A late PS: On Wall Street, the S&P 500 index has closed at a record high for the seventh straight day following today’s strong jobs report.

The blue-chip index of US stocks scaled new heights to finish 32 points higher at 4,352, up 0.75% today.

That’s its seventh daily record closing high in a row - as the surge in job creation in June lifted spirits on the NYSE.

Director of Research at Janus Henderson Investors Matt Peron said the jump in hiring last month boded well for some company earnings,

“A stronger than expected jobs report more closely aligns with the re-opening story in the US. It confirms that the economy continues to heal at a steady clip. The equity market has generally been anticipating this, so it should not be too impactful to markets overall, though it may portend continued strength in earnings, especially those sectors tied to the re-opening.”

CNN has more details:

The last time the S&P 500 had this long a streak of all-time high closes was in June 1997, when the index surged to eight straight records, according to S&P Dow Jones Indices senior index analyst Howard Silverblatt.

Stocks have enjoyed a superb first half of 2021, as investors are excited about the reopening of the economy thanks to Covid-19 vaccines. Corporate profits are boomingas a result.

The Dow and the Nasdaq also set alltime highs.

Wall Street is now closed until Tuesday, to mark Independence Day, so best wishes for the weekend! GW

Here are all today’s stories:

Goodnight, and best of luck in this weekend of sport... GW

The US added 850,000 jobs in June, a sign that the country’s post-vaccine rebound is continuing to accelerate.

The national unemployment rate remained relatively stable, rising 0.1% to 5.9% in June, probably because more people came off the sidelines to join the labor force.

The figures were better than expected. Predictions ahead of the latest release estimated that 700,000 jobs would be added in June, 150,000 jobs below the number that was released on Friday by the Bureau of Labor Statistics.

At a press conference Joe Biden said Friday’s report was “something else to celebrate” and said the $1.9tn stimulus package he signed in March aided the recovery.

Biden said:

“This is historic progress, pulling our economy out of the worst crisis in a hundred years.”

The uptick in jobs exceeded estimates for the first time since the Covid-19 vaccine began to be widely distributed in the US. April was a particularly dour month in comparison, with the country adding 266,000 new jobs that month – far below the 1m expected. New jobs doubled in May, jumping to 559,000, but still fell below expectations.

As a majority of states have fully lifted their coronavirus social distancing and masking restrictions, more Americans are traveling and eating out. A bulk of the jobs that were added in June came from the leisure and hospitality sector, with nearly 200,000 jobs being added to food and drink services. Private and public education jobs as well as employment in the retail industry also saw high growths in June.

Here’s the full story:

While Wall Street hits new peaks, the UK stock market has closed rather sedately.

The FTSE 100 has closed just 2 points lower, ending the week at 7123 points.

Banks led the fallers, with Standard Chartered (-2.4%), NatWest (-2.2%), Barclays (-1.7%), Lloyds (-1.7%) and HSBC (-1.6%) dipping.

That suggests investors are anticipating that today’s ‘Goldilocks’ jobs report won’t trigger early interest rate rises in the US (raising borrowing costs away from record lows would help bank profit margins).

But the weaker dollar, and hopes of economic recovery, lifted mining companies such as Anglo American (+2%) and precious metals producers like Polymetal (+2.4%).

Conference group Informa (+3.2%) finished as the top riser after Berenberg predicted a “a substantial recovery in profitability from 2022” as Covid-19 restrictions are lifted.

Commercial property firms British Land (1.75%) and Land Securities (+1.4%) also benefitted from recovery hopes, while software firm Aveva (+2.2%) joined other tech stocks higher.

The more domestically-focused FTSE 250 index had a better day, rallying by 0.5%.

Danni Hewson AJ Bell financial analyst, reckons City trades may have a half an eye on the sports fixtures, such as the Euro 2020 quarter finals, Wimbledon, the Tour De France, F1....

“The US jobs figures couldn’t have delivered better news for Wall Street. The term “Goldilocks” has been well used today but it’s on the money - not too hot, not too cold. Enough new jobs to confirm the economy is on a roll, enough jobless to give the Fed’s current strategy a warm hug. If investors in the US were after a pre-holiday weekend treat, they were definitely not disappointed.

“In London there was a slightly less celebratory mood, perhaps investors are distracted by the weekend of sport that lies ahead. The more domestic focussed FTSE 250 was the more successful of the two big indices today and those hospitality businesses among their number will take heart that the biggest job creation in the US has come from their sector and the US is slightly further along the recovery road.

