- FTSE 100 closes 2% higher at 7,335
- US non-farm payrolls grew 261,00 in October, above forecast
- Asian-focused stocks soar on talk China will ease Covid rules
4.45pm: Markets end the week on a high note
The FTSE 100 surged on Friday to finish nearly 2% higher as traders digested the Bank of England’s (BoE) interest rate rise to 3% and boosted by a weaker pound.
This came despite a warning that Britain faces its longest recession since the 1920s.
London’s benchmark index finished Friday at 7,335 for a 146-point gain on the day.
Stocks moved on hopes of China reopening and perhaps the first stirrings of weakness in the US labour market, said Chris Beauchamp, chief market analyst at online trading platform IG.
“While there was a wobble around the payroll rise, the week is ending with the buyers firmly in control, particularly in Europe. The hope of an easing of anti-Covid measures in China has trumped any worries about the Fed’s continued hiking, giving indices around the globe a reason to move higher," Beauchamp wrote in a note.
"Risk appetite has recovered impressively from its mid-week nadir, on hopes that a recovery in China will help to offset the continued dark clouds that hover over European and US markets.”
3.45pm: FTSE heading into the weekend in upbeat fashion
FTSE 100 now up around 2.2% as US markets soar as strong, bur softening US jobs data gave the market fresh impetus after being pushed higher earlier on reports that China was set to ease some Covid restrictions.
At 3.45pm London’s blue chip index was trading 157 points higher at 7,346 while the FTSE 250 was up 244 points at 18,354.
In the US the Dow is up over 400 points. The non-farm payrolls figures came in above forecast, but the unemployment rate ticked higher, and a slower pace of growth in payrolls suggested that the Fed’s medicine of higher interest rates may be finally feeding through to the jobs market.
In London, Asian-focused and mining stocks led the way with on hopes that a lifting of restrictions in China would boost the growth prospects of the economic superpower which has been held back by the Covid zero policy.
Anglo American PLC (LSE:AAL) surged 12.9%, Rio Tinto PLC (LSE:RIO) advanced 8.77%, Prudential plc rose 8.4% and HSBC Holdings PLC (LSE:HSBA) soared 6.33% as the rumours gathered pace.
Further reports that China is also looking at relaxing restrictions around flight suspensions which penalised airlines that brought Covid cases into the country have also boosted airlines, as well as Rolls-Royce Holdings PLC shares which rose 6%.
Morgan Advanced Materials plc (LSE:MGAM) topped the FTSE 250 risers after a bullish trading update, while similarly positive trading updates saw DFS Furniture PLC (LSE:DFS) bounce 4.7% and 4imprint Group Plc (AQSE:FOUR) rise 6.15%.
3.12pm: Frasers Group lifts interest in Hugo Boss
Frasers Group PLC (LSE:FRAS) has upped its holding in German fashion designer Hugo Boss AG by 1.5 percentage points, according to a company statement on Friday.
The FTSE-100 listed retailer now has a 30% interest via put options that it has sold, up from 28.5% as of 24 October, while still owning 4.3% of the shares of Hugo Boss, giving a total interest 34.3% interest, up from 32.8% before.
The company said after taking into account the premium it will receive for the put options, its maximum aggregate exposure its interest in Hugo Boss is around EUR1.0bn.
On 24 October, the company which owns SportsDirect and House of Fraser, said its maximum exposure for the interest in Hugo Boss was EUR960mln.
2.52pm: John Lewis kicks off Black Friday early
John Lewis has announced that it’s launched its Black Friday deals today, over a fortnight earlier than last year, in a bid to help its customers “spread the cost of Christmas” amid the cost of living crisis.
The UK department store chain said the first promotions are only valid for some technology products and some fragrances, while discounts on fashion, beauty and homeware will be unveiled in the coming days.
John Lewis introduces early Black Friday sale this year as customers look to save money ahead of Christmas.https://t.co/T0UwtT1Vo6
— Retail Gazette (@retailgazette) November 4, 2022
Kathleen Mitchell, John Lewis’s commercial director, commented: ““We know that, despite the rising cost of living, our customers still want to celebrate Christmas, so our teams and suppliers have worked incredibly hard to make sure we can offer our customers great value deals on the products they love.”
