Investors increase bets on interest rate cut from US Federal Reserve after jobs data
Investors have increased their bets on the Federal Reserve cutting interest rates this month after jobs data came in roughly in line with expectations.
Futures markets put an 89% chance on the Fed cutting rates by 25 basis points at its next meeting on 18 December after the payrolls data, compared to a 68% chance earlier in the session, Reuters reported.
Adam Hetts, global head of multi-asset at Janus Henderson Investors, said:
A strong November non-farm payrolls at 227,000 included some reversals from October and was further offset by a tick up in the unemployment rate to 4.24%. This big rebound from a distorted October read is actually quite balanced, should relieve some economic concerns, and keep the 18 December rate cut expectations on track.
Zooming out a bit from today, the trend of a slowly slowing labour market continues to sit in the sweet spot as far as rate cuts are concerned.
Samuel Tombs, chief US economist at Pantheon Macroeconomics, said:
November’s labor market data give the FOMC the green light to ease policy again this month.
With the cost of external finance for businesses still high, Indeed’s measure of job openings at a four-year low and catch-up growth in health and education payrolls now fizzling out, we expect monthly growth in payrolls to average about 100K in 2025, steering the FOMC to reduce the funds rate by 25bp at alternate meetings despite the risk of tariff-fuelled inflation.
That’s it from the business live blog this week. You can continue to follow our live coverage from around the world:
In our coverage of the Middle East crisis, thousands flee Homs in central Syria as rebel forces push on
In the US, Donald Trump defends Pete Hegseth as he announces more administration picks
In the UK, a minister declines to endorse Keir Starmer’s claim about civil servants being comfortable with ‘decline’
Thanks for reading, and please do join us next week. JJ
BAE Systems has signed contracts worth $2.5bn (£2bn) with Sweden and Denmark for new CV90 combat vehicles – with some to go to Ukraine.
Denmark will get 115 vehicles, while Sweden will buy 50. BAE, a member of the FTSE 100, said that the agreement also includes “further vehicles for Ukraine financed by the two governments”.
The vehicles are made in Sweden by BAE’s Hägglunds subsidiary.
Major general Peter Boysen, chief of the Royal Danish Army, said:
The infantry fighting vehicle is an essential component of the heavy brigade we are currently building. The 115 new vehicles will significantly enhance Denmark’s contribution to collective security and international operations. With the 44 existing vehicles, we will have a total of 159 vehicles, providing us with substantial strength – also from an international perspective.
Donald Trump complained constantly during the US presidential election campaign that Joe Biden had driven the economy into the ground, but the latest jobs numbers suggest that it is actually in fairly rude health.
Trump will take control on 20 January once more with questions being asked about whether the Federal Reserve should actually even continue its path of cutting interest rates.
The Fed last month lowered its key lending rate for the second time in this cycle, but there is not much sign that the US economy is in desperate need of support.
Nicholas Hyett, investment manager at Wealth Club, an investment platform, said:
Healthy US job numbers were widely expected, but they still come as a bit of a relief after last month’s shock slump. The overall impression is that the US economy continues to go from strength-to-strength.
The question investors will be asking themselves is, with the US economy booming does the Fed really need to keep cutting interest rates.
The incoming Trump administration is set to do everything it can to spur domestic economic activity, and with tariffs potentially pushing up the cost of imports the combination of surging demand and restricted supply could trigger a resurgence in inflation. With labour markets seemingly doing well enough on their own interest rate cuts look increasingly unnecessary.
Michael Brown, senior research strategist at Pepperstone, a foreign exchange broker, said:
The November US labour market report showed a rebound from the dismal, weather-affected October report, as the overall employment situation remains resilient.
Headline nonfarm payrolls rose by 227k in November, a touch above consensus expectations, but well within the forecast range. At the same time, the prior 2 months of data was revised higher, by a net 56k, taking the 3-month average of job gains to +173k.
Taking a step back, my base case remains that the [Federal Reserve] will still deliver a 25 basis point [0.25 percentage point] cut later this month, continuing to normalise the monetary policy stance, as the labour market also continues to normalise. Naturally, the committee will seek not to over-react to a single data point, particularly when incoming figures remain skewed by a number of one-off factors, though the modest rise in unemployment will embolden some of the committee’s doves for now.
