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Wall Street opens lower
Stock brokerage firms on wall street, Wall Street has opened lower, as investors get their heads around the news that just 20,000 new jobs were created in America last month, not the 180,000 they expected.
The Dow Jones industrial average is down 199 points or 0.8% in early trading, at 25,274, as jitters over the US economy hit confidence. The broader S&P 500 is down 0.8%, while the tech-focused Nasdaq has shed 1.1%.
Traders could also be worrying about the global economy; overnight, China shocked Asian markets by reporting a 20% plunge in exports last month, sending the Shanghai market reeling by 4%.
Democratic Senator Elizabeth Warren has also shaken things up, with a call to break up tech company monopolies such as Google, Facebook, and Amazon. Their shares are all down.
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US jobs report: What the experts say
The slump in US job creation in February show that economic growth has slowed, and interest rates will stay on hold for longer, says Michael Pearce of Capital Economics.
The 20,000 gain in non-farm payrolls in February was well below consensus expectations of a 180,000 gain. That is not quite as bad as it looks, given that it followed an unusually strong 311,000 gain in January, but it’s clear that the labour market is now losing momentum.
Rupert Thompson, head of research at Kingswood, is also concerned that the US economy is weakening.
“Today’s US labour market data can only fuel market worries over the ongoing slowdown in global growth and increase the Fed’s inclination to stay on the sidelines over coming months.
While the much smaller than expected employment gain in February is no doubt in part just payback for the strong increase the previous month, it can only exacerbate worries about the slowdown in the US economy, particularly as forecasts for Q1 GDP growth are down to a mere 1% or so.
But Guy Foster, head of research at Brewin Dolphin, is more positive, pointing out that job creation is running at around 180,000 per month over the last quarter.:
Wage growth was strong, unemployment fell and on average the US still produced more than 180k new jobs over the last three months. All the signs here are that job creation was constrained by lack of workers not lack of opportunity.”
Before anyone panics too much, several experts are suggesting that the jobs report is a one-off.
Jared Bernstein, formerly chief economic advisor to vice-president Joe Biden, has tweeted that occasional ‘outliers’ aren’t uncommon in the non-farm payroll:
The slowdown in US job creation between January and February is one of the biggest swings ever:
There is some good news in February’s jobs report — wage growth has picked up.
Average hourly earnings rose by 0.4% month-on-month, up from January’s 0.1%. That pushed average earnings up by 3.4% year-on-year, up from 3.1%.
The jobs report also shows that several sectors shed jobs in February:
- 31,000 jobs were lost in construction last month
- 32,000 jobs were lost at goods-producing firms
- 6,000 retail jobs were cut
However, services sector employment jumped by 57,000.
Financial experts are reeling from the unexpectedly weak jobs report:
Despite the extremely weak jobs number, America’s unemployment rate has actually fallen again to just 3.8%, from 3.9% last month.
US jobs report MASSIVELY misses forecasts
NEWSFLASH: Just 20,000 new jobs were created in America last month, in a major shock to the markets.
That’s a HUGE miss — Wall Street has expected around 180,000 new jobs to have been added to the Non-Farm Payroll.
That’s a massive tumble compared to January, when 311,000 new jobs were created (that’s revised up from the first estimate of 304,000).
So what went wrong? Maybe the US government shutdown has caused more disruption than thought? Or maybe the US economy weakened more than we thought?
Greenpeace: Norway’s divestment move isn’t enough
Charlie Kronick, Oil Campaigner for Greenpeace UK, says Norway hasn’t gone far enough:
“This partial divestment from oil and gas is welcome, but not enough to mitigate Norway’s exposure to both global oil and gas prices and the wider financial ramifications of climate change. However, it does send a clear signal that companies betting on the expansion of their oil and gas businesses present an unacceptable risk, not only to the climate but also to investors.
While BP and Shell are excluded from the current divestment proposal, they must now recognise that if they continue to spend billions chasing new fossil fuels, they are doomed.”
Norway’s finance minister has confirmed that major energy companies such as BP and Shell won’t be affected by the new ban on investments through the Norwegian sovereign wealth fund.
Speaking on Bloomberg, Siv Jensen argues that these integrated companies are spending more on renewable energy technologies, and can play an important role in a low-emissions future.