The retailer said it’s also hiring an additional 6,000 temporary workers - 2,000 of whom will work in its shops over the busy festive period and 4,000 in its distribution network.
2.22pm: China looking to ease Covid rules - Bloomberg
China is said to be working on plans to scrap a system that penalises airlines from bringing virus cases into the country, in a sign Beijing is looking for ways to ease its zero Covid policy.
The State Council recently asked agencies including the civil aviation regulator to prepare for ending the so-called circuit breaker mechanism, Bloomberg reports.
The system bans airlines temporarily from specific routes into China for between one and two weeks, depending on how many positive Covid cases they bring into the country. A similar scheme for Hong Kong ended in July.
The request is part of a broader three-step plan aimed at normalising China's aviation sector. The country has been effectively cut off from the rest of the world by its pandemic border restrictions.
1.45pm: FTSE extends gains on strong but softening US jobs data
FTSE 100 showed no signs of flagging this afternoon advancing to its best levels for the day as US markets opened higher following the stronger-than-expected non-farm payrolls figures.
At 1.45pm the FTSE 100 was up 145 points, more than 2%, at 7,334 while the FTSE 250 rose 136 points to 18,246.
Although above forecast the US data showed the jobs market was slowing and investors were hoping this would feed through to a softer stance on rates from the Federal Reserve.
Ian Shepherdson, chief economist at Pantheon Macroeconomics said: “The bottom line here is that the labour market is softening, but has not yet reached the point where the data are screaming at the Fed to stop tightening.”
“But if these trends continue, as we expect, markets will start to push the Fed - and especially Chair Powell - to rethink the idea of continued hikes next year. “
“More immediately, the data suggest that continuing to hike by 75bp per meeting is unnecessary, given the lags and cumulative tightening to date.”
US markets opened higher on the news. Shortly after the market opened, the Dow Jones Industrial Average had added 340 points or 1.1% at 32,341 points, the S&P 500 was up 51 points or 1.4% at 3,771 points, and the Nasdaq Composite had gained 148 points or 1.4% at 10,491 points.
1.15pm: Reaction to the non-farm payrolls
FTSE 100 close to best levels for the day after the US jobs data with investors taking heart from a sloing in the annual growth rate of average earnings which combined with the stronger-than-expected jobs data gave some hope of a soft landing in the US.
However, economists remained fearful that rising interest rates would eventually take their toll on the jobs market and, given the lagging nature of the jobs market, the Fed will leave it too late to react.
John Lieper, CIO at Titan Asset Management felt the important thing to note is the lagged effect of what he called “Fed driven demand destruction” impacting certain sectors more than others.
He explained “those sectors most hit by the covid crisis, like airlines, restaurants and hotels are still struggling to hire enough people whereas the tech sector, which we know previously over hired, is now trimming staff or holding back on hiring plans, as evidenced recently by Lyft, Stripe, PayPal and Amazon.”
Overall he felt “Today’s hiring and earnings data might push back expectations for a reduction in the pace of future rate hikes although the unemployment rate also rose slightly, and the Fed will place greater weight on the two further inflation prints before the December meeting.”
Richard Flynn, managing director at Charles Schwab (NYSE:SCHW) UK, feared US unemployment will continue to rise as the Fed fight inflation: “Today’s strong jobs figures indicate that the US economy is still running faster than the Fed might hope, increasing the likelihood that the central bank will continue to raise interest rates through into 2023.”
“Even though many may be hoping for weaker jobs reports in the near term, there will come a point at which weaker reports won’t be celebrated. The employment market is a lagging economic indicator, meaning recent interest rate hikes will take months to feed into future jobs reports. There is a risk that increasing unemployment becomes the price for a return to lower inflation.”
12.30pm: US non-farm payrolls higher than expected
US non-farm payrollls grew by 261,000 in October, higher than expected, and showing the US jobs market remains in rude health.
Analysts had forecast payrolls would grow by 195,000.
September's report was revised up, to show 315,000 new hires, from 263,000 first estimated.