US economy added 227,000 jobs in November
The US economy added 227,000 private-sector jobs in November, above the 200,000 expected by economists.
It was a stronger-than-expected bounceback from the 36,000 jobs added in October, according to the US Bureau of Labor Statistics. That October reading was revised up from the 12,000 initial reading.
The American unemployment rate rose from 4.1% to 4.2%, an increase in line with expectations.
The problem with analysing this month’s non-farm payrolls figures will be working out how much of the upward movement – presuming there is upward movement – is reversion to normal, or whether it is showing genuine economic strength.
Oscar Munoz, chief US macro strategist at TD Securities, an investment bank, said:
We do not think that a surge in November job gains implies a sudden resurgence in hiring, but only the normalization from temporary shocks in the data.
It would be more unbiased to analyse the recent payrolls performance by looking at the October-November data together.
Bob Savage, head of markets strategy and insights at BNY Mellon, an investment bank, said he expected 220,000 were added. The focus will be on revisions and unemployment holding at 4.1%, but also on hourly earnings growth.
That is expected at 0.3%, down from 0.4%. The mix of jobs added and the participation rate – the proportion of working-age adults in work – will be key for the Federal Reserve’s plans to lower interest rates further.
US non-farm payrolls: economists forecast 200,000 jobs added
It has been a fairly quiet day on financial markets, but all financial traders’ eyes will turn to the week’s biggest data release: US non-farm payrolls.
Economists expect a major bounceback in the jobs figures – which show how many private sector jobs were added in the previous month – after a shock decline in October.
That reading, at 12,000, dropped far below consensus expectations. Hurricanes and a big Boeing strike hindered hiring, but even so the figure was a fraction of the 113,000 expectation.
It would be a second big shock if November’s figures were not much better. Economists polled by Reuters expect 200,000 new jobs were added for the month.
Economists at Goldman Sachs, an investment bank, estimate nonfarm payrolls rose by 235k in November, above the consensus. The three-month average of job creation is 104,000 – generally a reasonably healthy rate.
Retailers saw a surge in sales on Black Friday week – both in stores and online – raising hopes that festive spending will grow this year.
Sales at established stores rose 19% with strong growth at fashion and homewares stores, according to advisory firm BDO’s high street sales tracker which mainly involves small and medium-sized retailers.
Sales in stores rose more than 14% and online sales were up more than 23% as cash- strapped shoppers sought out bargain presents and treats for themselves during the US-inspired discount event.
Fashion performed strongly – up 18% as cold weather hit after a difficult mild October while homeware sales were up 28% as families prepared for guests.
However, the numbers are flattered by comparison to last year when spending tailed off
after Black Friday week – which fell a week earlier in the calendar. It may not be clear until mid-December whether households have felt secure enough to bump up festive spending after a lacklustre few years.
Recent figures from credit and debit card operator Barclaycard suggests consumers’ confidence in their ability to spend on non-essential items reached its highest level since February in the month to mid November.
However it found supermarket spend decreased 1.8%, as two thirds or cardholders said they were looking for ways to reduce the cost of their weekly shop helped by easing inflation. Spending on travel and holidays was up but spending on clothing down amid the mild October and then stormy start to November which held back trips to the high street.
Steelmaking unions have called for the UK’s two remaining blast furnaces in Scunthorpe to remain open in a meeting with Jingye, the Chinese owner of British Steel.
Community, GMB and Unite, the three main unions representing steel workers, said on Friday that a meeting was “constructive” as they presented a report prepared by consultants Syndex. The report contained a “strong recommendation to operate two blast furnaces at Scunthorpe to facilitate a smooth and low-risk transition” to electric arc furnaces.
They said:
If these talks are to lead to a successful outcome, the UK government must make good on its promises to steelworkers by supporting the huge investments required to successfully transition to greener steelmaking.
The Labour government’s talks with Jingye have proven to be difficult, with sources with knowledge of the situation suggesting that Jingye is driving a hard bargain.
The government is even considering nationalisation as one option – although it is not seen as the preferred route.
At least 11 picks for strategic positions after Trump returns to the White House in January have either achieved billionaire status themselves, have billionaire spouses or are within touching distance of that threshold.
The net result will be the wealthiest administration in US history – worth a total of $340bn at the start of this week, before Trump further boosted its monetary value by trying to appoint at least three more billionaires.
