US economy beats forecasts with 253,000 new jobs in April, as jobless rate falls to 3.4% – as it happened

Closing post

HSBC shareholders reject proposal to split bank

Jasper Jolly

A volatile week of trading is over in London, with stocks closing higher tonight.

The FTSE 100 index has gained 75 points today, or 1%, to 7778 points, rising back from Thursday night’s one-month low.

Relief that America’s jobs market was stronger than expected last month, and easing fears over the US banking sector, propelled shares higher.

Mining giant Antofagasta led the risers, up 3.5%, followed by Barclays bank (+3.4%), and oil giant BP (+3.3%).

Sandy Villere, portfolio manager at Villere & Co in New Orleans, says US regional bakns are benefiting from a relief rally today, after the dramatic sell-off earlier thls week.

Villere added:

“People anticipate over the weekend you can see something with PacWest or one of these banks that’s really been struggling.

So PacWest are up 73% now, clawing back most of yesterday’s slump, while Western Alliance are up 37%.

The oil price is also rallying, as anxiety over the US banking sector eases

Brent crude, the benchmark, is up almost 4% today at $75.21 per barrel, with US crude up 4% at $71.33.

This still leaves oil on track for a weekly fall, after heavy losses earlier this week.

“Rather than underlying fundamentals, the selling frenzy over the past week has been driven by worries about demand linked to recession risks and the strain in the U.S. banking sector,” said PVM oil market analyst Stephen Brennock.

“The upshot is that there is a big disconnect between oil balances and oil prices.”

Wall Street higher after jobs report and Apple results

On Wall Street, shares in US regional banks are rallying hard, as pressure mounts for curbs on short-selling.

PacWest, which came under heavy pressure this week, have jumped by 43% in early trading, while Western Alliance (which yesterday denied a report it was seeking a buyer) have jumped 29%.

The rally comes amid calls for regulatory oversight of short-selling (where traders borrow stock and sell it, hoping to buy it back cheaper for a profit).

Wachtell, Lipton, Rosen & Katz, a law firm that has represented large companies, yesterday called on U.S. securities regulators to restrict short sales of financial institutions.

Also yesterday, the White House said it was closely monitoring the short-selling pressure on healthy banks.

The yield, or interest rate, on US government debt is jumping on the back of today’s hot jobs report.

It’s pushing up the UK’s borrowing costs too, and those of eurozone governments.

The yield on two-year US Treasury bills has jumped sharply to 3.87%, up from 3.73%, a sign that traders believe further US interest rate rises are more likely.

Longer-dated bond prices are also falling, pushing up the yield on 10-year US Treasuries by 9 basis points to 3.44%, from 3.35%.

UK gilts are also showing similar, though less dramatic moves.

The yield on two-year UK debt has risen to 3.77% from 3.7%, with 30-year gilt yields rising to 4.17% from 4.09%.

Today’s latest jobs report was ‘hot’ across the board, says Daniele Antonucci, chief economist & macro strategist at Quintet Private Bank, adding:

Payroll employment, the unemployment rate and hourly earnings all came in stronger than expected.

Of these three numbers, hourly earnings is probably the key one. This is because wages are a key driver of inflation, particularly for many services.

The US dollar has climbed after the economy added more jobs in April than expected.

This has pulled the British pound away from this morning’s 11-month high (of $1,2634), back to $1.259.

Harvard professor Jason Furman, a former director of president Biden’s National Economic Council, makes some interesting points on today’s jobs report:

This report should not be mistaken for an economy in great shape, cautions Bryce Doty, senior portfolio manager at Sit Investment Associates.

Doty says the jobs data is strong, but adds:

People are going back to work because they have burned through their savings. Companies may finally be able to fill positions that have been open for a long time.

This report should not be mistaken for an economy in great shape given the recent string of poor economic data and looming credit crunch.

And on the 4.4% year-over-year increase in hourly earnings, Doty adds:

If workers typically become about 2% more productive each year and companies increase wages by 4.4%, businesses only need to raise prices by 2.4% to maintain profit margins. We do not see 4.4% wage growth as inflationary.”

Hugh Grieves, fund manager of the Premier Miton US Opportunities Fund, says economists have been confounded (not for the first time) by today’s jobs report:

After 14 months of interest rate increases, the US unemployment rate has fallen to just 3.4%, lower than it was at the start of the hiking cycle (3.6%). Clearly economists need to rethink their forecasts of imminent recession.

“Given that the Federal Reserve hinted this week that it would pause on raising interest rates further, markets are now likely to be in a position to react positively to stronger economic data, rather than see it as an invitation for more aggressive Fed tightening.”

Andrew Hunter, Capital Economic’s deputy chief US economist, predicts that the US central bank will still pause its interest rate hikes, despite April’s stronger-than-expected jobs report.

The 253,000 gain in non-farm payrolls in April suggests that the labour market remains resilient despite the banking sector turmoil and broader signs of an economic slowdown.

Nevertheless, that stronger-than-expected gain was offset by sharp downward revisions to previous months, and, in any case, we doubt it will have the Fed reconsidering its plans for a pause given the wider evidence that labour market conditions are cooling.

Today’s jobs report shows that America’s labor market is strong, says Odeta Kushi, deputy chief economist at financial services company First American.

There’s no sign of a recession in the report, she argues, even though revisions to February and March’s data means job creation in those months was 149,000 lower than previously reported.