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Blowout US jobs report may feed inflation fears

Tom Rees
·26 min read
Payrolls
Payrolls

A bumper employment boost in Joe Biden’s first jobs report caused a spike in US government borrowing costs to their highest level in more than a year.

Inflation jitters on bond markets were fuelled again by 379,000 jobs being added to the US economy in February, the strongest showing for four months.

Forecasters predicted the vaccine rollout and the president’s stimulus jolt will extend the jobs recovery in the coming months after an expectations-smashing report.

The labour market quickly regained momentum following the second wave setback with the jobs gain in the first full month under Mr Biden well above forecasts of below 200,000.

Unemployment edged down 0.1 percentage points to 6.2pc but the headline rate is flattered by many American workers temporarily sitting out of the labour market.

Signs of the rapidly recovering jobs markets stoked volatility in US Treasuries, which are being closed watched by investors.

Expectations of a strong economic recovery boosted the benchmark 10-year Treasury yield to above 1.60pc, the highest level in more than a year before later retreating.

Bond yields have risen sharply this year on worries that a fast rebounding economy will spark higher inflation, potentially forcing central bankers to pare back stimulus.

“A very strong jobs report for February is just the start,” said James Knightley, ING economist. “With vaccines ramped up, we could see a broad second quarter re-opening that fuels a surge in job creation thereafter.”

The US Bureau of Labor Statistics revealed that restaurants and bars bringing back staff underpinned the jobs surge last month as states started to lift Covid restrictions again.

Employment in the leisure and hospitality sector jumped 355,000 but was still down 3.5m compared to a year earlier.

The jobs growth was less impressive in other sectors with manufacturing eking out a 21,000 gain and the construction industry suffering a 61,000 fall in employment. Building sites were hit by a cold snap hitting much of the country.

05:52 PM

Wrapping up

That is all from us. Here are some of our top stories so far today:

Thank you for joining! Have a great weekend and Louis will be back with you on Monday morning

05:26 PM

Tesla sheds market value this week

Elon Musk
Elon Musk

Leading on from the post below, Bloomberg has some interesting analysis about the rout in Tesla's shares this week.

The news agency says losses in the share price of Elon Musk's business have far exceeded the entire individual market capitalisation of around four-fifths of companies in US' benchmark S&P 500.

Its shares fell below the $600m mark today (currently at about $567), marking the lowest level since December 10. Tesla's stock has now lost 17pc of its value just this week, and 20pc so far this year.

According to Bloomberg, its current market capitalisation is around $552bn, a far cry from the high of $837bn it reached in late January.

In an indication of current investor sentiment, Tesla's current 14-day relative strength index is at 27, below the level of 30 which indicates when a stock is oversold.

The pull back comes a broader sell-off in technology stocks this week. Investors have ditched them as treasury yields rise, on concern that companies trading at high valuations may not perform up to expectations if borrowing costs surge.

04:54 PM

US markets retreat

US stocks have retreated after jumping at the open, dragged by technology stocks and as a bumper jobs report fuels worries the economy will kick up inflation.

Just before midday in New York:

  • S&P500: -0.5pc to 3,747.62. The benchmark is on route to its third week of losses, which would mark the longest streak sine September.

  • Dow Jones: -0.2pc to 30,865.81.

  • Nasdaq Composite: -1.7pc to 12,511.52.

Among slumping tech stocks is Tesla, which has already lost 9.8pc so far today, Apple which is down 1.7pc and Amazon which has fallen 2.3pc.

04:34 PM

Lockdown fatigue pushes people out to work

Commute
Commute

Official figures are showing Britons are heading out to work in growing numbers as lockdown fatigue grows following the launch of Boris Johnson’s coronavirus roadmap.

My colleague Russell Lynch reports:

The share of adults travelling to work jumped to 39pc in the week to February 28, up from 34pc in mid-February, the Office for National Statistics said.

The proportion of adults working exclusively from home has also dropped sharply from 37pc to 32pc since mid-February, its survey of more than 6,000 people showed.

03:47 PM

Parsley Box eyes £80m valuation with AIM float

Parsley Box, the online ready meal firm aimed at baby boomers, is gearing up for an £80m listing on London’s junior AIM market.