One of Trump’s latest appointments was podcaster and former PayPal chief operating officer David Sacks. Sacks will be “artificial intelligence and crypto tsar”.
Sacks, a venture capitalist and Silicon Valley insider, hosted big spenders at his San Francisco mansion in June to support the Trump campaign, with tickets ranging up to $300,000 a head. The event reportedly raked in more than $12m.
You can read the full story on the wealth of Trump’s cabinet here:
A clutch of bidders have expressed interest in buying Thames Water, after its initial owners essentially said they will walk away with nothing.
However, any buyer – including the newly public Covalis bid – will have to negotiate a complex regulatory and political process in order to take ownership. And workers at the sprawling utility will have their say.
Gary Carter, national officer at GMB, which represents water workers, said:
Any plan to takeover Thames and break it up would be a disaster for consumers and workers. These bids won’t stop the leaks nor pollution – they will only line the pockets of those who want to break it up.
Thames Water needs considered, long-term investment to repair its infrastructure, stop the leaks and provide stability; not the plundering of its assets to make a quick buck.
The government has to stop this vulture auction and take control of Thames in the interest of the public.
Bank of England official calls for lower interest rates
The Bank of England should be cutting interest rates by more, a member of the rate-setting monetary policy committee member has said.
Swati Dhingra, an external member of the committee, said high interest rates had hurt consumption and business investment, and damaged the supply capacity of Britain’s economy, according to Reuters. In an interview on Friday with Bloomberg TV, she said:
That’s why I think we should be easing policy more.
Dhingra said that the UK has limited direct exposure to US tariffs, but added that the indirect exposure may be greater. Tariffs could lead to a return of supply chain disruption that we’ve seen in recent years, she said.
She estimated that the neutral rate – the rate at which monetary policy is neither restrictive nor expansionary, was between 2.5% and 3.5%.
Quiz shares slump by 40% as it warns it could run out of cash
Glasgow-based clothing retailer Quiz has said it could run out of cash early next year after a “marked decline” in trade both online and in stores in October and November.
The company’s share price has fallen by 44% to 2.35p. It was only valued at £6.6m on Thursday evening.
The business, which has more than 70 stores in the UK and Ireland as well as concessions in New Look and outlets in the Middle East, said it had appointed
advisers to “consider appropriate options” from both a financing and strategic point of view.
In a statement issued to the stock market, Quiz said that changes in the budget had combined with poor autumn trading to put pressure on its balance sheet.
The company continues to proactively manage its cost base and identify opportunities to improve performance and profits. However, ongoing improvements being made in these areas will be offset by the recent proposed changes to the National Living Wage and Employer’s National Insurance arrangements, resulting in circa £1.7m per annum of
additional costs from April 2025.
Quiz said it was managing its working capital carefully but currently had just £1.2m
of headroom within its £4m borrowing facilities.
Tarak Ramzan, the company’s founder and largest shareholder, has offered to provide a
£1m loan to assist the company but this is subject to approval from Quiz’s other lenders.
Guardian Media Group agrees sale of Observer to Tortoise Media
The sale of the Observer, the world’s oldest Sunday newspaper, to Tortoise Media has been agreed in principle.
The announcement by the Scott Trust, the ultimate owner of the Guardian and Observer, came as it also revealed that it would invest in Tortoise to become a key shareholder and take a seat on both the editorial and commercial boards of the media company.
The Trust said the new ownership model would “protect the Observer’s future, championing the voice of liberal values and investing in exceptional journalism while building its digital offering”.
“We knew we needed the right combination of resources and commitment to build a new platform for the Observer,” said the Scott Trust chair, Ole Jacob Sunde.
“It required an ally to be sufficiently funded, long-term in nature and respect editorial independence and liberal values. I believe we have found this in Tortoise Media. We are looking forward to being part of the next phase in the Observer’s journey.”
Observer staff are due to meet managers today.
The eurozone economy grew by 0.4% in the third quarter of 2024, according to a third estimate of GDP.
That was an acceleration compared with the 0.2% growth in the second quarter, according to EU statistics office Eurostat.
However, despite the acceleration, the eurozone economy only grew by 0.9% compared with the same quarter of the previous year – a relatively meagre growth rate. Growth has been held back in particular by Germany, where economic growth lagged at 0.1% in the quarter.