“The week has been something of a roller coaster and the rest of the month looks set to remain turbulent beginning with the wait for a decision on oil production from OPEC+ which is still in the balance. Recovery is hard, it comes with a great number of changes which will be painful for some and profitable for others. Change is gonna come and it’s coming quickly.”

Football fans are expected to order well over a million takeaways on Saturday night as England’s Euro 2020 quarter-final match with Ukraine provides an excuse for a big evening in or out.

With more than 20 million people expected to watch the match, JustEat, the food delivery marketplace, said it expected to log more than a million orders, peaking at more than 2,500 a minute just before the 8pm kick-off on Saturday.

The Covid lockdowns, which forced restaurants to close to diners for long periods, have forced Britons to turn to delivery services in huge numbers for traditional takeaway cuisine as well as fast food and alcohol. The takeaway delivery company Deliveroo said orders rose by nearly a quarter during England’s victory over Germany on Tuesday, with spending on beer and wine up 27%.

Research commissioned by the website VoucherCodes.co.uk predicts a £500m blowout as people stock up on drinks and barbecue fare at the supermarket or get a round in. Tesco, for example, expects to sell double the amount of burgers, sausages and kebabs this weekend compared with the previous two.

The research, carried out by the Centre for Retail Research, said about £150m of that figure would be spent in pubs. However, the British Beer & Pub Association has complained that restrictions such as the rule of six are holding back sales with 19m pints expected to be sold on Saturday, a figure that would be nearer 24m without Covid restrictions....

On Wall Street, stocks have hit a new record high as investors welcome today’s employment report.

The S&P 500, which covers a broad swathe of the US market, is up 13 points or 0.3% at 4,333 points in early trading.

The tech-focused Nasdaq also hit a new high, currently up 54 points or 0.35% at 14,576.

The Dow is slightly higher at 34,661.58 with tech stocks leading the way: Intel, Apple and Microsoft are all up around 1.2%, while aerospace manufacturer Boeing and pharmaceuticals group Walgreens Boots Alliance are both down around 1.8%.

Tech stocks tend to do well when investors are less worried about rising inflation and interest rates.

Janet Mui, investment director at wealth manager Brewin Dolphin, says the jobs report is a ‘Goldilocks’ scenario --it shows the recovery is continuing, but without a surge in wages that might force the Fed to raise interest rates prematurely.

• “We think the US labour market report in June reaffirmed the “goldilocks” scenario: not too hot, not too cold. This is a positive backdrop for equities as the Federal Reserve can stay dovish amid ongoing recovery.
• “Not too cold: Employment gains of 850K in June were well above expectations, showing continued normalisation in the labour market, largely driven by leisure and hospitality jobs.
• “Not too hot: On the other hand, the unemployment rate ticked up to 5.9% from 5.8% (above 5.6% expected), as previously economically inactive people are re-entering the labour force, hence increasing the pool of available labour.”

Hugh Gimber, global market strategist at J.P. Morgan Asset Management, agrees:

“Stronger than expected job growth confirms that the US economic recovery is firmly on track, with the composition of gains providing encouragement that the rebound is now broadening across sectors. Employment in the leisure and hospitality sector remains over two million jobs below the level at the start of the pandemic, but hiring in this area is now clearly accelerating as virus-related restrictions ease. For the market, wage growth was the crucial data point to watch today given the potential implications for the path of Fed tightening.

“While wage pressures are clearly building, today’s report will offer an element of comfort. The US labour market is heating up, but it is not yet hot enough to force the Fed into adopting a more hawkish tone.”

Average earnings rose again in June, by 0.3% or 10 cents per hour, and are 3.6% higher than a year ago.

That will help America’s workers as they juggle the rise in inflation in recent months (CPI hit 5% in May). But the monthly rise is slower than May’s 0.4% increase.

The BLS says:

Average hourly earnings for all employees on private nonfarm payrolls rose by 10 cents to $30.40 in June, following increases in May and April (+13 cents and +20 cents, respectively).

Average hourly earnings of private-sector production and nonsupervisory employees rose by 10 cents to $25.68 in June. The data for recent months suggest that the rising demand for labor associated with the recovery from the pandemic may have put upward pressure on wages. However, because average hourly earnings vary widely across industries, the large employment fluctuations since February 2020 complicate the analysis of recent trends in average hourly earnings.

