Global economic fears mount as US job growth stalls and Chinese exports tumble - as it happened

Graeme Wearden

from on 2019-03-08 18:28 (#4AMAF)

America's non-farm payroll only rose by 20,000 in February, much weaker than expected, and the lowest monthly growth in almost 18 months

Earlier:

6.28pm GMT

Time for a quick recap.

Unexpectedly weak US job figures, and a shock tumble in Chinese exports, have reignited concerns that the global economy is weakening.

5.54pm GMT

Oil has also had a bad session, with Brent crude dropping more than 2% to $64.83 per barrel.

That reflects concerns that the global economy is running out of juice.

A weaker tone for #Oil prices as worse than expected Chinese trade data renews concerns over economic slowdown,the small corrective rebound attempted yesterday by #CAD has been halted,w/a further losses likely if data disappoints.Get your update here: https://t.co/5ZsyqquRiO $CAD pic.twitter.com/e6oe6ZeEze

5.36pm GMT

European stock markets have posted their biggest weekly fall of 2019.

The Stoxx 600 closed down 0.9% today, which means it's lost around 1% this week. That's not a major fall, of course, but it may show that the optimism that sent shares fizzing higher this year is fizzling out.

5.19pm GMT

Associated Press have dug into the US jobs report:

The unemployment rate for most major demographic groups fell in February, with the rate for Hispanic and Latino Americans hitting a record low of 4.3%.

It wasn't entirely good news. More Hispanic and Latino Americans stopped look for work, so they weren't classified as unemployed. The government counts people as unemployed only if they are actively looking for a job. When fewer people seek a job, the unemployment rate often declines.

After falling to an all-time low last year, black unemployment has now risen sharply, to 7%. Not sure how much to read into it -- pretty volatile series -- but the big jump is concerning. pic.twitter.com/4TRyGF2gnD

5.00pm GMT

4.43pm GMT

The pound is ending the week on the wrong foot, dropping almost one eurocent to just below a1.16 tonight.

Brexit anxiety is weighing on sterling again, with no sign of a breakthrough between the the UK and the EU before the second Meaningful Vote on Theresa May's deal.

Shorter @MichelBarnier

- We are not talking the blame here.

- The UK has clear choices. As this weeks talks show, they can't be fudged.

- It's the original NI-only backstop May rejected; or the all-UK one she negotiated.

- Stop looking for uncorns, just choose. #Brexit

EU's offer on the backstop in a nutshell: No border in the Irish sea now but a future UK government can decide there will be. Northern Ireland will be treated somewhat differently whatever.

4.17pm GMT

Investors should keep a close eye on the US economy for further signs of economic weakness, says Ian Forrest, investment research analyst at The Share Centre.

Although the US has been in good economic shape for some there have been some small signs of weakness in recent data. Employment data is a lagging indicator but latest jobs data may be caused by one-off factors and investors should wait for further information to see if a trend develops.

It does add to growing signs of a slowdown in global growth following news from China and the ECB's decision to restart its economic stimulus this week.

3.53pm GMT

Stock markets on both sides of the Atlantic are solidly in the red right now.

The US Dow Jones down 150 points (-0.6%) and Britain's FTSE 100 is off 42 points (also -0.6%, a pleasing symmetry).

The week is set to finish on a negative note as a mixture of underwhelming Chinese trade figures and a dreadful headline US non-farm payrolls number weighed on sentiment.

China posted disappointing trade numbers overnight. Exports and imports declined by 20.7% and 4.8% respectively. The poor numbers added weight to the argument that the global economy is cooling down.

3.42pm GMT

Gregory Daco of Oxford Economics also argues that today's non-farm payroll paints too weak a picture.

He points out that combining January's excellent report with February's grim offering gives a more balanced picture, of a maturing jobs market.

