Time to wrap up, after a busy day. Here’s the main stories so far:

Have a lovely weekend, we’ll be back on Monday morning. GW

Wall Street has opened higher, as investors are cheered by today’s US jobs report.

The Dow Jones industrial average of 30 major US companies has gained over 1%, or 377 points, to 33,307, while the broader S&P 500 index is also 1% higher.

Deceber’s better-than-expected job creation, with 223,000 new hires last month, suggests the US labor market remains solid. And the drop in wage growth may ease concerns over inflation.

Today’s jobs report was what markets wanted to hear, says Mike Bell, global market strategist at J.P. Morgan Asset Management:

Solid job gains but with signs that wage gains are moderating. The ideal scenario for 2023 is that wage growth and inflation moderate without a rise in the unemployment rate and this report suggests that outcome is not impossible.

“Our base case though remains that unemployment will have to rise to get wage growth and inflation back down to the Fed’s target. We think though that equities have already priced in a lot of bad economic news for 2023, so even a recession wouldn’t necessarily take stocks materially lower than their 2022 lows. If wage growth does come down this year without the need for a rise in the unemployment rate, stocks markets would likely cheer that outcome.”

The US jobs market ended 2022 on a high note, adding another 223,000 jobs in December, the department of labor reported on Friday.

The unemployment rate dipped to 3.5%, back to its pre-pandemic low, our US business editor Dominic Rushe reports.

The continued strength of the jobs market comes as the Federal Reserve has struggled to cool hiring and bring down inflation by raising interest rates at a pace unseen in a generation.

Jobs growth has slowed – the US added an average of 539,000 new positions per month in the first three months of 2022 – but over the year the economy added 4.5m jobs, the second strongest year on record.

The government jobs report comes a day after ADP, the US’s largest payroll supplier, announced private employers had added 235,000 for the month, well ahead of the 153,000 Dow Jones estimate and the 127,000 initially reported for November.

The Fed has been raising rates since March last year in response to the US’s cost of living crisis. The central bank raised rates seven times in 2022. While inflation has cooled from its peak of 9.1% in June, it remains high at 7.1%, well above the Fed’s 2% target rate, and is expected to remain elevated through 2023.

Wage growth slowed last month – a blow to US workers, but pleasing news for central bankers trying to cool inflation.

In December, average hourly earnings for all employees on private nonfarm payrolls rose by 9 cents, or 0.3%, to $32.82.

That’s a slowdown on November, when average hourly earnings rose by 0.4% to $32.73.

Over the past 12 months, average hourly earnings have increased by 4.6%, a slowdown on November’s 4.8%.

The US unemployment rate dropped to 3.5% in December, down from 3.6% in November.

The number of unemployed people edged down to 5.7 million last month.

Newsflash: The US economy added 223,000 new jobs in December, more than the 200,000 expected.

That’s a slowdown on November, though, when 256,000 jobs were added to the Non-Farm Payroll (this has been revised down from 263k).

Investors are bracing for the latest US jobs report, due in around 30 minutes time.

December’s Non-Farm Payroll is expected to show that around 200,000 new jobs were added across the US last month, a slowdown on November’s 263,000 (which may be revised today).

The NFP is due at 1.30pm UK time, or 8.30am on the East coast of the US.

A strong jobs report could unsettle markets, as it could spur the US Federal Reserve central bank to continue tightening monetary policy to fight inflation.

US employment data yesterday was stronger than expected – private sector payrolls rose by 235,000, while new jobless support claims fell, which lifted the dollar and hit stocks.

“Markets are on edge,” said Baylee Wakefield, multi-asset portfolio manager at Aviva Investors, via Reuters.

Wakefield adds:

“We’re all hoping for that turning point in where inflation peaks, so investors are looking at these (jobs) releases very closely.

This is an environment where you’re going to see a lot of volatility based on small details.”

A report on the progress of the administration of collapsed energy supplier Bulb has been published, with administrators Teneo still awaiting approval of their £25m fee, our energy correspondent Alex Lawson reports.

