a strict timetable, Hauser said.”We are not forced sellers. We want to work with the market and sell into demand where it exists, and where it doesn’t we can afford to wait,” he said.When the programme was launched, the BoE said it would sell the bonds purchased “in a smooth and orderly fashion once risks to market functioning are judged to have subsided”.Hauser said the BoE still needed “to remain sensitive and, if necessary, appropriately responsive to still-febrile market conditions”.British government bond yields are broadly back to where they were before the mini-budget – following the reversal of most measures in it and the replacement of Truss as prime minister by former finance minister Rishi Sunak.However, Hauser said liquidity in the gilt market had not yet fully recovered.The BoE started the sale of short- and medium-dated gilts from its separate 838 billion pound quantitative easing stockpile on Tuesday, but postponed plans to begin selling long-dated gilts this year because of the market turmoil.These sales are taking place according to a fixed schedule. The BoE plans eight auctions for November and December, for 750 million pounds of gilts each. Demand was solid at the first sale.The BoE aims to reduce its QE gilt holdings by 80 billion pounds over 12 months, through a mix of outright sales and not reinvesting the proceeds of maturing gilts. ($1 = 0.8910 pounds) More

The BoE bought 19 billion pounds of long-dated and index-linked government bonds last month to halt a fire sale of assets by pension funds following former prime minister Liz Truss’s mini-budget.Britain’s finance ministry – which indemnifies the BoE against losses on its bond portfolio – approved a 100 billion pounds increase in the maximum size of the APF to 966 billion pounds, in case greater purchases were needed.Bailey, in a letter to finance minister Jeremy Hunt on Friday, said this could now be lowered to 80 billion pounds and would fall further as the BoE unwound its quantitative easing purchases.The BoE also aimed to sell the 19 billion pounds of long-dated and index-linked gilts in a “timely but orderly” way, Bailey wrote.”Orderly disposal includes not selling gilts into febrile markets whereby the Bank’s sales might increase the level of dysfunction, such that value for money cannot be achieved,” he said. More

This may shock you, but the Institute of International Finance was never a big fan of “modern monetary theory”, and has gleefully declared its death this year. MMT became a hot topic when government debt kept ballooning around the world, even as long-term interest rates kept sagging lower and lower and inflation remained comatose.

That led MMT-ers to argue that governments could act FAR more aggressively to sort out a variety of societal ills. But as the second chart above shows, things now look a little different. “The illusion of limitless fiscal space has ended abruptly in recent months,” the IIF’s chief economist Robin Brooks wrote in a report the lobbying organisation published Friday, pointing to the UK omnishambles as an example of how the market’s patience is not inexhaustible. Yes, Japan still seems to have its foot to the pedal, but that then manifests itself in a collapsing currency, he argues. Government debt had been rising steadily for many years even before COVID, yet interest rates were falling and — amid massive COVID debt issuance — remained low. This conundrum sparked debate on whether fiscal space in advanced economies is in fact limitless, making it possible to fund things like a universal basic income cheaply. The illusion of limitless fiscal space got a reality check in 2022. Japan had been a favored MMT talking point, given that it has been able to sustain high debt levels at low rates of interest. However, this year’s inflation shock and global rise in interest rates exposed the risks to this high debt equilibrium: as global interest rates have risen, the fact that YCC has pegged Japan’s yields at low levels has meant that rate differentials moved sharply against Japan, sending the Yen into an unprecedented devaluation spiral. This illustrates that a central bank can suppress the fiscal risk premium in the bond market, but — if it does that — the risk premium just shows up in currency devaluation. You can read the full report here. There are some more nice charts.But FTAV can’t shake off the feeling that just as MMTers were too eager to embrace the most extreme interpretation of the low-rate era, MMT-foes are now being too eager to embrace simplistic narratives of bond vigilantes enforcing fiscal rectitude. More