Some perspective on Feb #Jobsreport. Employment is gradually moderating but not as much as signaled by Jan payrolls alone:

Goods : +25k in Jan-Feb versus +53k in 2018.
Services : +142k in Jan-Feb versus +163k in 2018

--> this is normal in a maturing labor market pic.twitter.com/93PCsgSsLC

3.04pm GMT

"Very fluky, I wouldn't pay any attention to it to be honest with you," Trump advisor Larry Kudlow reacted to the recent jobs report which showed the worst month for job creation since September 2017. https://t.co/LGutFoxixb pic.twitter.com/s4wT1JhCFD

3.04pm GMT

Larry Kudlow, the head of president Trump's national economic council, says we shouldn't give today's non-farm payroll too much attention.

The small rise in job creation is "an absolute fluke', he insist, pinning the blame on the weather, the Federal shutdown, the way workers and non-workers are classified.....

2.42pm GMT

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.

2.29pm GMT

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.

"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.

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."

2.13pm GMT

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:

No, that topline payroll number (20,000 jobs in Feb) isn't missing a zero. It's an outlier--stuff happens with noisy, monthly data (Jan jobs: 311K!). Underlying trend over past 3-months (186K) provides more reliable take. pic.twitter.com/utUdRX0Y4w

Another picture of "outliers" happen in payroll data. See 9/17, 14K jobs, and note what followed. To be clear, this could be the beginning of a downshift in pace of job growth--that wouldn't surprise me. But too soon to make that call. pic.twitter.com/RSiT2aXuRp

Why did we only get 20,000 new #jobs in February?

1) It could be a blip (we often get 1 "meh" month a year)
2) Hiring was weak everywhere except health care & biz
-Construction hiring FELL by 31,000
-Almost no new jobs in leisure & hospitality, warehouses, finance or retail.

Further supporting the weather theory: Zero job growth in leisure & hospitality in Feb. pic.twitter.com/xYkB748fKV

1.55pm GMT

The slowdown in US job creation between January and February is one of the biggest swings ever:

The difference of nearly 300k between February and January payrolls was the steepest month on month fall since June 2010, and the 3rd biggest downward swing in 20 years. pic.twitter.com/9OR0nILN3F

1.46pm GMT

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%.

1.44pm GMT

The jobs report also shows that several sectors shed jobs in February:

1.39pm GMT

Financial experts are reeling from the unexpectedly weak jobs report:

Jobs report truly bad.

US adds 20,000 jobs in February vs 180k expected, jobless rate drops to 3.8%. I expected a good number.

Wow -- this is an awful jobs report. The expectation was for +180,000 jobs and the actual figure was only +20,000. https://t.co/8mLnYupAwA

1.39pm GMT

Despite the extremely weak jobs number, America's unemployment rate has actually fallen again to just 3.8%, from 3.9% last month.

1.34pm GMT

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.

1.05pm GMT

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."

12.49pm GMT

12.48pm GMT

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.

12.13pm GMT

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).

11.56am GMT

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.

11.38am GMT

Green party MP Caroline Lucas has hailed Norway's move:

Hugely significant move from Norway.

We can't avoid climate catastrophe & keep building new fossil fuel infrastructure. No new oil rigs. No new pipelines.

Now Parliament's pension fund must urgently follow Norway's lead & ditch millions in dirty energy investments. @MP_Divest https://t.co/p9AVek2t1k

Woah, big news. Norway's sovereign wealth fund, the world's biggest, is going to divest from oil and gas companies, Norwegian govt decides. https://t.co/AIjmwNzAJL (background: https://t.co/1f5BkSLgMu)

So it looks like the Norway move only applies to E&P and upstream companies. So BP, Shell etc are spared... for now.

Norwegian government approves #divestment of world's biggest sovereign wealth fund from pure oil and gas exploration companies. https://t.co/IU7SQPDZ0H This is huge. If the O&G companies can't see this particular piece of writing on the wall, they deserve to go under.

11.22am GMT

Norway's decision feels like a landmark victory for climate change campaigners.

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.

BREAKING: World's biggest sovereign wealth fund in Norway to divest from pure oil & gas companies https://t.co/AHoHphnAe7

11.17am GMT

Shares in energy companies have fallen, following Norway's decision to remove oil and gas producers, and explorers, from its $1tn wealth fund.