Ireland (+3.5%) recorded the highest increase of GDP compared to the previous quarter – although Ireland’s economic figures are heavily caveated because of the infuence of tech companies’ offshore holding companies. It was followed by Denmark and Lithuania (both +1.2%). The highest decreases were observed in Hungary (-0.7%) and Latvia (-0.2%).
Household spending was a big contributor, increasing by 0.7% in the euro area.
However, exports decreased by 1.5% in the euro area in the quarter.
The UK may not retaliate if Donald Trump imposes tariffs on British goods imports, the business secretary has said.
Jonathan Reynolds said that the UK could be relatively sheltered from Trump’s ire because the US runs a goods trade surplus, exporting more goods to Britain than it imports the other way.
But if Trump does impose tariffs on all countries, the UK would not automatically respond, Reynolds said in an interview with the Financial Times. He said:
In this country there’s no political constituency for protectionism.
Increasing costs of goods or food for your constituents is not attractive.
Reynolds also cautioned that the prospects for a trade deal between the US and UK could be tricky, given the “very different regulatory regimes for agriculture and food”.
British trains able to run normally once underway says National Rail
National Rail has given an update on the rail disruption: it appears to be limited mainly to trains setting off for their first journey, although there could be knock-on delays through the day.
Its update said:
This issue is mainly affecting trains on some routes leaving the depot to start their service. However, trains can run normally once they are underway.
Short-notice cancellations and alterations are expected due to the knock-on effect on the timetables. Please check before you travel, allow extra time for your journey and monitor live departure boards.
Mike Ashley’s Frasers Group is in the market for another retailer: this time it’s Norwegian sporting goods retailer XXL ASA.
Frasers said that it is launching a hostile takeover of the brand because it disagreed with the company’s plan to issue new shares, which would dilute Frasers’ existing shareholding.
Frasers, the bulk of whose earnings come via Sports Direct, is XXL’s second largest shareholder, with about 32.5% of the voting rights and about 25.8% of the issued share capital.
It said that it opposed a share issue by XXL which would have sought to raise 600m Norwegian krone (£42m). It said in a statement to Oslo’s stock market:
We believe that the proposed alternative rights Issue is wrong, its legality is questionable and its implementation will be extremely detrimental to both Frasers and the other minority holders of XXL shares, who will be unfairly and significantly diluted by the commission shares to be issued under the terms of the Alternative Rights Issue.
In addition, we do not believe that shareholders, especially minority shareholders, should be asked to provide further funding to XXL when it has not articulated any clear plan to address and resolve the root causes of its persistent problems.
Michael Murray, Frasers chief executive (and Ashley’s son-in-law), said:
Our strategic vision and industry experience position us uniquely to help XXL navigate its current challenges. We are committed to ensuring that XXL reaches its full potential.
UK house prices hit new record high of £298,083 says Halifax
The average price of a house in the UK has hit a record high as homeowners experience a fifth successive month of increases in the value of their properties, Britain’s biggest mortgage lender has said.
Halifax’s monthly house price index found that the cost of an average home stood at £298,083 in November, up almost £5,000 on the previous record set in October.
Prior to the latest rise, the record average house price was set in June 2022, at 293,507.
House prices increased by 1.3% in November, the biggest increase this year and the fifth consecutive monthly rise.
On an annual basis property prices are up 4.8%, the highest rate of increase since November 2022.
Amanda Bryden, the head of mortgages at Halifax, said:
Latest figures continue to show improving levels of demand for mortgages, as an easing in mortgage rates boost buyer confidence. However, despite these positive trends, many potential buyers and movers still face significant affordability challenges and buyer confidence may be tested against a changeable economic backdrop.
As we move towards the end of the year and into 2025, positive employment figures and anticipated decreases in interest rates are expected to continue supporting demand. This should underpin further house price growth, albeit at a modest pace as borrowing costs remain above the average of a few years ago.
You can read the full story here:
Here is the full statement from Suez on the bid by Covalis for Thames Water:
In exclusive partnership with Covalis, Suez is submitting a non-binding offer to advise and assist Thames Water by leveraging Suez’s expertise in technical advisory and organizational optimization.
At this stage, Suez scope of work is limited to advisory mission to ensure the project’s success and address the specific challenges faced by Thames Water.