Across leisure and hospitality, average hourly earnings rose to $18.23 in June from $18.05 in May - and up from $17.02/hour in June 2020.

That suggests bosses are having to pay more to attract workers, as the reopening of bars, restaurants and other venues creates higher demand for staff.

“Notable job gains” occurred in leisure and hospitality, public and private education, professional and business services, retail trade, and other services last month, the U.S. Bureau of Labor Statistics says.

The report shows that employment in leisure and hospitality increased by 343,000, as pandemic-related restrictions continued to ease in some parts of the country.

The BLS explains:

Over half of the job gain was in food services and drinking places (+194,000). Employment also continued to increase in accommodation (+75,000) and in arts, entertainment, and recreation (+74,000).

Employment in leisure and hospitality is down by 2.2 million, or 12.9 percent, from its level in February 2020.

In education, employment rose by 155,000 in local government education, by 75,000 in state government education, and by 39,000 in private education.

Employment in professional and business services rose by 72,000, while retail trade added 67,000 jobs in June.

But manufacturing only picked up by 15,000 jobs, while construction saw 7,000 job losses on the month.

But despite adding 850,000 new jobs, there are still around 9.5m unemployed people in June, the BLS adds.

The US economy added 850,000 jobs in June, as American companies continue to take on staff as demand picks up.

That’s more than the 700,000 increase which Wall Street expected.

May’s non-farm payroll has been revised up too, to show 583,000 new hires (up from 559,000).

But the unemployment rate has risen, to 5.9% from 5.8%, indicating more people were looking for work too.

More details to follow....

Economics professor Nouriel Roubini has a stern warning for central bankers and finance ministers -- their loose monetary and fiscal policies are pumping up asset and credit bubbles to dangerous levels, creating a ‘slow-motion train wreck’.

Roubini explains that the surge in public and private borrowing has put central bankers in a ‘debt trap’: raising interest rates would trigger a recession, but not doing would let inflation run hot, creating stagflation when the next crisis comes along (as history says it inevitably will...)

He writes:

The warning signs are already apparent in today’s high price-to-earnings ratios, low equity risk premia, inflated housing and tech assets, and the irrational exuberance surrounding special purpose acquisition companies, the crypto sector, high-yield corporate debt, collateralised loan obligations, private equity, meme stocks, and runaway retail day trading. At some point, this boom will culminate in a Minsky moment (a sudden loss of confidence), and tighter monetary policies will trigger a bust and crash.

But in the meantime, the same loose policies that are feeding asset bubbles will continue to drive consumer price inflation, creating the conditions for stagflation whenever the next negative supply shocks arrive. Such shocks could follow from renewed protectionism; demographic ageing in advanced and emerging economies; immigration restrictions in advanced economies; the reshoring of manufacturing to high-cost regions; or the Balkanisation of global supply chains...

On Wednesday, the Bank of England’s now-ex-chief-economist Andy Haldane also warned of the risk of a Minsky Moment, unless the Bank started to rein in its stimulus programme.

BoE governor Andrew Bailey, though, argues that there’s no reason to panic, as inflationary price rises will be temporary.....

Prices at the eurozone factory gate rose at a faster pace in May, driven by more expensive energy costs.

Industrial producer prices rose by 1.3% in May in the euro area, and by 1.4% in the EU, compared with April (when they rose 0.9%).

Energy prices rose by 2.1% month-on-month in May, while intermediate goods (used to make final products) were 1.8% pricier.

But other products rose less steeply. Capital goods (physical assets such as machinery and equipment) rose 0.4%, while durable and non-durable consumer goods were both 0.3% up.

On an annual bases, prices were 9.6% higher than in May 2020 - reflecting the pick-up in prices since the early days of the pandemic [energy prices are 25% higher!].

China’s stock markets have posted their biggest one-day fall since March, with the CSI 300 index tumbling over 2.8%.

Shares fell in Hong Kong too, where the Hang Seng has lost 1.8%.

The selloff came after China’s president, Xi Jinping, warned that China won’t allow anyone to “bully, oppress, or subjugate” it, in a speech marking the centenary of the Chinese Communist party.

Associated Press explains:

In a speech Thursday, Xi warned that anyone who tries to bully China “will face broken heads and bloodshed.”

Xi appeared to be hitting back at the U.S. and others that have criticized China’s trade and technology polices, military expansion and human rights record. The harsh rhetoric also appeared aimed at a domestic audience. But coming at a time of sharp tension with Washington, it struck an ominous tone.