We see that the investments are going up. It’s an interesting market and it would be sad if the pension fund could not invest in them in the future.
She also denied that a “political compromise” had prevented Norway from a more sweeping ban on energy stocks, insisting that the decision was based on expert advice.
European stock markets have dropped deeper into the red as lunchtime arrives in the City.
The FTSE 100 is now down almost 1%, as global growth worries hit stocks. BP and Royal Dutch Shell are among the fallers (even though they may not be directly hit by Norway’s energy move, as they’re ‘integrated’ energy firms).
Catherine Howarth, chief executive of campaigning group ShareAction, says Norway’s decision is part of a wider trend, as investors hang up on the fossil fuel industry.
“Norway’s announcement is further evidence that investors are growing increasingly dissatisfied with oil exploration and production companies.
Institutional investors are withdrawing their capital from oil and gas companies on the grounds that quicker-than-expected growth in clean energy and associated regulation is making oil and gas business models highly vulnerable.
This announcement will put pressure on investors to ramp up their engagement with integrated oil majors ahead of the AGM season.”
Green party MP Caroline Lucas has hailed Norway’s move:
However, it appears that its sovereign wealth fund will still be able to hold some energy assets, but not firms focused purely on finding and exploiting fossil fuels.
Norway took a half step toward divesting oil and gas stocks in its wealth fund, saying it approved selling pure exploration companies while sparing the biggest integrated producers.
Shares in energy companies have fallen, following Norway’s decision to remove oil and gas producers, and explorers, from its $1tn wealth fund.
Norway’s wealth fund to ditch some energy investments
Newsflash: The world’s biggest sovereign wealth fund is to stop investing in energy companies such as oil and gas producers.
Norway’s government has announced that companies classified as exploration and production companies within the energy sector should be excluded from its sovereign wealth fund, which manages more than $1trn of assets.
The plan is meant to protect Norway’s economy from the risk of low oil prices, says Norway’s Minister of Finance, Siv Jensen.
The objective is to reduce the vulnerability of our common wealth to a permanent oil price decline.
Norway’s sovereign wealth fund was created to ensure that the rewards from the 1980s oil boom would benefit the country over the long term (unlike in the UK, where they help fund the Thatcher government’s spending and tax cuts).
The finance ministry says that exploration and production companies will be phased out from the Fund “gradually over time”, adding:
The oil industry will be an important and major industry in Norway for many years to come.
The state’s revenues from the continental shelf are, as a general rule, a consequence of the profitability of exploration and production activities. Therefore this measure is about diversification.
The 20% tumble in Chinese exports comes just days after Beijing cut its growth target for 2019.
Fiona Cincotta, the senior market analyst at www.cityindex.co.uk, says anxiety over China is weighing on the markets today:
It’s the morning after and the FTSE is struggling. The London gauge is down 0.7% after the ECB’s grim assessment of the state of the European economy yesterday and the index’s chance of recovery has been dealt a further blow by data pointing to an increasingly serious slowdown in China.
The chance of an economic turnaround in Europe is looking increasingly unlikely if China continues to slow down. The country has already lowered its growth target for 2019 this week to between 6% and 6.5%, the lowest level in almost 30 years, and this morning’s data added to the unsettling picture showing that February exports from the Asian powerhouse plummeted by 20%.
Although February is traditionally the weakest month for China’s foreign trade because the country closes down for a week during the local New Year festivities, this year’s decline has been exacerbated both by a slowdown in the domestic economy and the ongoing trade dispute with the US.
Hopes that the US and China will reach a trade deal have also take a knock.
Overnight, the US ambassador to China, Terry Branstad, revealed that there’s still no date for a proposed summit between presidents Donald Trump and Xi Jinping. That could dash hopes of a meeting – and a trade deal – before the end of this month.
The FT says:
The two sides had been discussing a meeting at Mar-a-Lago on March 27 or March 28, immediately following Mr Xi’s planned trip to Europe. Those dates are now off.
In London, shares in struggling department store chain Debenhams have jumped after retail magnate Mike Ashley launched a bid to seize control.
Ashley stunned the City last night by declaring that he wants to be appointed to Debenhams board to run the company, and would step down from his current role running Sports Direct.
Sports Direct owns almost 30% of Debenhams, which is fighting to restructure its finances in the face of sliding falling sales. Ashley’s plan is to oust the entire board, apart from finance director, Rachel Osborne, and steer the business himself.