My colleague Hannah Uttley reports:

The company, which was founded in 2017 by Gordon and Adrienne MacAuley, revealed its intention to float on Friday and will give customers the opportunity to invest as part of the IPO which is expected to take place later this month.

The couple set up the company after searching for ready meals for Gordon’s mother. It now delivers around 900,000 products a month to customers which are aged 60 and over. Last year it raked in sales totalling £24.4m, compared with £7.4m in 2019.

Meal kit providers such as Hello Fresh and Mindful Chef have typically focused on the younger generations, but Parsley Box said it was created specifically for the underserved and wealthier baby boomer generation. The ready meals do not require refrigeration and can be stored for up to six months.

03:24 PM

Pound steadies out

The pound has steadied out just above a two-week low, with fear momentum seemingly low following those non-farm payroll figures.

03:15 PM

Government response to rural connectivity fears ‘inadequate’

The Government's response to questions over its rollout of 5G and gigabit-capable broadband has been labelled “inadequate” by MPs.

My colleague Michael Cogley reports:

Julian Knight, chairman of the Digital, Culture, Media and Sport (DCMS) Committee, has written to Culture Secretary Oliver Dowden to demand a fuller response to urgent questions he says the Government has yet to answer.

Elsewhere, Honda has beaten Tesla to the launch of the world’s most-advanced self-driving car that will be allowed on the road.

03:04 PM

France backs Italy’s decision to block AstraZeneca exports

AZ - Peter Byrne/PA Wire
AZ - Peter Byrne/PA Wire

France backed Italy’s decision to halt a shipment of AstraZeneca jabs to Australia, signalling that other EU states could take similar measures.

Bloomberg has the details:

“Of course I understand Italy,” French Health Minister Olivier Veran said during an interview with RMC radio. “We could do the same thing.”

The support from a major EU country comes after Australia called on the European Commission to take a look at Italy’s actions. The bloc has struggled to distribute shots to its population, and sparred with the Anglo-Swedish drug company over production delays.

“Australia has raised the issue with the European Commission through multiple channels,” Greg Hunt, Australia’s health minister, told reporters. “We have asked the European Commission to review this decision.”

Italy informed the commission that it would withhold the vaccine shipment, using a new rule that obliges member states to inform the EU executive when it decides to stop doses being exported outside of the bloc. The commission didn’t oppose Italy’s decision, an EU official said. The company declined to comment.

02:48 PM

London Stock Exchange shares tumble as boss hints of job cuts

LSE
LSE

London Stock Exchange Group's shares nosedived after the company said it will spend more on its integration with Refinitiv this year than expected, and warned of impending job cuts.

My colleague Simon Foy reports:

Capital expenditure is set to come in at £850m in 2021, with £150m of associated operating costs, the group said.

It came as chief executive David Schwimmer warned that the integration of data company Refinitiv will lead to job losses. He said the group is "working towards cost synergies" and reducing "overlap", but declined to specify how many roles will be axed.

The higher costs and talk of job cuts overshadowed an otherwise robust performance, with LSE posting pre-tax profits of £685m in 2020, compared with £651m a year earlier. Revenue jumped 3pc to £2.1bn. As a result, it increased its full-year dividend by 7pc to 75p.

The stock exchange completed its $27bn (£19.5bn) acquisition of Refinitiv earlier this year, which will result in the majority of its revenues coming from data.

Mr Schwimmer, a former Goldman Sachs banker, also shrugged off concerns about the City losing business to Amsterdam since the beginning of the year.

02:35 PM

Wall Street climbs

Trader
Trader

US stocks jumped at the open as investors shrugged off concerns about inflation after a bumper jobs report and focused instead on prospects for economic growth.

  • S&P 500 +0.9pc

  • Dow Jones +1pc

  • Nasdaq +0.7pc

02:05 PM

US should recover a ‘significant’ amount of lost jobs this year

Paul Ashworth from Capital Economics says those NFP number may look weak with a pre-pandemic comparison, but they signal a continued step towards recovery:

Even with upward revisions to the gain in January and the strength last month, employment is still 9.5 million short of the pre-pandemic level, with 3.5 million of those jobs lost in the leisure and hospitality sector specifically, which represents a 20pc fall for that sector.

Nevertheless, with COVID case numbers still falling sharply, more large-scale fiscal stimulus on the way and the vaccination program likely to reach critical mass before mid-year, the US is well-placed to recover a significant number of those lost jobs this year.