#Norway will take upstream oil companies out of its wealth fund. The STOXX Europe 600 Oil & Gas Index
right now pic.twitter.com/45MCGguKzJ

11.12am GMT

Newsflash: The world's biggest sovereign wealth fund is to stop investing in energy companies such as oil and gas producers.

The objective is to reduce the vulnerability of our common wealth to a permanent oil price decline.

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.

Norway's SWF currently holds:

BP - 2.31%
Shell - 2.45%
Total - 2.02%
Eni - 1.59%
Chevron - 0.99%
ConocoPhillips - 1.0%
ExxonMobil - 0.94%#OOTT

10.42am GMT

The 20% tumble in Chinese exports comes just days after Beijing cut its growth target for 2019.

Fiona Cincotta, 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%.

10.18am GMT

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 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.

"A date hasn't been finalized" for a meeting between President Trump and Chinese leader Xi Jinping, Terry Branstad, the U.S. envoy to Beijing, said in an interview with WSJ. He said preparations for such a meeting aren't yet under way either. https://t.co/PQDHSCHQSF via @WSJ

9.46am GMT

In London, shares in struggling department store chain Debenhams have jumped after retail magnate Mike Ashley launched a bid to seize control.

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.

9.45am GMT

Analyst and journalist Louise Cooper is also concerned by the Chinese trade data:

Asia stocks dealt body blow as China exports tank

Monthly data is lumpy but even so Chinese exports down >20% is large https://t.co/cRs92wHSjc

9.40am GMT

Many experts are blaming the ongoing trade war between Washington and Beijing for the slide in Chinese trade:

China's huge export industry has suffered its worst month in three years, hurt by the trade war with the United States and a slowing global economy https://t.co/2RxSMCEUvS

On top of sluggish Eurozone, Chinese exports collapsed in February partly because of trade war with US but more importantly because of the global slowdown. Exports plunged an astonishing 21pc year-on-year last month.

China posted weak foreign trade for February; some is due to the production shutdowns around the Chinese new year. But very clear slowdown in export to the US, even adjusted for seasonalities. Trade war is visible in the data #macrobond pic.twitter.com/piiBlWrwG1

8.56am GMT

Sabrina Khanniche, senior economist at Pictet Asset Management, blames weaker foreign demand for the slide in German factory orders.

In #Germany, factory orders dropped.
-The annual pace remains depressed on foreign demand
-BUT a trough has been reached.
-The normalization regarding the one-off factors is under way.
-BUT the uncertainty remains painful! pic.twitter.com/WpaqYVgUUe

8.42am GMT

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.

#Manufacturing in January 2019: New orders -2.6% seasonally adjusted on the previous month. https://t.co/WfRJNQEhqr pic.twitter.com/xMpiz1GiEu

Germany's factory orders unexpectedly fall https://t.co/0VFsk0XFNd pic.twitter.com/5rhifDOHTe

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%.

8.31am GMT

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).

8.23am GMT

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.

Shanghai stocks having their worst day since Oct last year pic.twitter.com/yo19DhU2B9

8.15am GMT

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%.

By country, China exports to (Jan + Feb):

USA -35.1% (largest market)
South Korea -13.7%
ASEAN -8.2%
Singapore -4.7%
Japan -0.7%
UK -5.2%
Italy -1.1%

France +42.2%
Brazil +33.5%
Canada +35%
Australia +5.1%
Malaysia +5.6% pic.twitter.com/nkNP9EoamC

8.01am GMT

This chart shows the scale of China's export tumble:

7.47am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

#China export data for Feb was pretty ugly at -20.7%y/y. The surprise Jan rise turns out to be nothing more than front-loading ahead of Lunar New Year and probably take advantage of the tariff truce. New export orders show hopeful signs. But we need the trade deal concluded fast. pic.twitter.com/FKjrMMyxsR

"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.

Risk off this morning as Asian stocks shuddered lower on Friday after shockingly weak export data from China heightened market fears about a global economic slowdown, a day after European policymakers slashed growth forecasts for the bloc. https://t.co/6EJNxz57q5

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