The unemployment rate rose to 3.7%.
Average hourly earnings came in slightly above forecast with a monthly rise of 0.4% against estimates of 0.3%.
In October, notable job gains occurred in health care (53,000), namely ambulatory health care services (31,000), nursing and residential care facilities (11,000), and hospitals (11,000); professional and technical services (43,000).
Also, the manufacturing sector unexpectedly added 32,000 jobs, with some investors expecting a fall; and the leisure/hospitality sector added 35,000 jobs. Monthly job growth has averaged 407,000 thus far in 2022, compared with 562,000 per month in 2021.
US payrolls +261k (exp 200k)
Unemployment rate 3.7% (exp 3.6%)
Avge hourly earnings (m/m) +0.4% (exp +0.3%)
Avge hourly earnings (y/y) +4.7%
(exp +4.7%)
— Jamie McGeever (@ReutersJamie) November 4, 2022
12.20am: No stopping the Footsie - yet
FTSE 100 now up 100 points to, testing the 7,300 level, at its best levels for the day with Asian-focused stocks topping the risers still on the rumours that China will relax its strict Covid rules.
US markets are also seen higher but attention firmly switches to the US non-farm payrolls die shortly to see if the today's upbeat mood in the market can be broken.
Expectations are for October jobs growth of 195,000 which would be the lowest number this year, along with the unemployment rate ticking back up to 3.6%.
The FTSE 250 is up 108 points at 18,218.
11.50am: Football fans face travel chaos
Football fans travelling to Qatar for the World Cup could face chaos, and disruption to their travel plans, as hundreds of workers at Heathrow prepare to strike.
The Unite union said 700 workers will walk out from the early hours of Friday November 18 until early on Monday 21.
The strike involves staff employed by Dnata and Menzies carrying out a range of roles including ground-handling, airside transport and cargo.
Unite said the strike will lead to disruption, delays and cancellations at Heathrow terminals 2, 3 and 4 and will particularly affect Qatar Airways, which has scheduled an additional 10 flights a week during the World Cup.
The strike could also cause disruption to passengers returning to the United States for the Thanksgiving holiday, on November 24.
Other leading airlines that will be hit heavily include Virgin, Singapore Airlines, Cathay-Pacific and Emirates.
Sharon Graham, Unite general secretary, said: “Our members at Dnata and Menzies undertake highly challenging roles and are simply seeking a decent pay rise.”
“Both companies are highly profitable and can fully afford to make a fair pay increase.”
“The owners and directors are simply lining their own pockets rather than paying their workers fairly” she said.
“The workers at Heathrow will have Unite’s complete support during this dispute.”
11.25am: UK construction PMI rises in October but optimism is fading
The S&P Global construction PMI showed the UK construction sector gained momentum in October, with total industry activity rising at the fastest pace since May, but growth expectations for the year ahead remain subdued.
The degree of optimism has fallen sharply since September and was the lowest for almost two-and-a-half years, reflecting falling volumes of new work and worries about the longer-term UK economic outlook, the report said.
The headline seasonally adjusted number for October was 53.2, up from 52.3 in September and the highest reading since May and a continued pick up from the 26-month low seen in July.
Latest data for the UK's construction sector indicated another growth in activity with the #PMI at 53.2 (Sep: 52.3). New orders fell for the first time since May 2020, however, while sentiment dropped to a 29-month low. Read more: https://t.co/EEoC8ywAKc pic.twitter.com/YABrhWvspx
— S&P Global PMI™ (@SPGlobalPMI) November 4, 2022
Higher levels of business activity were attributed to a combination of new project starts and strong pipelines of unfinished work.
But total new orders decreased slightly in October, which ended a 28-month period of sustained expansion.
Construction companies noted weaker confidence among clients, alongside headwinds from rising input prices and higher borrowing costs.
Some firms also reported a drop in new work due to heightened political uncertainty
Survey respondents noted that weaker demand contributed to a slowdown in the rate of job creation since September.
10.57am: US markets seen higher ahead of jobs data
US stocks were expected to start cautiously higher on Friday as traders await the latest, always volatile, non-farm payrolls report, recovering after having extended falls in the previous session after mixed signals Wednesday from the Federal Reserve on future interest rate rises.