02:02 PM

US stock futures point higher

After an initial wobble, US stocks futures are now pointing towards small gains, of about 0.7pc on the benchmark S&P 500. Half an hour until the open.

01:50 PM

True unemployment rate hidden

The Washington Post’s Heather Long notes that the US’s headline unemployment levels don’t paint a full picture:

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01:47 PM

US unemployment rate falls to 6.2pc

That blowout reading was enough to nudge the US’s unemployment rate down to 6.2pc – still highly elevated by recent standards.

01:43 PM

The bigger picture

Stepping back, February’s non-farm payrolls change of 379,000 doesn’t even take the total above 2015 levels. There’s still a lot of catching up for the US labour market to do.

01:39 PM

US 10-year yield passes February 26th peak

The yield on US 10-year Treasuries (which moves inversely to prices) has hit 1.62pc in the wake of those figures – topping its highest level on February 26th, which was a one-year high. But US stock futures are still holding broadly (if narrowly) in the green, with even the tech-heavy Nasdaq set to dip just 0.3pc.

01:33 PM

Good or bad for markets?

It will be interesting to see how markets react to that reading: if the economy is rebounding more strongly than expected, that will add to inflation fears and could prompt further stock selling.

01:31 PM

US added 379,000 payrolls last month

The US added 379,000 non-farm payrolls in February, blowing out expectations for a 200,000 gain.

January’s figure was also significantly revised, from 49,000 to 166,000.

01:19 PM

Coming up: US non-farm payrolls

At half past, we’ll get the latest data on non-farm payrolls as part of the US’s monthly jobs report.

Economists are expecting a bounce-back in hiring, with 200,000 jobs added during February compared to January’s 49,000.

The unemployment rate is expected to be unchanged at 6.3pc.

Earlier this week, research by payrolls provider ADP suggested 115,000 private sector jobs were added during the month – falling short of the 205,000 expected.

12:52 PM

TikTok to rent offices in East London

TikTok has agreed a deal to rent offices above Farringdon East crossrail station, landlords Helical have announced.

My colleague Ben Gartside reports:

The property includes five floors of office space and a roof terrace with views over London.

Talks mooting a larger UK office presence began in October, following a threat from US Government to ban the app.
The move follows a spree of tech companies picking up office space during the pandemic. Google rented a new satellite office in Oxford Circus in September last year, despite telling staff they wouldn’t return to the office until at least July 2021.

Netflix also entered negotiations to expand office space in London last year, as it looked to take space in the West End from outsourcing giant Capita.

12:18 PM

Deloitte diversity boss quits over bullying allegations

Dimple Agarwal
Dimple Agarwal

Deloitte’s deputy UK chief has stepped down from her leadership roles at the firm a day after The Telegraph revealed she was under investigation over accusations of bullying and inappropriate working practices.

My colleague Michael O’Dwyer reports:

The Big Four accountant confirmed on Friday morning that Ms Agarwal, its diversity and inclusion champion, will give up her roles as deputy chief executive and head of people and purpose.

Richard Houston, Deloitte’s UK chief executive, said: “After two years on the executive and making a significant contribution to the firm’s people and purpose agenda, Dimple will be stepping down from her leadership roles. We’re grateful for what she’s achieved during her tenure.”

A person close to Deloitte management said: “We have a zero tolerance approach to bullying and harassment of any kind across the firm.”

12:01 PM

Steel bosses and ministers hold crunch meetings over future of industry

Kwasi Kwarteng - Geoff Pugh
Kwasi Kwarteng - Geoff Pugh

Steel industry leaders and Government officials are meeting today to consider the future of the sector as questions grow about the future of Sanjeev Gupta’s GFG Alliance, parent of UK-based Liberty Steel.

My colleague Alan Tovey reports:

Business Secretary Kwasi Kwarteng is leading the conference which reconstitutes the Steel Council formed in 2016 as the UK steel industry teetered on the brink of collapse.

However, the council has not met since early 2019 as worries about the health of the sector which directly employs 30,000 people dropped down the Government’s agenda.

Mr Kwarteng is now understood to be keen to restart regular meetings with the industry.

Attendees include Liberty Steel managing director Jon Ferriman, as well as bosses from other key players including British Steel, Celsa, Sheffield Forgemasters, and Tata, along with union leaders.