Bulb, which has around 1.5m customers, went bust in November 2021 and spent a year in an administration process overseen by government before a deal with Octopus Energy was agreed. That deal completed just before Christmas but is subject to a judicial review after complaints from rival suppliers.

In November, a judge at the Insolvency and Companies Court asked for Teneo’s fees to be scrutinised by a High Court judge. Today’s report says this hearing is due to take place in “early 2023”. The first 55% of the fees have been paid as an interim measure.

Among the other costs, £4.9m was paid in “professional fees” which includes legal advice and the services of Lazard, the advisory firm which ran the sale process.

The report says administrators have spent the year: ensuring Bulb’s customers do not suffer interruptions to supply, replacing the chief financial officer, handling price changes and “implementing improvements to customer complaints processes to reflect increase in inflow from increased media coverage and prices rises”.

The report also confirms that it is “unlikely that there will be a distribution for unsecured creditors”.

The option for Bulb to draw on up to £3.9bn of funding to buy energy was made in the autumn amid soaring wholesale gas prices, but later reduced to £2.2bn. Around £1.1bn has been drawn on to date, and the government has pledged up to £4.5bn in further funds.

There are fresh job losses in the troubled crypto currency world today.

Crypto exchange Huobi plans to lay off about 20% of its staff, the company told Reuters, in the latest sign of sharp cost cutting in the industry as investor interest in digital assets slumps.

Here’s the story:

“The planned layoff ratio is about 20%, but it is not implemented now. With the current state of the bear market, a very lean team will be maintained going forward,” Huobi said in a statement, responding to queries from Reuters.

The statement confirmed an earlier message from Tron founder Justin Sun, who said that the “structural adjustment” in Huobi had not started yet but was expected to be completed by the end of the first quarter.

Sun said the company has 1,100 employees now.

More here: Crypto exchange Huobi to lay off 20% of staff as industry slump deepens

Yesterday, crypto-focused bank Silvergate announced it was cutting 40% of its workforce, after being hit by a surge in withdrawals in the last quarter following the collapse of the FTX exchange.

The Bet365 boss Denise Coates was paid more than £260m in salary and dividends in the year to March 2022, underlining her place as one of the world’s highest-paid executives.

The best-paid Bet365 director, thought to be Coates, received remuneration of £213m for the year, about 15% lower than the £250m awarded in the previous year, according to the company accounts published on Friday.

As the company’s controlling shareholder she is also entitled to at least 50% of the £100m dividend for the year.

Coates’s latest package was a drop of about £35m compared with the previous year as the gambling company spent heavily on expansion.

Her extraordinary pay package regularly ranks among the biggest in Britain and beyond, and the latest is likely to put her among the very highest earners at a time when many in the UK are struggling with the rising cost of living. More here.

Inflation across the eurozone fell last month, and faster than expected, as energy prices fell back.

Consumer prices across the euro area rose by 9.2% in the year to December, down from the 10.1% recorded in November.

The drop was driven by lower energy prices – annual energy price inflation slowed to 25.7%, compared with 34.9% in November.

European gas prices fell back to their pre-Ukraine invasion levels last month, but are still sharply higher than two years ago.

Food, alcohol & tobacco prices rose, pushing its annual inflation rate up to 13.8%, from 13.6% in November. Non-energy industrial goods prices rose by 6.4%, up from 6.1% in November, while services inflation rose to 4.4%, from November’s 4.2%.

Core inflation, excluding volatile food and energy prices, rose to 6.9% from 6.6%, which may encourage the European Central Bank to continue hiking interest rates.

Bert Colijn, ING’s senior eurozone economist, predicts eurozone interest rates will be lifted at the ECB’s next two meetings:

The ECB has taken a very hawkish stance towards this development and has indicated that it will hike through a mild recession to bring inflation structurally down to 2%.

With energy inflation dropping quickly and energy supply forecasts improving, 2% could be reached much sooner than expected. Still, rising core inflation will be enough for the ECB to continue to hike by 50bp in February and March.

UK construction has joined other sectors of the UK economy by shrinking in December, points out the EY Item Club.