Futures for the Dow Jones Industrial Average were up 0.5% in pre-market trading on Friday, while contracts for the S&P 500 and the Nasdaq-100 were both 0.7% higher. On Thursday, the Dow Jones shed 0.5%, while the S&P 500 fell 1.1% and the Nasdaq Composite dropped 1.7%.
In light of the negative market reaction to this week's Fed meeting and governor Jay Powell's press conference, in particular, the focus is now set to return to economic fundamentals, with the October US non-farm payrolls report due at 8.30am ET today, as well as next week’s US CPI inflation report.
Michael Hewson at CMC Markets said: "The Federal Reserve continues to see the labour market as particularly tight, especially when looking at the fairly low participation rate, and any weakness here in the coming months could take some of the heat out of the recent rise in yields and surge in the US dollar.
"The very low unemployment rate is perhaps one of the reasons why the US labour market has managed to hold up well despite concerns over slowing consumer spending and increased costs on the part of some US businesses."
Expectations are for October jobs growth of 195,000 which would be the lowest number this year, along with the unemployment rate ticking back up to 3.6%.
Back in London and the FTSE 100 keeps pushing higher, now up 85 points.
10.31am: New car sales rise in October but improvement expected to be short-lived
UK car sales jumped by a quarter last month, new figures show, despite the rising squeeze on household incomes but economists think the improvement will be short-lived.
New registrations rose by 26% year-on-year to 134,344 units in October, the SMMT reports.
Despite bumper month, market on course for weakest year since 1982 but recovery expected to continue in 2023.https://t.co/TTEYoala0Y pic.twitter.com/PypwuyJQvE
— SMMT (@SMMT) November 4, 2022
Sales were lifted by growing demand for hybrid (MHEV) vehicles while the soon to be discontinued Ford Fiesta was the most popular model in the month.
But despite this increase, the SMMT expects 2022 to be the worst year for car sales in four decades.
It said: “Ongoing supply chain shortages, surging inflation and a growing cost of living crisis have led to a -2.2% downward revision of the market outlook for the year, with 1.566mln registrations now anticipated.”
“This puts 2022 on course to be the market’s toughest year since 1982.”
Many of the people who received new cars in October will have ordered them some time ago, due to the supply chain disruption that slowed production.
Gabriella Dickens, senior UK economist, at Pantheon Macroeconomics, suggested any improvement would be short-lived.
“Looking ahead, they look set to remain below pre-Covid norms for at least the next 12 months.”
“For starters, consumers’ confidence remains on the floor” she pointed out, adding “real disposable incomes will take a further battering in 2023, due to the watering down of government support for energy bills in April, austerity measures and higher unemployment.”
“In addition, the hit to households’ budgets from the staggering rise in mortgage rates will mean major purchases will be put on the back burner.”
10.00am: BoE trying to strike the right balance - Huw Pill
The Bank of England’s chief economist Huw Pill told CNBC today that the Bank of England is trying to get inflation under control without doing too much damage to the UK economy.
Pill explained: “What we are seeking to do, we’re always seeking to do, is to find that balance that gets us back to our 2% inflation target without generating unnecessary and costly problems in the real side of the economy.
“Creating that balance, signalling that balance, that was really our key message yesterday.”
Huw Pill today : " We still think 'there is more to do' in order to control domestically driven wage price cost dynamic within the UK"
+ discussing the trade off between the economy & inflation & the dovish market reaction pic.twitter.com/FLBApDqK6G
— Joumanna Bercetche ???????? (@CNBCJou) November 4, 2022
The Bank of England increased interest rates by 75bp to 3% in an attempt to tame run away inflation.
Pill suggested the price for reducing the inflation was a slowing of economic growth.
“(The) slowdown in the economy is what we anticipate is required to contain domestic inflationary pressures to achieve our targets.”
Pill said that recent months have been turbulent.
“I think we’ve had a clearly quite disturbed period in the UK markets, in the UK political economy, in the UK economy over the last few months.
(We’re) trying to re-anchor our own thinking in the more fundamental drivers ... I think we’re trying to re-anchor our communication” he said.
