Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Oil prices have climbed to the highest levels in nearly 14 months after the Opec oil cartel and its allies surprised the market yesterday by sticking to their output cuts for April, as they wait for demand to recover from the Covid-19 pandemic. Brent crude is up $1.311 at $67.85 a barrel while US crude is 95 cents higher at $64.8 a barrel. Brent hit $68 earlier, a level not seen since 8 January 2020.
Investors were surprised that Saudi Arabia decided to maintain its voluntary cut of 1m barrels per day through April, despite the rally in oil prices in the past two months.
This prompted analysts to raise their predictions for oil prices. Goldman Sachs has raised its forecast for Brent crude by $5 to $75 per barrel in the second quarter and $80 in the third quarter.
It’s non-farm payrolls day! The closely-watched jobs report from the US (out at 1:30pm GMT) is expected to show that the economy added 182,000 jobs in February, which would be a big increase on the 49,000 jobs gain in January.
The unemployment rate is set to hold steady at 6.3%, and annual average earnings growth is forecast to cool from 5.4% to 5.3%. This could be a sign that lower-income workers are returning to the labour market. The participation rate, which measures how many people are actively looking for work, will also be in focus.
Michael Hewson, chief market analyst at CMC Markets UK, says:
Should the participation rate increase and the unemployment rate fall that would suggest the labour market is strengthening.
Given that stocks have sold off due to fears about higher inflation being in the pipeline, a healthy jobs report might prompt dealers to trim their equity positions. On the other hand, a disappointing update could be interpreted as a sign the recovery is running out of steam, so the Fed will need to maintain its extremely loose monetary policy and that could assist sentiment.
Ray Attrill, head of currency strategy at National Australia Bank, says:
We suspect the market will be inclined to look through a weaker number, with investors looking ahead to the big fiscal stimulus planned in the US and the eventual removal of Covid-related restrictions later this year.
Orders for German industrial goods rose twice as much as expected in January thanks to stronger foreign demand, according to official data released this morning. The Federal Statistics Office said orders rose 1.4% in January from the month before, compared with analysts’ forecasts of a 0.7% rise.
Foreign orders increased by 4.2%. New orders from the eurozone went up 3.9%, and new orders from other countries increased by 4.4% compared with December However, December’s drop in overall goods orders was revised lower, to -2.2%.
Wall Street suffered big losses yesterday due to rising government bond yields, with higher inflation on the horizon. The tech-heavy Nasdaq lost 2.1% while the Dow Jones and the S&P 500 slid more than 1%. The selloff accelerated as Federal Reserve chair Jerome Powell insisted that the US central bank would continue to keep monetary policy loose to help Americans back to work. He disappointed some investors by not indicating that the Fed might step up purchases of long-term bonds to keep longer-term interest rates down.
Stock markets in Europe were more mixed, with the FTSE 100 index in London closing 0.37% lower and the Dax down 0.17%, while France’s CAC was unchanged and Italy’s FTSE MiB posted a 0.2% gain.
In Asia, markets are also mixed. Japan’s Nikkei has closed 0.23% lower, while Hong Kong’s Hang Seng is little changed and the Australian market slid 0.82%. Futures for Europe are pointing to a lower open.
- 8:30am GMT: UK Halifax house price index for February
- 9:00am GMT: Italy Retail sales for January
- 1:30pm GMT: US Non-farm payrolls for February (forecast: 182,000, previous: 49,000)