But Neil Wilson of Markets.com reckons Sports Direct will succeed in taking control, one way or another…
As far as the restructuring of its balance sheet goes, lenders will want to know quickly what the outcome is, what the strategy is and what management team they should be dealing with.
One wonders why Ashley does not simply go the obvious route and bid for Debenhams and combine into the House of Fraser rump. The rationale for tying these companies together is clearly compelling. If the coup fails, he will surely launch a takeover. If it succeeds he will be able to tie up the operational side and shore up finances from his own resources. Whether this boardroom coup fails or not, there is surely only one outcome from all of this: Mike Ashley will get what he wants.
Analyst and journalist Louise Cooper is also concerned by the Chinese trade data:
Many experts are blaming the ongoing trade war between Washington and Beijing for the slide in Chinese trade:
Sabrina Khanniche, the senior economist at Pictet Asset Management, blames weaker foreign demand for the slide in German factory orders.
German factory orders slide unexpectedly
In another blow, German factory orders have fallen unexpectedly.
Destatis reports that factory orders declined by 2.6% in January compared with December, and were 3.9% lower than in January 2018.
One upside – December’s data has been revised higher, but it’s still concerning.
Naeem Aslam of Think Markets says it bolsters the European Central Bank’s decision to crank up its stimulus programme again yesterday.
The German economic data was rotten and it has left a bitter taste in investors’ mouth.
Germany is the economic engine of the Eurozone and it is known for its strong export and manufacturing. The German Jan factory order data came in at -2.6% by missing the forecast of 0.5%.
This really shows why the ECB made such a dovish decision by introducing the TLTROs, and at the same time, it cut the growth and inflation forecast.
European stock markets have also been hit by the gloomy trade data from China.
The FTSE 100 is down 47 points, or 0.6%, with mining stocks among the top fallers (they’ll suffer if global growth stumbles).
Across Europe, nearly every sector has fallen. Carmakers, who are also relying on China’s economy holding up, are the biggest fallers.
News that China’s exports plunged by a fifth last month went down extremely badly on the Shanghai stock markets.
The benchmark CSI 300 has slumped by 4%, their biggest fall of the year, as traders fretted that China’s economy is weakening.
Even stripping out the impact of the Lunar new year, China’s economy has weakened clearly this year.
If you combine January and February’s trade data, Chinese exports are down 4.6% year-on-year while imports are down 3.1%.
Sales to the US have absolutely tanked – down 38% in February alone – as Chinese firms are hurt by US tariffs.
This chart shows the scale of China’s export tumble:
Introduction: China export plunge spooks market
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone, and business.
Fears over the health of China’s economy have intensified after a worrying plunge in exports.
Trade data released overnight shows that Chinese exports plunged by over 20% in dollar terms year-on-year in February, much worse than the 4.8% economists had expected.
Imports also slid, dropping by 5.2% compared to forecasts of a 1.4% decline.
Such a sharp fall in exports suggests Chinese companies are feeling the full force of the recent global slowdown, and that the tariffs imposed by Donald Trump on exports to America are now biting.
It’s also possible that the Lunar New Year distorted the figures, as many firms shut down to allow staff to take holidays or travel home.
But can that really account for China’s trade surplus shrinking to just $4.12bn, down from over $39bn in January, and significantly below the $26.38bn economics forecast?
Julian Evans-Pritchard, the senior China economist at Capital Economics, says seasonal distortions can’t be solely blamed – the global slowdown is also responsible.
“The upshot is that today’s downbeat data provide further evidence that global demand is cooling and remains consistent with subdued domestic demand.
“A row back in U.S. tariffs would provide a mild boost to exports but not enough to offset the broader external headwinds. Meanwhile, with policy stimulus unlikely to put a floor beneath growth until the second half of the year, imports will remain under pressure in the near-term, ” he added.
This comes just a day after the European Central Bank slashed its growth forecasts, and announced fresh loans to eurozone banks in an attempt to stimulate the economy.
Stocks slid in China after the trade data was released, and European markets are expected to open lower too.
Also coming up today
The latest US jobs report is likely to show that job creation dropped last month. Economists predict the Non-Farm Payroll rose by around 180,000, down on January’s impressive 304,000 new jobs.