The meeting comes with concerns growing about the financing of GFG, the industrials group headed by Mr Gupta which expanded rapidly in the steel sector after the 2016 crisis.

11:36 AM

Reddit hires first chief financial officer ahead of possible IPO – NYT

Reddit – the internet messaging board at the heart of January’s market madness – has hired its first chief financial officer as it takes a step towards going public, the New York Times reports.

The paper says:

The [website] said on Thursday that it had appointed its first chief financial officer, Drew Vollero, in a move toward tidying up the company’s books before an eventual public offering of its stock.

Mr Vollero, 55, previously ran financial operations for Mattel, Snap and Allied Universal. His task at Reddit will be building out the financial, audit and accounting functions and leading the company through the process of going public.

“Is Reddit going public?” Steve Huffman, Reddit’s chief executive, said in an interview. “We’re thinking about it. We’re working toward that moment.”

11:20 AM

Full report: House prices fall for second month

My colleague Rachel Mortimer has a full report on this morning’s Halifax house prices index. She writes:

The Halifax numbers contrast to the index from rival Nationwide, which reported a 0.7pc monthly rise in February, suggesting buyers were already responding to reports that the stamp duty holiday would be extended.

The figures come the same week Chancellor Rishi Sunak confirmed plans to extend the much-called for stamp duty holiday until the end of September, as well as the incoming Government-backed 95pc mortgage scheme.

11:03 AM

Tesco increases health and vegan focus

Tesco is doubling down on healthy food and plant-based meals with a new five-year plan.

My colleague Laura Onita reports:

The supermarket chain said it will overhaul the recipes of its ready meals to have more vegetables in them; sell healthier products, expected to account for more than two thirds of total sales by 2025; and stock more plant-based meat alternatives.

Ken Murphy, chief executive, said: “Customers are telling us they want to eat a more healthy, sustainable diet, but without having to stretch the weekly shopping budget.

“By making even very small changes to the items they put in their basket week in week out, we can help them make that change.”

The company will share updates on its progress over the next five years.

10:38 AM

BT boss Jansen gave director ultimatum over chair’s exit – Sky News

Philip Jansen - Hollie Adams/Bloomberg
Philip Jansen - Hollie Adams/Bloomberg

BT’s chief executive gave members of its boardroom an ultimatum, suggesting he may quit unless its chair Jan du Plessis – who left earlier this week – stepped aside, Sky News reports.

The broadcaster reports:

Sky News has learnt that Mr Jansen told fellow directors of the telecoms giant over a period of several months that he had become frustrated with the speed at which BT was taking key strategic decisions.

The BT chief, who joined in 2019, indicated that he was prepared to resign unless Mr du Plessis was replaced by a chairman who could accelerate the pace of change at the former state monopoly, according to several people close to the company.

10:22 AM

Frasers Group threatens closures after ‘worthless’ Budget

Mike Ashley - John Nguyen/JNVisuals 
Mike Ashley - John Nguyen/JNVisuals

Mike Ashley’s Frasers Group has threatened to close stores after slamming Rishi Sunak's new business rates holiday as “near worthless” for larger companies.

My colleague Simon Foy reports:

The Sports Direct owner said that the £2m cap on the amount of relief a company can claim means it will have to review all its stores to find any that might no longer be viable.

“Frasers Group wishes to note its disappointment at the business rates relief announced,” it said.

“Whilst the retail industry as a whole has repeatedly asked for structural reform of business rates, none has been forthcoming. Frasers Group and many retailers would have expected suitable relief until structural reform is implemented.”

In his Budget on Wednesday, Mr Sunak extended the holiday on business rates until the end of June, adding that rates would remain discounted by two thirds for the rest of the financial year, up to a value of £2m if businesses are closed. However, this cap shuts out many larger businesses.

09:56 AM

Virgin Galactic chair sells personal stake

Chamath Palihapitiya - REUTERS/Brendan McDermid/File Photo
Chamath Palihapitiya - REUTERS/Brendan McDermid/File Photo

Chamath Palihapitiya, chair of Virgin Galactic, has raised $213m after selling his personal holding in the space-tourism company, which was founded by Sir Richard Branson.