They warn that the near-term outlook is weak, which will hit housebuilding, saying:

Housing market activity looks to be correcting significantly, which is likely to weigh on house building. Cost pressures facing construction businesses have continued to ease but remain elevated by past standards. And still-high inflation and falling household real incomes are likely to discourage spending on home improvements.

However, energy-intensive construction is benefiting disproportionately from Government action to limit rises in businesses’ energy bills and should continue to be supported by the more targeted scheme which is expected to replace the current support in April. And as a relatively cyclical sector, construction businesses could be among the first to benefit when the economy begins to recover from its current challenges.

The UK factory sector shrank at the fastest pace since the early days of the pandemic, while activity in the services sector dipped slightly last month.

British construction activity fell in December at its sharpest rate since May 2020, as the building sector was hit by rising interest rates and cost pressures.

A closely-watched survey of construction firms has found that activity and new work declined at the quickest rates since May 2020 last month.

Faced with this downturn, construction firms cut jobs for first time since January 2021, and business confidence turned negative, according to the S&P Global/CIPS Purchasing Managers’ Index (PMI) for the construction sector.

This pulled the Construction PMI down to 48.8 in December from 50.4 in November, below the 50 level that separates growth from contraction.

The survey found that housing activity declined for the first time since last July, while civil engineering recorded a sixth consecutive monthly contraction in output. Commercial contruction kept growing, though.

Fears over the economic outlook knocked business confidence into negative territory for the first time since the initial Covid-19 wave in 2020.

Dr John Glen, chief economist at the Chartered Institute of Procurement & Supply, warned that builders’ resilient spirits are being drained:

“The construction sector was stuck in the mud in December with the steepest fall in activity since the beginning of the pandemic in May 2020 and a similarly fast drop in pipelines of new work.

House building saw a notable change of direction, with a mix of higher inflation for raw materials and transportation and the squeeze on affordability rates for mortgages resulting in fewer house sales. The sector subsequently fell back into contraction for the first time since July. Civil engineering, responsible for larger projects, continued to be the weakest performer again, with a sixth month in the doldrums as uncertainty about the UK economy reared its ugly head again and customers hesitated.

Over in Germany, factory orders have dropped again as Europe’s largest economy struggles.

Manufacturing orders fell by 5.3% during November to the lowest level since July 2020, much worse than the 0.5% forecast by analysts, after a 0.6% rise in October.

Orders from eurozone countries fell by 10.3% on the month, as demand within Europe’s economy weakened, and were down 6.8% from outside the euro area. Orders from within Germany dipped by 1.1%

Statistics body Destatis says the drop was driven by weaker demand for heavy-duty machinery, and fewer major orders.

In the case of the manufacturers of capital goods, the order intake fell particularly sharply at -8.5% (excluding major orders -3.7%).

The decline in orders in mechanical engineering and other vehicle construction (e.g. rail vehicle construction and aircraft and spacecraft construction) played a large part in this development. Orders for manufacturers of intermediate goods fell by 0.9% and for consumer goods by 0.7%.

The average UK house price fell for the fourth month in a row in December, according to Halifax.

Property values decreased by 1.5% in December, after a 2.4% drop in November, a 0.4% decrease in October and a 0.1% dip in September.

The annual rate of house price growth more than halved, to 2% in December, from 4.6% in November.

This marked the lowest annual growth rate recorded since October 2019, when a 1.1% increase was recorded.

Across the UK the average house price in December was £281,272.

Kim Kinnaird of Halifax Mortgages said:

“As we’ve seen over the past few months, uncertainties about the extent to which cost of living increases will impact household bills, alongside rising interest rates, is leading to an overall slowing of the market.

More here:

While UK house prices are falling, European stock markets are on track for their best week since early November.

The pan-European Stoxx 600 index has gained around 3.5% so far this year, the biggest weekly gain in almost two months.

The UK’s FTSE 100 index has gained around 2.6% during 2023, an upbeat start to the new year.

2022 was grim for global markets, which lost around 20% of their value.

Mark Dowding, CIO of BlueBay Asset Management, warns that it may be ‘premature’ to predict an end to wintery conditions in the financial markets.