Suez attaches great importance to support Thames Water in its operational recovery and long-term sustainability in alignment with regulatory expectations.
The FTSE 100 in London has edged down in the opening trades by five points – less than 0.1% – to 8,344.
Direct Line Group has jumped by 7.6% to £2.53 – although it remains well off the £2.75 offer price, suggesting investors may have questions over whether the deal will be completed.
Here are the opening snaps from across Europe’s major stock indices:
EUROPE’S STOXX 600 FLAT
FRANCE’S CAC 40 UP 0.1%; SPAIN’S IBEX DOWN 0.2%
EURO STOXX INDEX DOWN FLAT; EURO ZONE BLUE CHIPS DOWN 0.1%
GERMANY’S DAX UP 0.1%
Trains across Great Britain could be disrupted by nationwide communications fault
Trains across Great Britain may be disrupted this morning because of a nationwide fault with the radio systems used by drivers to communicate with signaller, National Rail has reported.
National Rail, which is run by train operating companies, said that all National Rail routes may be affected, in a statement on its website. It said it was investigating the problem.
It said:
There is a nationwide fault with the communication system used between train drivers and signallers. As a result, services across the National Rail network may be subject to disruption this morning.
Trains across the network are having to start their journeys later because of this fault and some may also be subject to cancellations or alterations. Please check before you travel, allow extra time for your journey and monitor live departure boards.
The lines affected included London’s Elizabeth line – Britain’s most popular line – ScotRail, and services across England.
National Rail said the problem was with the GSMR system, or the Global System for Mobile Communications-Railway. The technology is designed to deliver “digital, secure and dependable communications between drivers and signallers” including within tunnels and deep cuttings, according to Network Rail, which runs the UK’s rail tracks.
Aviva agrees £3.6bn Direct Line takeover; Suez lined up to manage Thames Water in bid
Good morning, and welcome back to our love coverage of business, economics and financial markets (after a two-day break).
FTSE 100 insurer Aviva has agreed to buy rival Direct Line in a £3.6bn cash and shares deal after a sweetened offer.
Direct Line’s board said that it would be minded to accept the offer of £2.75 per share, up from Aviva’s first bid of £2.50 per share that valued its FTSE 250 rival at £3.3bn.
Direct Line had argued that it could turn its performance around, after slumping in recent years. It rejected the first offer, saying it substantially undervalued the company.
The latest offer is a 73% premium to the closing price before the first bid was announced, the companies said in a joint stock market statement on Friday morning. The companies said:
The Direct Line board believes that, in addition to the attractive headline value per share, the combination would provide the opportunity to deliver significant synergies, creating substantial additional value for both sets of shareholders.
Aviva has until 5pm on – ah – Christmas day to make a firm offer or walk away.
Another Thames Water bidder emerges
French utility Suez could reportedly be brought in to manage the struggling Thames Water as part of a new £5bn bid by an infrastructure investor.
Covalis Capital has submitted a bid to Thames Water, the Financial Times reported, as it looks for new owners and tries to agree an emergency debt package to avoid temporary nationalisation.
Thames Water provides water and sewage services to 16 million customers across London and the Thames Valley in south-east England. It has been on the verge of collapse for several months, labouring under its £19bn debt pile.
The investor plans to break up Thames Water and list the remainder on the stock market, while giving the UK government a seat on the board, according to people cited by the FT. It reported:
Covalis would provide about £1bn up front on agreement of the deal, the people added. The London-based investor would then raise another £4bn from asset sales, refinancing and the listing, which is expected in two to three years’ time.
Under the deal Suez would only function as a service provider. Suez said in a statement:
At this stage, Suez’s scope of work is limited to [an] advisory mission to ensure the project’s success and address the specific challenges faced by Thames Water.
The FT reported that other potential bidders for Thames Water could be Hong Kong-based firm CK Infrastructure Holdings, the owner of Northumbrian Water, and Castle Water, which is owned by Conservative party treasurer Graham Edwards.
The agenda
10am GMT: Eurozone GDP growth third estimate (third quarter; previous: 0.2% quarter-on-quarter; consensus: 0.4%)
1:30pm GMT: US non-farm payrolls (November; prev.: 12,000 jobs; cons.: 200,000)
Updated