Investors also anticipate a pullback in central bank support for markets in China, analysts said.

Bloomberg flags up that some investors had expected a period of safety and stability leading up to this week’s centenary, so are now retreating.

Chinese equities slid the most since early March as investors rushed to offload shares, with a perceived period of safety seen ending after the ruling Communist Party’s 100th anniversary celebrations.

The CSI 300 Index finished the session 2.8% lower. Liquor giant Kweichow Moutai Co. and China Merchants Bank Co. were among the top drags on the benchmark. Foreign investors are also dumping mainland shares via trading links in Hong Kong, with net outflows hitting 8.6 billion yuan ($1.3 billion), the most since September.

In the City, the blue-chip index of leading shares has hit its highest level in just over two weeks.

The FTSE 100 has risen by 36 points or 0.5% to 7161, its highest since Thursday 17th June (when jitters about possible US interest rate rises spooked the markets).

Conference organiser Informa (+3.2%) is the top riser, after analysts at Berenberg upgraded their recommendation on the firm to ‘buy’ as authorities around the world began lifting their Covid-19 restrictions.

UK housebuilders Barratt Development (+1.7%), Persimmon (+1.2%) and Bellway (+2.4%, on the smaller FTSE 250 index) are also higher, after analysts at Jefferies argued that every company in the sector was a ‘buy’.

Over the past month UK housebuilder share prices have fallen 10%, despite the continued robust housing market. Exploring investor feedback, the bear argument revolves around the view that the market & sentiment is peaking. However we believe forecasts remain well short of including even current market conditions & valuations offer opportunity.

We reiterate our positive stance, upgrading our ratings on Barratt & Bellway bringing all our Housebuilders to Buy.

UK shares also rallied yesterday on reopening hopes, after prime minister Boris Johnson said he hoped England would return to as close to the pre-pandemic status quo as possible on 19 July, although some “extra precautions” may be needed.

Christine Lagarde also rejects the suggestion that eurozone sovereign (government) debt should be cancelled, in her interview with La Provence:

Q: Do you agree with the opinion of some observers that the sovereign debt generated by governments should be cancelled?

First of all, it runs counter to the legislation and would be an infringement of the treaties. Furthermore, it’s an accounting illusion. Most of the coronavirus-related debt contracted by the French Government and purchased on the secondary market as part of monetary policy is recorded on the Banque de France’s balance sheet. The debt canceled would create a gap in the balance sheet that would have to be filled, either through a contribution from the French Government to the Banque de France, or through a reduction in the revenues transferred by the Banque de France to the French Government.

It’s a bit like borrowing from Peter to pay Paul. It makes no economic sense, because interest rates are extremely low at the moment and because if a country were to stop repaying its debts, lenders would be reluctant to fund it. That’s what happened to Venezuela, Argentina and Lebanon.

Lagarde adds that the debt created by countries such as France was “crucial to avoid an economic disaster”.

It was fast and complemented by a European effort, the result of which we have just seen – France’s share of the New Generation EU plan, €39.4 billion, has just been announced, 13% of which is scheduled for disbursement in 2021. Immediate measures have been introduced at the national level, such as the partial unemployment schemes, government loan guarantee schemes, etc.

She adds that Europe now needs a major push to modernise its economies.

It’s not enough to say “let’s be green, let’s go digital”; we must implement the necessary reforms.

Q: But is helicopter money a solution?

Lagarde also insists that the ECB isn’t handing out money - that’s a job for governments:

In its purest definition, i.e. in the form of central bank direct handouts to households and firms, it has never been used. That is a matter for the budgetary authorities, not a central bank.

The US, of course, sent stimulus checks to households as part of its pandemic rescue plan - helping to spur its recovery.

A review of academic papers published yesterday from Positive Money Europe argued that a eurozone helicopter money scheme would boost consumer spending:

The results are unanimous. Consumers always spend a significant fraction, often between 40% and 70%, of the additional money they receive. We can thus reasonably expect that households would likewise spend a significant fraction of helicopter money, if the ECB did implement it.

European Central Bank’s President Christine Lagarde has cautioned that the eurozone recovery remains fragile, as it rebounds from the slump of the pandemic.

In an interview with local French daily La Provence, Lagarde explains how the ECB had scrambled to put together its pandemic stimulus package back in March 2020.