After a tumultuous 2022, which was a miserable year for traditional fixed income and equity investors, there has been some hope coming into 2023 that the outlook for the year ahead may be materially more favourable. During the past few weeks there have been signs that the growth outlook remains relatively healthy. Business and consumer confidence surveys have stabilised, labour market data have remained robust and recession fears seem to have been pushed back, for a time at the very least.

Chinese re-opening is also seen as a growth positive, even if the surge in Covid since the end of restrictions last month means that the next several weeks may be difficult for policymakers in Beijing. Meanwhile, mild winter weather in Europe has seen gas prices drop to levels last seen prior to the start of the Ukraine war and with oil prices also dropping, this has helped inflation data to surprise to the downside.

Added together, this has helped to support sentiment in financial markets at the start of the New Year with government yields and credit spreads rallying in sympathy. However, it seems right to ask whether this is the start of a trend that can shape the landscape in the year ahead, or a shorter-lived period of respite in the midst of a policy tightening cycle that continues to represent a material headwind for asset price valuations.

Listening to central bankers, it strikes us that we may be nearing the top of the hiking cycle within the next few months. Policy tightening is gaining traction and inflation should continue to moderate through the course of the year, on both sides of the Atlantic. However, with labour markets remaining tight there is ongoing anxiety that pressure on wages could continue to be a factor that drives up prices in the quarters to come.

Energy news: Shell says it expects to pay around $2bn over the fourth quarter of last year, due to windfall taxes in the European Union and the UK.

The oil and gas giant made the prediction in a stock market update on its fourth quarter 2022 outlook, this morning.

It says:

The Q4’22 earnings impact of recently announced additional taxes in the EU (the solidarity contribution) and the deferred tax impact from the increased UK Energy Profits Levy is expected to be around $2 billion.

These impacts will be reported as identified items and therefore will not impact Q4’22 Adjusted Earnings and will have limited cash impact in Q4’22 given the expected timing of payments.

Shell also told investors that outages at two major liquified natural gas plants in Australia will weigh on LNG production in the last quarter.

Back in October, Shell reported it had not yet paid any windfall tax in the UK (despite making record global profits of nearly $30bn (£26bn) in the first nine months of 2022), because the scheme allowed tax relief on extra drilling activity.

The levy was lifted, and widened, in November’s autumn statement.

Victoria Scholar, head of investment at interactive investor, tells us:

BP and Shell achieved sky high profits in 2022 as the war in Ukraine sent oil and gas prices sharply higher, boosting their earnings, which prompted the UK government to increase its windfall levy. However, Shell warned in November that it will be evaluating its plans to invest £25 billion in Britain over the next ten years as a result of the tax, suggesting that Shell could invest less in UK energy.

Three quarters of this decade-long investment plan was set aside for the green transformation, intended for low and zero-carbon products and services.

UK house prices have now dropped for four months running, points out Victoria Scholar, head of investment at interactive investor:

“British house prices fell by 1.5% in December month-on-month according to the latest Halifax house price index. This was the fourth consecutive monthly declined but an improvement on November’s 2.4% shrinkage. Year-on-year annual house price growth slowed to the lowest level since October 2019 at 2%, more than halving versus November growth of 4.6%.

All nations and regions suffered an annual growth rate slowdown in the final month of 2022. The average UK property price now stands at £281,272 down from £285,425 last month with Halifax forecasting an 8% drop in house prices over the year.

But although house prices are expected to continue to ‘soften’, although the shortage of properties on the market will prevent a deeper fall, Scholar adds:

Although house prices remain historically elevated, 11% higher than at the start of 2021, as the UK heads towards a recession, house prices are expected to soften further. The housing market looks set to struggle under the weight of a rising mortgage rates and broader inflationary pressures such as the high cost of energy and food which are squeezing the consumer and weighing on housing demand.

Many individuals and households are holding off from purchasing properties on the back of slimmed down budgets and in the hope that mortgage rates and property prices become more affordable down the line. Offsetting an even steeper slide in the UK property market is the chronic shortage of houses and the macroeconomic backdrop of build cost inflation.