UK builders reported the first fall in orders in two-and-a-half years, fuelling concerns over a recession as rising interest rates, economic uncertainty and cost constraints hit their books.The decline last month in the sub-index that tracks new orders ended a 28-month period of sustained expansion, the S&P Global/Cips UK construction purchasing managers’ index showed on Friday. The survey, which measures month-on-month changes in total industry activity, indicated that growth “will be harder to achieve in the coming months”. Optimism from builders about the year ahead was at its lowest level since May 2020, said John Glen, chief economist at the Chartered Institute of Procurement & Supply.Builders noted weaker confidence among clients, alongside difficulties from rising input prices and higher interest rates. The Bank of England raised its key policy rate to 3 per cent on Thursday, its highest point since 2008. The rate was at 0.1 per cent a year ago, but the UK is battling inflation which has reached a 40-year high of 10.1 per cent.Still, construction output staged a “modest recovery” after the summer downturn, said Tim Moore, economics director at S&P Global Market Intelligence, which compiles the survey.The S&P Global/Cips UK construction purchasing managers’ index, which measures month-on-month changes in total industry activity, rose to 53.2 in October, from 52.3 in the previous month. A figure above 50 denotes expansion. More

Olaf Scholz, the German chancellor, said that he and China’s president Xi Jinping had agreed during talks in Beijing that nuclear threats over the war in Ukraine were “irresponsible and extremely dangerous”.Russian president Vladimir Putin has made repeated warnings about using nuclear weapons as his eight-month invasion of Ukraine falters, part of a strategy western officials say is designed to deter military aid to Kyiv.Scholz said he and Xi had agreed that the use of nuclear weapons in Ukraine would “cross a line that the community of nations has drawn together”. “President Xi and I agree that nuclear-threatening gestures are irresponsible and extremely dangerous,” he told a press conference.Xi and Scholz met on Friday in the Great Hall of the People in Beijing against a backdrop of rising tensions between the west and China. Xi’s administration has come under increasing criticism from Europe and the US over its stance on Ukraine, crackdowns in the region of Xinjiang and in Hong Kong and military aggression towards Taiwan. Xi’s criticism of the nuclear threat was less direct, according to Beijing’s readout of the meeting. It said Xi told Scholz that the international community should oppose the threat or use of nuclear weapons and “prevent a nuclear crisis in Eurasia”.In his first face-to-face talks with Xi since becoming chancellor late last year, Scholz said China should “assert its influence on Russia” to end the war in Ukraine.“As a geopolitical actor and permanent member of the UN Security Council, China is responsible for peace in the world,” Scholz said. “It’s about abiding by the principles of the UN charter, which we have all agreed on.”Xi has been heavily criticised for his refusal to condemn Russia’s invasion and for not using his personal relationship with Putin to push him to reverse course on the war. China has opposed the use of sanctions against Russia and at times echoed Kremlin talking points that blame the conflict on Nato and the US. Dr Yu Jie, senior China research fellow at Chatham House in London, said it was “unsurprising” that Xi agreed with Scholz over the need to prevent nuclear war in Europe.“It is in line with China’s long term nuclear and disarmament policies,” she said. “If there is one thing to make Xi to change his stance on Russia’s invasion to Ukraine, it would be the looming potential of deploying nuclear weapons from Moscow.”In a thinly veiled reproach of the US, the Chinese leader also said he hoped EU-China relations would not be controlled by a “third party”.Scholz is the first western leader to meet Xi since the Communist party congress this month, which established Xi as the most powerful Chinese leader since Mao Zedong. In a statement carried by Chinese state media, Xi said Scholz’s visit would enhance trust between Beijing and Berlin and set the scene for more co-operation. “As influential powers, China and Germany should work together in times of change and chaos,” Xi said.Scholz, who has been criticised by some German Green politicians for visiting China so soon after the party congress, said he had addressed the issue of Taiwan in his talks with the president, conveying the message that any change in its status could happen only “peacefully and by mutual consent”.He also said he had raised the subject of China’s treatment of Uyghur Muslims in Xinjiang, insisting it was not “interference in [China’s] internal affairs” to point out Beijing’s obligation to respect the rights of minorities.Scholz said he had told Xi that China was becoming “more difficult” for German companies, in terms of market access, the protection of intellectual property and the “interruption of economic relationships” as the country moved towards “autarky”. He said he had told his hosts “how important it is in our view to rectify these imbalances”.In comments to journalists, premier Li Keqiang acknowledged Germany and China had “differences” and said these had been discussed. “But we still respect each other,” he said. Xi is reasserting himself on the world stage after a long absence from global diplomacy. In September, he travelled to central Asia in his first overseas trip since the pandemic started in early 2020. Analysts say he will focus on efforts to strengthen bilateral ties, especially with countries perceived to be less aligned with the US. Sone foreign policy experts in Beijing believe the united front shown by Europe during the Ukraine war will be shortlived. Xi is also expected to attend this month’s G20 summit in Bali, where a meeting with US president Joe Biden is possible.