Bloomberg has more details:

The Sri Lanka-born businessman disposed of 6.2 million shares at an average price of $34.32 this week, based on a filing with the US Securities & Exchange Commission. He still owns 15.8 million shares with his investment partner Ian Osborne, amounting to a 6.2pc stake.

Mr Palihapitiya, 44, and Mr Osborne helped to kick-start the booming Wall Street trend of special-purpose acquisition vehicles, through New York investment firm Social Capital Hedosophia. Its initial SPAC merged with Virgin Galactic in 2019 in a deal that made the Branson startup the world’s first publicly traded space-travel venture.

09:47 AM

ONS: Two in five companies furloughed staff in January

Two in five UK companies furloughed staff during January, according to the latest analysis by the Office for National Statistics.

It found that the proportion of the workforce on full furlough increased from early December 2020 to the end of January as the UK was plunged back into a full lockdown.

The stats body found London had the highest proportion of workers on furlough, at 15.8pc in December.

Here is the ONS’s breakdown by sector (which uses official HMRC data as well as findings from its own surveys – measures which it says are “very closely matched”):

09:38 AM

Money round-up

Here are some of the day’s top stories from the Telegraph Money team:

09:09 AM

Spirent Communications jumps after acquisition

Telecoms testing company Spirent Communications has jumped higher today, after announcing the acquisition of rival octoScope for up to $73m.

The FTSE 250 group said it would pay an initial $55m on a debt- and cash-free basis to buy the company from founder Fanny Mlinarsky, management and other investors. It will pay an additional consideration of up to $18m basis on the company hitting revenue targets in the next two years and retaining some key staff.

Founded in 2006, octoScope provide tools for testing Wi-Fi and 5G performance in emulated environments.

Spirent chief executive Eric Updyke said:

This acquisition supports our strategy of sustainable, profitable growth by establishing Spirent as the firm market leader in the expanding Wi-Fi space, adding to our 5G solution portfolio. octoScope brings to us an impressive and well-known customer base, providing us with the opportunity to further leverage our established global routes to market and trusted relationships with our key accounts.

08:46 AM

House prices fell again during February – Halifax

UK house prices fell for a second month in February, extending a tepid start to 2021, according to Halifax.

The bank said prices fell 0.1pc over the month, taking the average cost of a house to £251,697 – still 5.2pc higher than a year before.

Price notched up repeated highs during 2020 as buyers rushed to complete purchases before the end of the stamp duty holiday, which was extended in Wednesday’s Budget.

Halifax’s findings contrast with those of building society Nationwide, which found that prices had increased in February.

Russell Galley, Halifax’s managing director, said:

The housing market has been at something of a crossroads at the start of this year, with upcoming events key to determining the path of activity and prices over the next few months… In the longer-term, the performance of the housing market remains inextricably linked to the health of the wider economy.

08:40 AM

Pound’s gains unwind amid inflation fears

The pound has continued to fall today, as fears of a resurgence in global inflation rattle markets and drive investors towards lower-risk assets.

08:35 AM

London Stock Exchange Group drops after final results

LSEG - Jason Alden/Bloomberg
LSEG - Jason Alden/Bloomberg

Shares in London Stock Exchange Group have dropped this morning after it reported a decline in full-year technology revenue.

Revenues across the group rose 3pc to £2.1bn during 2020, but technology revenues fell 7pc over the period. Information services sales – now the key focus for LSEG, which recently completed its merger with data giant Refinitiv – grew 3pc, but were weaker than expected.

Profit before tax rose despite the challenging market backdrop, rising to £685m from £651m the previous year.

Chief executive David Schwimmer said:

The Covid-19 pandemic and broader geo-political events presented unprecedented challenges in 2020. Despite this environment, and with the vast majority of employees working remotely across our global locations, LSEG has delivered for its customers and provided a strong financial performance, demonstrating strong operational resilience.

He said the group was “well positioned” for growth despite the uncertain macroeconomic and regulatory backdrop.

LSEG proposed a final dividend of 51.7p per share, bringing its full-year payouts to 75p per share – a rise of 7pc.

Royal Bank of Canada’s Ben Bathirst said LSEG’s priorities have now shifted since its completed merger.

08:10 AM

FTSE fall at open

The FTSE 100 has fallen fairly sharply at the open, amid a resurgence in fears over inflation across global market.