UK housebuilders like Persimmon and Barratt Developments have had a very tough year in terms of share price performance, down over 50% and 40% respectively.”

Halifax’s house price index is turning 40, a milestone – and like many 40-somethings, it’s seen quite a lot of change.

The Halifax House Price Index was established in January 1983, when the average UK house price was £26,188 and Bank of England base rate was 11%.

Since then, average house prices have risen to £281,272, while Bank Base Rate is currently 3.5%.

Halifax reports:

While the cost of buying a home was at its lowest when the Index began, looking over the past four decades, prices peaked in August 2022 at £293,992.

Regionally, London was the most expensive place to buy a home in early 1983, as it is today. Properties in the capital have risen from an average £36,056 in early 1983 to £541,239 today.

Yorkshire and the Humber was the cheapest place to buy a property when the Index began, at £20,332 vs £205,466 now.

In the North East, average properties are £169,980 today, up from £21,494 in Q1 1983.

In Scotland, the average property in the first quarter of 1983 was £26,411 vs £200,166 today.

In Wales, the average home now costs £217,547, compared to £21,388 forty years ago.

While in Northern Ireland, average prices have risen from £23,383 in the first quarter of 1983 to £183,825 today.

After ending 2022 on a weak note, how will the housing market fare in 2023?

Halifax Mortgages director Kim Kinnaird predicts a slowdown:

“As we enter 2023, the housing market will continue to be impacted by the wider economic environment and, as buyers and sellers remain cautious, we expect there will be a reduction in both supply and demand overall, with house prices forecast to fall around 8% over the course of the year.

It’s important to recognise that a drop of 8% would mean the cost of the average property returning to April 2021 prices, which still remains significantly above pre-pandemic levels.”

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

UK house prices fell last month as the cost of living crisis, and rising interest rates, hit demand for property.

Lender Halifax reports that the average house price fell by 1.5% in December, following a 2.4% drop in November. This pulled the annual growth rate down to 2%, from 4.6% a month earlier.

Annual growth slowed across all nations and regions during December, Halifax reports, pulling the price of the average UK property down to £281,272.

The squeeze on household incomes, and the rise in borrowing costs this year, are slowing the market, explains Kim Kinnaird, director of Halifax Mortgages:

“As we’ve seen over the past few months, uncertainties about the extent to which cost of living increases will impact household bills, alongside rising interest rates, is leading to an overall slowing of the market.

Kinnaird points out that the housing market was a mixed picture in 2022, with prices heading south since September (the month of the mini-budget, which drove up mortgage rates).

We saw rapid house price growth during the first six months, followed by a plateau in the summer before prices began to fall from September, as the impact of cost of living pressures, coupled with a rising rates environment, began to take effect on household finances and demand.

But following the surge in prices since the start of the pandemic, average house prices are still rather higher than a few years ago.

Kinnaird says:

The cost of the average home remains high – greater than it was at the start of 2022 and over 11% more than house prices at the beginning of 2021.

The first half of last year was a very strong period for sellers, between January 2022 and August 2022, the average cost of a home rose by over £17,000 to £293,992 (growth of 6%), setting a new record high.

Also coming up today

UK rail passengers face another day of travel disruption as thousands of workers strike in the ongoing dispute over jobs, pay and conditions.

Members of the Rail, Maritime and Transport union (RMT) who work at Network Rail and at 14 train operators will strike for 48 hours, following yesterday’s industrial action by train drivers in the Aslef union which caused widespread disruption.

Investors are bracing for the latest US jobs report later today, which will guide how aggressively the Federal Reserve will continue to raise interest rates.

The Non-Farm Payroll is predicted to rise by around 200,000 jobs in December, after increasing by 263,000 the previous month.

We also get an initial estimate of Eurozone inflation for last month – economists expect a small drop, to 9.7% per year from 10.1% in November – and a healthcheck on UK builders.

The agenda

• 7am GMT: Halifax UK house price index for December

• 7am GMT: German factory orders for November

• 9.30am GMT: UK construction PMI report for December

• 10am GMT: Eurozone ‘flash’ inflation report for December

• 1.30pm GMT: US Non-Farm Payroll report for December