Scholz’s visit to Beijing comes at a time when the German government is reappraising its relationship with China, its largest trading partner. A new China strategy is to be published next year.The Greens, Scholz’s coalition partners, want a much tougher approach to Beijing and are pressing German businesses to reduce their heavy dependence on the Chinese market. Scholz, however, has repeatedly warned of the risks of decoupling from the world’s second-biggest economy.Shi Zhiqin, a Europe-China expert at Tsinghua University, said a face-to-face meeting was a good start to resuming diplomatic communication.“Even inside Germany, there are different voices on his visit to China. But Germany is a very practical country,” Shi added. “China and Germany’s trade volume is large. His visit to China is a response to the voice for decoupling with China in the EU.”Additional reporting by Xinning Liu and Maiqi Ding in Beijing and William Langley in Hong Kong More

Chinese stocks shot higher today, amid rumours that the country could begin to relax its stringent zero-Covid policy early next year and hopes for an easing of US-China tensions.The Hang Seng surged 5.3 per cent and notched its biggest weekly gain in 11 years. The Shanghai Composite rose 2.4 per cent for a 5.3 per cent weekly gain, the largest in more than two years. China-sensitive assets around the world rose sharply.The gains for Chinese shares came as German chancellor Olaf Scholz became the first western leader to meet President Xi Jinping since the Chinese president embarked on an unprecedented third term as leader of the Communist Party. Tension between the west and China has been exacerbated this year by Xi’s close relationship with Vladimir Putin and his refusal to condemn Russia’s invasion of Ukraine.But rumours circulating on social media today that Zeng Guang, the former head of China’s Center for Disease Control and Prevention, had said at a conference held by Citigroup that the country could reopen its border with Hong Kong in early 2023, with more relaxations on international border controls to follow, boosted investor sentiment. Citigroup refused to comment.Stock markets in China have also been helped this week by reports that local authorities in the country have approved a new vaccine to tackle coronavirus. The Hong Kong-listed shares of CanSino Biologics rose as much as 70 per cent on Wednesday after the Chinese pharma group said its inhaled Covid-19 vaccine had been approved for use in some cities.A summit of global financiers in Hong Kong also helped lift stock markets in the city and on the mainland, despite a handful of executives withdrawing from the event at short notice.Separately, traders said shares were getting a lift today from a Bloomberg report, citing unnamed sources, stating that a US review of Chinese corporate audit papers in Hong Kong had finished early. It was viewed as a sign of progress in the process to prevent the US delisting of hundreds of stocks, from Alibaba to Yum China.Calculations by the Financial Times based on exchange data show mainland investors in China bought roughly $3.7bn worth of Hong Kong-listed stocks this week.Five more stories in the news1. Exclusive: HSBC investor Ping An calls for ‘aggressive’ cost cuts The bank’s largest shareholder has called for “much more aggressive” cost reduction and job cuts, while warning that its board lacks experience in Asia. Chinese insurer Ping An has been privately urging HSBC to hive off its Asian operations to boost returns.2. Mass lay-offs begin at Twitter A plan to cut about 3,700 jobs at Twitter has begun. Staff at the social media company will be notified of their employment status by 9am Pacific time on Friday, according to an email seen by the Financial Times. One staffer said many employees lost access to their corporate Slack account and email last night. This is a developing story. For updates follow our live blog.More technology lay-offs: Ecommerce platform Stripe and ride-hailing service Lyft yesterday announced hundreds of staff redundancies and Amazon said it would pause new hires in its corporate workforce.3. Jeff Bezos and Jay Z prepare bid for Washington Commanders NFL team The founder of Amazon and the music mogul are teaming up to acquire the Washington