9.13am: Sizewell C under view - BBC
The Sizewell C nuclear power plant in Suffolk is reportedly under review as the Government looks to cut spending to fill the UK’s £50bn fiscal ‘black hole’ according to the BBC.
Sizewell C was expected to provide up to 7% of the UK's total electricity needs, but critics have argued it will be expensive and take years to build, the report said.
A government official told the BBC: “We are reviewing every major project - including Sizewell C.”
The BBC said another project under review was a new high speed rail line in the north of England.
Former prime minister Liz Truss had pledged to build a major rail scheme in northern England in full, with a high speed link eventually connecting Northern towns and cities from Hull to Liverpool, through Bradford.
But the plans for the rail line - known as Northern Powerhouse Rail - are now expected to be reduced.
9.05am: FTSE holds gains
FTSE 100 held its gains, up 45 points now, with Asian focused stocks flying high following the strong advances in Asian indices on the back of the unconfirmed rumours that China could relax its Covid rules.
Neil Wilson at Markets.com said “The Hang Seng rallied a further 5%, with the Shanghai Composite Index up more than 2% on fresh chatter that China is looking at ditching its zero covid policies. Beijing says a press conference will follow tomorrow...”
Oil prices rose and mining companies advanced but as Wilson cautioned “the risk is that this is all just a lot of puff and hot air.”
After the excitement of the central bank rate moves attention will now switch to the US non-farm payrolls due later.
The US jobs market has proved resilient despite the interest rate rises by the Federal Reserve but that will get a further test today.
Victoria Scholar, head of investment, interactive investor says, “Trader attention shifts to October’s US jobs report at lunchtime with non-farm payrolls expected to hit +195,000 slowing from +263,000 in the previous month."
"The unemployment rate is also expected to deteriorate slightly from 3.5% in September to 3.6% this month."
Plenty of chatter surrounding what may or may not be in the autumn statement.
The Telegraph reported the chancellor might launch a raid on capital gains tax while the BBC is reporting that a number of infrastructure projects may be put on hold including Sizewell C.
8.15am: FTSE on the rise, mining stocks lead the way
FTSE 100 made a bright start on Friday following strong gains in Asian markets on renewed speculation that China might relax its strict Covid rules.
At 8.15am the FTSE 100 was up 45 points at 7,234 while the more domestically focused FTSE 250 rose 78 points to 18,187.
The zero Covid policy has led to strict lockdowns and caused a major disruption to the economic superpower.
Richard Hunter, head of markets at interactive investor said: “The limitations and lockdowns, which have exacerbated a decline in consumer confidence and a faltering property market, have crimped demand which has not only hampered the Chinese economy, but has also tipped over into other asset classes such as commodities and oil.”
The rumours lifted mining stocks and the market generally on hopes of increased demand from China at a time when the global economy needs it most.
Anglo American PLC (LSE:AAL) surged 5.65%, Rio Tinto PLC (LSE:RIO) rose 2.47% and Glencore PLC (LSE:GLEN) advanced 3.33%.
Shares in Reach PLC (LSE:RCH) jumped 6.6% as National World confirmed late on Thursday that it was in the early stages of exploring a possible offer for larger rival Reach.
Responding to press speculation, the owner of the Scotsman and Yorkshire Post said it had not yet approached the board of directors of Reach about the possible offer.
In a separate statement, Reach, which publishes the Daily Mirror and Sunday Mirror, said it had not received an approach from National World.
"The board will issue a further statement if and when appropriate. In the meantime, Reach shareholders are strongly advised to take no action," it said.
Drugmaker AstraZeneca PLC was in focus after it said its Beyfortus asset had received European Union approval for the prevention of respiratory syncytial virus lower respiratory tract disease in new-borns and infants.
AstraZeneca stated that Beyfortus was now the first and only single-dose RSV passive immunisation for the broad infant population, including those born healthy, at term or pre-term, or with specific health conditions.
7.47am: Sterling struggles against the US dollar as Bank of England faces Fed hawks
Sterling had an ugly day yesterday, despite interest rate decisions from the Bank of England and the US Federal Reserve coming in as expected.