Given the scale of the risk, we came together in extraordinary circumstances. As it was at the start of the lockdown and the ECB premises were closed, we began to work by videoconference, albeit without the equipment that we now have at our disposal. The emergency purchase programme and the massive funding for firms were decided on during the night of 18 March by all of the governors of the 19 central banks.

In my case, I was with some members of my Executive Board around my kitchen table in my apartment in Frankfurt!

That pandemic emergency purchase programme (PEPP) is now on course to buy up to €1.85 trillion of bonds by March 2022, depending on the path of the economy and inflation.

Some hawkish members of the ECB’s governing council have been pushing to slow it, worried that this huge balance sheet expansion will be inflationary.

But Lagarde bats away concerns that this huge stimulus programme is a risk, arguing that the recovery is still not secure.

The most serious risk would have been to do nothing. The ECB’s primary mandate, laid down by Europe’s founders, is to maintain price stability. For that, the economy needs to be running smoothly, there needs to be investment, growth and job creation. It’s in this context that we offered our support by using the two levers of emergency purchases and exceptional loans at extremely favourable conditions.

And we agreed to maintain these measures until at least March 2022, and in any case, until we judge that the coronavirus crisis phase is over. While the recovery is now beginning to get under way, it remains fragile.

Recent economic data has suggested the eurozone is recovering strongly from its double-dip recession last winter, with factory growth hitting a record last month and unemployment falling in May.

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

Arguably the most important data release of the month for global investors, the US jobs report, is looming over markets today.

June’s Non-Farm Payroll is expected to show a jump of around 690,000 jobs last month (although forecasts vary), up from 559,000 in May, with the unemployment rate dipping to 5.7% from 5.8%.

Wages are forecast to have risen 0.4% in the month, and 3.7% over the last year, as the reopening of the economy has helped to boost pay.

Investors will scrutinise the data closely, for fresh clues on how soon the Federal Reserve will change its monetary policy and begin tapering its stimulus programme -- slowing the flow of cheap money into the markets.

A strong jobs report would reinforce confidence in the strength of the US recovery... while a weak one might show that firms are struggling to hire in the scramble for staff.

Yesterday, the number of Americans filing new jobless claims hit a fresh pandemic low - highlighting the strength of the jobs market.

But as Jim Reid of Deutsche Bank points out, more than 7 million jobs are still missing due to Covid-19:

DB’s US economists are expecting a +700k gain for nonfarm payrolls, which in turn they expect to help knock the unemployment rate down a tenth to a post-pandemic low of 5.7%.

Of course, even with a +700k increase, that would still leave the total level of nonfarm payrolls -6.9m beneath its level in February 2020, so there’s still some way to travel before we get back to pre-Covid normality. But in advance of the report, we had a decent report on the weekly initial jobless claims, which fell to a post-pandemic low of 364k (vs. 388k expected) for the week through June 26.

Wall Street hit record highs this week ... Ipek Ozkardeskaya, senior analyst at Swissquote, says traders are looking for a strong figure.

Given the steady decline in weekly unemployment claims, we could expect to see a strong figure, but whether it’s stronger than 700’000 is yet to be seen.

The market clearly needs a strong figure to hold on to its upbeat mood, as a surprise weakness in jobs figures wouldn’t get the Fed to do more, when inflation is hovering around a worryingly high 5% and it’s not even sure that it’s a peak. Also, another important thing here is the average earnings, which are expected to have risen to 3.7% in June - to cope with the inflationary pressures, from 2% printed a month earlier.

The fact that many people are now getting new jobs in an environment of rising inflation makes the wages growth even steeper. And of course, if an eventual fall in oil prices could temper inflation, the higher wages are here to stay.

Oil is also on the agenda, as Opec+ ministers will meet today to discuss whether to raise output. Yesterday’s meeting was delayed after the United Arab Emirates balked at a plan to add back 2 million barrels per day (bpd) in the second half of the year.

The standoff could lead oil-producing countries to refrain from increasing output at all, says Bloomberg, falling back on terms that call for production to remain steady until April next year.

Yesterday, Brent crude hit its highest level since October 2018, scaling $76 per barrel, on the prospect of supply remaining tight even as demand continues to improve.

But it’s currently a little lower, down 0.25% so far this session, at around $75.65, ahead of the meeting.

The agenda

• 10am BST: eurozone producer price inflation index
• 1.30pm: US unemployment report for June
• 3pm BST: US factory orders for May