Commanders in a bid that could value the National Football League team at up to $6bn, said two people briefed about the matter. Josh Harris, the billionaire private equity executive who left Apollo last year, is also competing to buy the team from existing owner Dan Snyder, who has been forced to sell after being engulfed in a financial scandal.4. Judge authorises monitor to oversee Donald Trump’s businesses A New York judge will allow an independent monitor to oversee Donald Trump’s business interests and has imposed restrictions on the Trump Organization’s assets pending a trial over allegations of widespread fraud.5. Saudi Arabia agrees electric vehicle partnership with Foxconn Saudi Arabia’s sovereign wealth fund has agreed a deal with Apple partner Foxconn to produce electric vehicles in the kingdom as part of its push to diversify its oil-dependent economy. The joint venture between Saudi Arabia’s Public Investment Fund and Foxconn will operate under the brand name Ceer, which sounds like the word for “drive” in Arabic.How well did you keep up with the news this week? Take our quiz.The days aheadUS non-farm payrolls: US job growth is expected to have cooled for the third straight month, a sign that the Federal Reserve’s aggressive monetary tightening has finally started to restrain a historically tight labour market. Canada is also anticipated to report slowing employment growth with 5,000 jobs forecast to have been added in October, down from 21,000 in September. Earnings The maker of Hershey’s Kisses and Jolly Ranchers should provide insights into consumer demand, including the outlook for the holiday season based on Halloween trends. Joining Hershey in reporting before the bell are Royal Caribbean, Blue Owl Capital, Duke Energy, Dominion Energy, DraftKings, Liberty Media, CBOE, Huntsman and Canopy Growth.Berkshire Hathaway Warren Buffett’s conglomerate will report third-quarter earnings tomorrow. Investors will be watching for any signals on share buybacks, which Buffett often adjusts when he thinks public markets are overvaluing or undervaluing the company. Due to the vast array of businesses in Berkshire’s portfolio, investors will also be watching for potential signals on the health of the economy. What else we’re readingStarbucks’ Schultz: ‘The soul of the company was being compromised’ Four years after retiring and three since his abortive presidential campaign, Howard Schultz is back for a third shift as Starbucks’ chief executive. In an interview with the Financial Times he discusses succession, a barista revolt, the impact of the pandemic and the challenges ahead for the global coffee chain.Republicans benefit in first ‘post-pandemic’ election High inflation and poor school test results as well as rising levels of crime have replaced Covid-19 on the list of voter concerns. But all those issues have been exacerbated to some degree by the pandemic and its aftermath. And it is Republican candidates who are reaping the benefits.Luxury brands look to expand across US From Fifth Avenue to Fort Worth demand for expensive handbags and clothes has been surprisingly strong since the pandemic. And far from entrenching in the face of the economic gloom hanging over the US economy, the world’s largest luxury goods groups are planning to open dozens of new stores across the country.

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Kherson residents describe reign of terror under Russian rule As Ukraine pursues its counteroffensive in Kherson, those living in the southern region have said the occupying authorities are terrorising anyone who defies them, with an alleged public hanging of a defiant woman just one example of Moscow’s brutal occupation. Executives wake up to their collective blind spots We learnt from the financial crisis that when networks lack diversity, they are vulnerable to a single shock, writes Gillian Tett. But what is striking, in retrospect, is that the non-financial world seems to have learnt so little from it.TravelFT Globetrotter editors weigh in on how to make the most of your next trip on this new mini-series of the FT Weekend podcast.

Presenter Lilah Raptopoulos talks to FT Globetrotter editors Rebecca Rose and Niki Blasina who give tips for planning your next trip More