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US job market weakens in December, fuelling hopes of more stimulus – as it happened

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An employee stands by empty bench tables inside at “Eat At Joe’s”.
An employee stands by empty bench tables inside at “Eat At Joe’s”. Photograph: Patrick T Fallon/AFP/Getty Images
An employee stands by empty bench tables inside at “Eat At Joe’s”. Photograph: Patrick T Fallon/AFP/Getty Images

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Key events

Oil prices climb to 11-month highs

Crude oil has also had a good week, after Saudi Arabia, the world’s biggest oil exporter, agreed a voluntary production cut of 1m barrels per day in February and March. Oil prices have reached their highest level in 11 months.

Brent crude touched $54.92 a barrel, the highest since 26 February, and is now up 0.68% at $54.75 while US crude rose to the $51.34 a barrel, the highest since 25 February, and is now 0.59% higher at $51.13 this morning.

Market summary

The FTSE 100 index in London has just dipped into negative territory, down 0.0.4% at 6,854, but a strong rally earlier this week means it’s still on track for a weekly gain of about 6%.

Other European markets are still trading higher after strong industrial production data from Germany, and US futures are pointing to a higher open on Wall Street later, a day after the three main US indices hit fresh all-time highs.

The MSCI world equity index, which tracks shares in almost 50 countries, has risen 1.18% close to a new record high. Germany’s Dax is 0.61% ahead, France’s CAC has inched up 0.15% and Italy’s FTSE MiB has advanced 0.71%. In Asia, Japan’s Nikkei hit the highest level since 1990 and closed 2.36% higher, even as the country declared a state of emergency and moved to stricter Covid-19 restrictions amid a surge in Covid-19 cases that threatens to overwhelm hospitals.

Investors are hopeful that Joe Biden, who takes over as US president in a couple of weeks, will expand the $900bn stimulus programme agreed by Congress. While Covid-19 infections and hospitalisations continue to rise around the world, many countries have started to vaccinate their populations against the deadly virus.

The European Union has reached a deal with US drugmaker Pfizer and Germany’s BioNTech for another 300m doses of their Covid-19 vaccine, doubling the amount it will receive.

Ursula von der Leyen, the president of the European Commission, said:

This would enable the EU to purchase up to 600m doses of this vaccine, which is already being used across the EU.

François Savary, chief investment officer at the Swiss wealth manager Prime Partners, told Reuters:

Investors are buying the end of an erratic Trump administration and looking forward to something new, which is a Biden presidency and the prospect of a significant spending programme.

People are going for cyclical names and this is driving the market forward but there has to be care taken as this relies on a rebound in the economy in the coming quarters.

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German industrial production strong

Germany released strong industrial production data this morning, which fuelled hopes that the economy could avoid a double dip in the quarter. Neither the light lockdown in Germany itself nor the stricter lockdowns in some neighboring countries impacted German industry in November, says Carsten Brzeski, global head of macro at ING.

Factory output climbed 0.9% in November from the month before, following October’s upwardly revised 3.4% gain. On the year, production was still down 2.6%. Almost all sectors were up; only the production of consumer goods declined. Brzeski says:

Since the summer, industrial activity has decoupled from the service sector and other lockdown-hit activities. The nature of the ‘smart lockdowns’ is clearly one important driver of this divergence. Also, the German manufacturing sector seems to benefit from the strong and continuing recovery of the Chinese economy.

Yesterday’s industrial orders data suggests that this divergence could still continue. However, don’t forget that the manufacturing sector entered the crisis on a much weaker footing than most other sectors. Despite the recent acceleration, industrial production is still some 4% below its pre-crisis level.

Industry is back as the German economy’s biggest hope in the race against the double dip. In fact, if it wasn’t for the pandemic and the lockdowns, available hard monthly data all point to a strong economic performance in the fourth quarter. At its current level, industrial production is up some 6%, and the construction sector some 5%, compared with the third quarter. Even retail sales were much stronger than in the third quarter.

The German statistical agency will release its first preliminary estimate for 2020 and fourth-quarter GDP growth next week.

The production line of the Volkswagen e-Golf car at the Volkswagen Glaeserne Manufaktur (Transparent Factory) in Dresden, Germany. Photograph: Filip Singer/EPA
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The housing market has been surprisingly strong in recent months, despite the Covid-19 pandemic. Mortgage approvals rose in November to 104,9696, the highest level in more than 13 years, according to the latest Bank of England figures.

But many forecasters expect the market to slow this year as the stamp duty holiday expires at the end of March, the help to buy programme for new-build homes becomes more restricted, and crucially, unemployment is expected to rise sharply, once the government’s job retention scheme ends in April.

Halifax house price index for December Photograph: Halifax

Jeremy Leaf, north London estate agent and a former residential chairman at the Royal Institution of Chartered Surveyors, says:

Not surprisingly, the pace of house price rises started to slow in December, which is exactly what we found in our offices, as home movers were deterred by further lockdown restrictions and seasonal distractions.

However, we recorded very few abortive sales, other than when chains had broken down or price renegotiations in response to reduced activity. Therefore, looking forward we expect the pattern to be repeated and the overwhelming majority of transactions to proceed to completion, followed by more balance between supply and demand as rollout of the vaccinations hopefully accelerates.

Estate agents signs in Highbury, north London. Photograph: Linda Nylind/The Guardian

UK house prices rise at slowest monthly rate since June

UK house prices rose in December to a fresh record, but at the slowest monthly rate in six months, according to Halifax, one of Britain’s biggest mortgage lenders. It said the average price of a home rose 0.2% to £ 253,374, a new all-time high.