Both tossed another 75 bps hike into the fire, though the BoE’s rhetoric signalled a looser policy on the horizon.
In contrast, Fed chair Jerome Powell suggested that the terminal rate (i.e. the rate at which the Fed will draw a line in the sand) will actually be higher than expected as the bank battles to get inflation down to the 2% target.
It was these contrasting game plans that cause the pound to dip to a 13-day low of US$1.114.
A hawkish Fed could see the pound fall further against the US dollar – Source: capital.com
But this morning has seen a correction of sorts as the bulls stepped in.
With half a percent added to GBP/USD so far, the pair is currently changing hands at US$1.121.
Sterling similarly dipped against the euro yesterday, with a hefty 1.25% added to the EUR/GBP pair resulting in a nine-day high of 87.4p.
A correction has begun in Friday’s Asia trading session, pushing the pair back to 87.1p.
Sterling’s dip and recovery was also played out against the Japanese yen and the Swiss franc.
The euro continues to struggle against the US dollar. Despite some incremental gains this morning, EUR/USD has lost over 1.8% this week and is currently changing hands at US$0.978.
7.33am: Government mulling CGT changes
Chancellor, Jeremy Hunt, is set to launch a capital gains tax (CGT) raid as he looks to plug a £50bn black hole in the public finances, according to reports.
Hunt is reportedly considering an increase in the headline rate of the tax which is paid on the sale of assets which are investments such as shares and second properties.
The government, who was parachuted into Number 11 last month following economic turmoil in the wake of the mini-budget, is also considering an increase in dividend taxes and slashing the £2,000 tax-free dividend allowance.
The front page of tomorrow's Daily Telegraph:
'Hunt set to launch capital gains raid'#TomorrowsPapersToday
Sign up for the Front Page newsletterhttps://t.co/x8AV4OoUh6 pic.twitter.com/Q3SvDqiEME
— The Telegraph (@Telegraph) November 3, 2022
The Telegraph reported that cuts to CGT reliefs and allowances are most likely.
But an increase in the headline rate of the tax is also on the table due to the size of the crater in the public finances.
A CGT raid would be seen as electorally more palatable as it would place a greater burden on wealthier people as it is applied to profits of the sale or disposal of shares and second properties.
7.17am: UK hours away from meltdown - Bank
The UK was just hours from a possible complete financial meltdown after prime minister Liz Truss’s disastrous mini-budget, the governor of the Bank of England has confirmed.
Andrew Bailey said the bank was forced to step in “quickly” and “decisively” to stave off a “very real threat to financial stability” after markets were spooked by the disastrous £45bn unfunded tax giveaway.
“We certainly reached a point where markets were very unstable, and these were core markets, this is the government bond market, which is in many ways the most core of all,” Bailey told Channel 4 News on Thursday.
“And it was becoming unstable and it was affecting … pension funds for instance, and how they were operating.”
“And our worry was that when you get into that situation, this can easily spread very rapidly and then you have a huge job on your hands to get it back under control.”
“So we had to step in quickly and we had to step in quite decisively.”
Asked if the UK was close to potential total meltdown, Bailey said: “I think at that point when we intervened, I can tell you that the messages we were getting from the markets were that it was hours.”
Bailey’s comments came after the Bank of England announced its biggest interest rate increase in three decades as it tries to beat back stubbornly high inflation, boosting its key rate by 75bp to 3%.
7.00am: FTSE set to open higher on rumours China is to relax Covid rules
FTSE 100 set to make a bright start to Friday after strong gains in Asian markets on rumours that China might be looking at relaxing its strict Covid rules.
The renewed speculation gave markets in Asia a boost sending the Hang Seng up 6.47%.
Spread betting companies are calling London’s blue-chip index up by around 50 points.
In the US, markets closed lower for the fourth consecutive day as investors looked ahead of key jobs data today.
The non-farm payrolls are expected to reveal 200,000 new nonfarm jobs in October, for an average hour for an average hourly pay rise steady around 0.3%.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank said: “Stronger than expected jobs, or wages data could only further boost the Fed hawks.”