Bloomberg TV - Bloomberg TV
Bloomberg TV - Bloomberg TV

07:57 AM

Aggreko agrees to £2.3bn takeover

Aggreko, one of the world’s largest suppliers of portable power generators, has agreed a private equity takeover worth £2.3bn.

My colleague Simon Foy reports:

The acquisition at 880p per share represents a substantial 39pc premium to Aggreko’s 645p closing price when the deal was first announced last month.

The swoop for the London-listed company comes from a consortium led by Britain’s TDR Capital – which is buying Asda with the billionaire Issa brothers – and Florida-headquartered infrastructure fund I Squared Capital.

It will join the long list of UK-quoted companies that have fallen into the hands of private equity firms in recent months after the pandemic wreaked havoc on many industries.

07:48 AM

FCA sets final dates for Libor

Libor, the infamous interbank offered rate that stood at the heart of the global financial system for decades, finally has a date for its retirement.

Libor, which was once dubbed the world’s most important number, has been used since the Eighties as a benchmark for lending between banks. But its reputation was tarnished in 2012 when traders were found to be fixing it, distorting global markets.

The Financial Conduct Authority said in a statement this morning that the final readings for most Libor rates will take place at the end of the year, with a few remaining US dollar settings set to continue until late June 2023.

The regulator said:

The Bank of England and the FCA have made it clear over a number of years that the lack of an active underlying market makes Libor unsustainable, and unsuitable for the widespread reliance that had been placed upon it.

Accordingly, both have worked closely with market participants and regulatory authorities around the world to ensure that robust alternatives to LIBOR are available and that existing contracts can be transitioned onto these alternatives to safeguard financial stability and market integrity.

The FCA said it is taking steps to address cases where there are existing Libor contract that could prove “particularly difficult to amend”.

Bank of England Governor Andrew Bailey said:

Today’s announcements mark the final chapter in the process that began in 2017, to remove reliance on unsustainable LIBOR rates and build a more robust foundation for the financial system. With limited time remaining, my message to firms is clear – act now and complete your transition by the end of 2021.

07:11 AM

Agenda: FTSE set to fall

Good morning. The FTSE 100 is set to fall at the open amid fears of a rise in interest rates.

5 things to start your day

1) Tariff truce settles Airbus-Boeing dogfight over state aid: Row dates back to 2004 when US demanded talks about what it claimed were unfair subsidies for Airbus from France, Germany, UK and Spain.

2) Deloitte senior consultant investigated over bullying claims: Exclusive: Deloitte's diversity champion Dimple Agarwal is being investigated over accusations of bullying and inappropriate working practices.

3) M&S Bank pulls plug on current accounts and in-store branches: Supermarket banks have struggled to compete with big lenders despite confidence in the sector crashing after the 2008 financial crisis.

4) Ocado pays 5p per plastic bag returned by customers: Ocado drivers will be able to collect up to 99 carriers when they drop off goods, under the scheme which starts on Monday.

5) NHS and private hospitals to unite in future, says Spire boss: Healthcare firm used by NHS for hip and knee replacements carried out critical and cancer care worth £363m for health service last year.

What happened overnight

Asian stocks skidded to one-month lows on Friday as rising US Treasury yields again rattled equity investors while hoisting the dollar to a three-month high, which in turn dragged the Japanese yen.

Energy markets were not spared the volatility either, with oil prices adding to big gains overnight after the Organization of Petroleum Exporting Countries (OPEC) and its allies agreed to mostly maintain their supply cuts in April as they await a more solid recovery in demand from the coronavirus pandemic.

Australian stocks shed more than 1%, Japan's Nikkei share average dropped 1.6% and shares in Seoul fell 1.4%. Chinese shares were in the red with the bluechip CSI300 index off 1.5%.

That sent MSCI's broadest index of Asia-Pacific shares outside of Japan to 684.52, the lowest since Feb. 1.

E-Mini S&P futures were 0.5% lower.

U.S. stocks dropped on Thursday after Federal Reserve Chair Jerome Powell disappointed some investors by not indicating that the Fed might step up purchases of long-term bonds to hold down longer-term interest rates.

Coming up today

Corporate: ConvaTec, Essentra, London Stock Exchange Group (Full year)

Economics: Halifax house price index (UK), manufacturing orders (Germany), non-farm payrolls (US)