However, the monthly rise was the smallest gain since June when prices were flat, and compares with November’s 1% increase. The annual growth rate slowed to 6% in December from 7.6% in November.

Russell Galley, managing director of Halifax, says:

2020 was a tale of two distinct halves for the housing market. Following a strong start, the first half was dominated by the restrictions on movement due to COVID-19, and prices were subsequently down 0.5% at mid-year as the market effectively ground to a halt. However, when the market reopened, prices soared as a result of pent-up demand, a desire amongst buyers for greater space and the time-limited incentive of the stamp duty holiday.

All this left average prices sitting some 6.0% higher at the end of 2020 when compared to December 2019, a notably strong performance given the anticipated impact of the pandemic earlier in the year. Whilst the annual rate of inflation did fall compared to November (+7.6%) to stand at its lowest level since August, it should be noted that this also reflects a particularly strong period for house prices towards the end of 2019 as political uncertainty at that time began to ease.

In the near-term, and with mortgage approvals still sitting at a 13-year high, there may be enough residual strength in the market to sustain prices up to the deadline for the stamp duty holiday and the scaling back of Help to Buy at the end of March. However, with the pace of the UK’s economic recovery expected to be constrained by the renewed national lockdown, and unemployment widely predicted to rise in the coming months, downward pressure on house prices remains likely as we move through 2021.

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Other European stock markets are also pushing higher in early trading.

  • Germany’s Dax up 1%
  • France’s CAC up 0.8%
  • Spain’s Ibex up 0.4%
  • Italy’s FTSE MiB up 0.8%

Shares in London have opened higher. The FTSE 100 index has risen 26 points, or 0.42%, to 6,885 after the opening bell. The housebuilders Barratt and Taylor Wimpey are the biggest risers, trading 4.5% and 2.4% higher respectively, after Barratt issued an upbeat trading update.

Barratt, Britain’s biggest house builder, sold 9,077 homes in the six months to December, up from 8,314 a year earlier. It said demand was lifted by the introduction of the stamp duty cut and the help to buy programme, ahead of the end of March when the stamp duty holiday is due to end and help to buy becomes more restricted.

Barratt now expects to sell between 15,250 and 15,750 homes in the current year – more than the 14,500 to 15,000 completions it had forecast in October.

The housing market has bounced back strongly since the end of the first lockdown last spring when it ground to a halt, with property viewings and moves banned, and construction sites shutting. Many office workers are now working from home and no longer commuting to work every day, so some have moved out of London and other cities, in search of bigger houses and greener surroundings.

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Marks & Spencer said this morning that its clothing sales dropped by a quarter over the key Christmas trading period as the retailer was hammered by the closure of non-essential shops because of Covid 19, reports our retail correspondent Zoe Wood.

The restrictions on socialising over Christmas – no Christmas parties this time – meant that party dresses didn’t sell. But pyjamas and jogging bottoms were big sellers as people snuggled up at home.

The outlook for trading “remains very challenging” because the latest lockdown could last until Easter, M&S said. Sales of clothing and home slumped by 24.1% in the 13 weeks to 26 December. The figure reflected a near halving of store sales which was partially offset by a similar sized surge in online sales.

Clothes hangers are pictured in a Marks and Spencers retail store in Loughton, east of London. - Photograph: Shaun Curry/AFP/Getty Images
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Introduction: Stocks boosted by recovery hopes

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

Asian stocks rocketed to record highs at the end of 2021’s first trading week, as investors shrugged off rising coronavirus infections globally and political unrest in the US to focus on hopes of economic recovery later this year. On Wall Street, all three leading indices hit record highs during the day, and the S&P 500 closed 1.48% higher, the tech-heavy Nasdaq climbed 2.56% and the Dow Jones ended the day up 0.69%.

The mood was buoyant despite Wednesday’s attack by an angry mob of Donald Trump supporters on the US Capitol, which interrupted the certification of Joe Biden’s election victory in Congress. He was confirmed as the next US president in the early hours of Thursday, and is expected to expand the $900bn stimulus package agreed by lawmakers. Democrats took control of the Senate after two wins in elections in Georgia, and now control both chambers of Congress.

The prospect of more spending to underpin the US recovery, along with the rollout of vaccines, lifted markets in Asia, where Japan’s Nikkei hit a three-decade high and closed up 2.36%. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1.56% to a record high.

Last night, Bitcoin, which has been setting new all-time highs in recent days, surged above the $40,000 mark for the first time in its history after doubling its value in less than a month. The world’s best-known cryptocurrency rose to $40,402.46 last night.

Along with other digital currencies, bitcoin has become increasingly popular with institutional investors after being endorsed by several prominent hedge fund managers. Investors see it as a hedge against inflation, at a time when massive stimulus programmes are likely to drive up inflation, and some are touting it as an alternative to gold. Analysts at the US investment bank JP Morgan said this week that bitcoin could eventually hit $146,000. But others point to previous boom and bust cycles and say it has no intrinsic value.

The main focus today is the US non-farm payrolls data on the jobs market. Wall Street economists are forecasting the creation of 71,000 jobs (compared with 245,000 in November), which would be the smallest increase since the jobs recovery started in May, and mean the economy recouped about 12m of the 22.2m jobs lost in March and April.

The Agenda

  • 8:30am GMT: UK Halifax house price index for December
  • 10:00am GMT: Eurozone unemployment rate for November (forecast: 8.5%)
  • 1:30pm GMT: US Non-farm payrolls for December (forecast: 71,000)
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